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Are OFW’s Falling Through the Cracks?: Between Unwieldy Regulation and the Middle Men of Migration

Are OFW’s Falling Through the Cracks?: Between Unwieldy Regulation and the Middle Men of Migration

Jan 14, 2012

Are OFW’s Falling Through the Cracks?: Between Unwieldy Regulation and the Middle Men of Migration

By Julie de los Reyes

Even as the economy benefits from remittances from its migrant workers abroad, another beneficiary of the steady stream of workers leaving the country is the thriving recruitment industry back home.  In a given day, nearly 3,000 Filipinos leave the country for work abroad, almost all of whom go through private recruitment agencies.  Not surprisingly, the growth of the recruitment industry over the past three decades was nothing short of spectacular: from 44 agencies in 1974 to 3,168 agencies  in 2007.

While the Philippine Overseas Employment Administration (POEA) recognizes the crucial role of the private sector in sending one million Filipinos abroad each year, regulating the industry has been a challenge.

Looking back

Temporary labor migration in the Philippines started in the 1950s, but it was not until the period 1974 to 1983 that the recruitment industry came into full swing.  This is due in large part to the fact that it was only in 1974 that the labor migration program of the Philippines was officially institutionalized, with the issuance of Presidential Decree 442, also known as the Labor Code of the Philippines.  Prior to this, private recruitment agencies facilitated small-scale migration almost exclusively to the United States.


With the increased demand for manpower in the Middle East as a result of the oil boom in the 1970s, overseas employment was explored by the government as a temporary measure to address unemployment and to improve the national balance of payment position of the country.  In the view of then President Ferdinand Marcos, “if these problems are met or at least partially solved by contract migration, we [can] expect an increase in national savings and investment levels”.[2]

In 1974, the number of recruitment agencies stood at a mere 44.  But with the sustained demand for overseas work over the years, this figure grew exponentially, leading to an equally exponential growth in migration flows.  From the period 1974 to 1982 alone, the number of deployed workers increased from 14, 366 to 314,284[3].  By 1982, there were a total of 1,100 recruitment agencies in existence.

Source: Figure 1 from Aguinas and Ruiz, 2007 .  Basic data taken from the Philippine Statistical Yearbooks, 1984 to 2006.

During this period of accelerated growth in deployment, the government abandoned its initial plan of centralizing the recruitment and placement of workers in the Overseas Employment Development Board, the National Seaman Board, and the Bureau of Employment Services, the three administrative bodies which were established to first regulate and later replace private recruitment agencies.  These institutions were later merged in 1982 with the establishment of the Philippine Overseas Employment Administration (POEA) under the Department of Labor and Employment (DOLE).

Indeed, by 1995, the idea of big government was far from the minds of policymakers and government officials.  Before it was amended, a provision in the Migrant Workers and Overseas Filipinos Act, a piece of legislation that explicitly aims to “establish a higher standard of protection and promotion of the welfare of migrant workers”, sets out for a comprehensive deregulation plan on the DOLE’s recruitment activities and a gradual phase-out of its regulatory functions.

Managing migration

The POEA is primarily mandated to manage the country’s overseas employment program, including the regulation of private sector participation in recruitment and overseas placement (POEA).  In practice, this saw the POEA in charge of issuing licenses to recruitment agencies, monitoring their compliance with the rules and regulations governing overseas employment, hearing and arbitrating cases and complaints, and imposing disciplinary actions when necessary.

The amendment of the Labor Code[4]  in 1978 heralded greater private sector participation in the recruitment and placement of overseas workers.  Today, these tasks fall almost completely on private recruitment agencies.  While the POEA to a limited extent directly facilitates the deployment of workers to foreign government clients (through government-to-government arrangements), private agencies still account for nearly all deployment.   In 2007, 94 percent of the total workers deployed are through the private sector.[5]

The POEA’s regulation of private recruitment agencies is best summed up by its “hard to enter, easy to go” policy.  Under the POEA’s Rules and Regulations, recruitment agencies are required to show sufficient capital, post bonds and escrow deposit, and satisfy nationality requirements: only Filipino citizens or corporations, partnerships or entities which are at least seventy-five percent (75%) owned and controlled by Filipino citizens are permitted.  This ensures that Philippine authorities can easily assume jurisdiction in cases of violation, while the surety bonds and escrow deposit guarantees available resources in case of valid and legal claims.[6] Depending on the nature of the violation, penalty can range from suspension to revocation of license.

Yet, despite stiff entry requirements, there are still over one thousand licensed recruitment agencies in the country.

Regulating the private sector

A clear consequence of the involvement of the private sector is the growth in deployment figures.  The POEA admits that given its limited resources, it would not have hit its one million mark without the help of the private sector. In 2007, there were a total of 1,077,623 OFWs deployed[7] making the Philippines the highest migrant-sending country in Asia.

The basic function of recruitment agencies is to match the requirements of the foreign employer to the worker and, ideally, vice versa.  Given the continuing demand for labor abroad and with nine out of ten Filipinos willing to work abroad[8], recruitment agencies are thrust an important role in bridging the pull and push factors of Filipino migration.

But like in other Asian countries, the recruitment industry in the Philippines has been responsible for a number of malpractices and infractions.  In fact, majority of cases filed at the POEA are against recruitment agencies. In 2007 alone, 59 percent of complaints are against recruiters. [9]

The most common violations by recruitment agencies involved placement fees.  This includes such irregularities as illegal exaction of fees, excessive collection of fees,[10] and non issuance of receipts.  Of cases pending before the POEA, roughly 78% were due to excessive placement fees.[11].

A survey report by the Mission for Migrant Workers shows that in the case of domestic workers in Hong Kong, majority of those employed via recruitment agencies had to pay three to four times the legal amount for placement fees[12] in the POEA guidelines. Even after the placement fee on domestic workers was abolished in 2007, exorbitant placement fees are still being collected.
Aside from cases of overcharging, illegal recruitment cases are also high, with 1,624 cases handled by the POEA in 2007.  [13]



  Source: POEA 2007 Annual Report

Monitoring compliance

While the POEA managed to put in place stringent entry conditions for recruitment agencies, its monitoring of licensed and illegal agencies remains weak.

A Sectoral Performance Audit report by the Commission on Audit (COA) finds that the POEA “may not be considered effective” in regulating the recruitment industry.[14] While the POEA attributes this failure to its limited human and financial resources, the COA report noted that the POEA does not even maintain a database of recruitment agencies that are to be subjected to inspection in the first place.

A paper by the Migration Policy Institute illustrates the constraint faced by the POEA in, ironically, manpower.  It was reported that there were only “six full-time inspectors for the country’s 1,422 active agencies and the 479 agencies that applied for new licenses – a ratio of about one inspector for every 317 agencies.”  That same year, the POEA conducted only 264 annual inspections.[15]

At the off chance that an agency is upheld for violations, POEA allows the payment of fines in lieu of suspension. But with the ease by which the fine can be recouped, the rule ceases to serve as deterrent.  The COA report warns that “allowing recruitment agencies to merely pay fines ranging from P20,000 to P190,000 that could easily be recovered from prospective applicants in lieu of serving suspensions of 2 to 19 months…did not compel recruitment agencies to abide with existing rules and regulations as manifested in their recorded repeated violations.”

Incidentally, the total revenue collected by the POEA between 2001 and 2007 from these agencies amounted to 64 million pesos.[16]

Promoting labor migration

The importance of recruitment agencies in the migration process is evident in the role they play as brokers between workers and prospective employers: agencies must find the best match and ensure that the employment contract is kept by both parties.  A precondition to a successful placement however is the integrity of the agency acting as mediator, and the effectiveness of existing regulations to keep agencies in place.  Worth noting is the fact that, of the several stages in the migration process, majority of the reported infractions happened at pre-departure.

While the Philippines is lauded for putting in place legislations that provide for comprehensive protection of its OFWs, the implementation of the provisions are constantly challenged by the government’s interest to sustain migration flows. The POEA is always conscious of regulating too much as to provide disincentives for recruitment agencies.  Meanwhile, the POEA’s incentive programme for the victims and witnesses of illegal recruitment deserves a reassessment to make it a worthwhile option.  Comparing the POEA’s accomplishments in deploying over one million workers abroad and its performance at ensuring the protection of overseas workers leads one to conclude that the POEA is a more successful labor exporter than a regulator.

Three decades and five presidencies later, labor migration remains a key tenet in the country’s economic agenda, perhaps more openly in the current administration.  Like previous administrations, balancing between promotion and protection continues to pose a big challenge.  Unlike previous administrations however, labor migration is no longer seen as a stop-gap measure but rather actively pursued as an alternative to domestic employment and as a development strategy.  President Gloria Macapagal-Arroyo’s statement in a televised phone interview explains the simple rationale behind this:

Jobs here are difficult to find and we are depending on the people outside the country.  If you can find work there, and send money to your relatives back here, then perhaps you should stay there.[17]

To date, remittances constitute more than ten percent of the country’s GDP.  Given this over-reliance to overseas employment, the fear that protection of OFWs might in the end be only secondary to sustaining the deployment figures may not be completely unfounded.

The contribution of Filipino overseas workers in propping up an otherwise stagnant economy is widely recognized.  As one government official quips, “Overseas employment has built more homes, sent more children of the poor to college and established more business enterprises than all the other programmes of the government put together”.  For a policy that has salvaged the Philippine economy for over thirty years, the least the government can do is to provide the best protection possible for its modern-day heroes.
[1] The total number of licensed recruitment and manning agencies as of June 2007.  http://www.coa.gov.ph/GWSPA/GWSPA.htm

[2]Nana Oishi.  Women in Motion: Globalization, State Policies, and Labor Migration in Asia, (California: Stanford University Press, 2005), 63.

[3] Bureau of Labor and Employment Statistics.  “The Philippine Overseas Employment: Understanding its Trend and Structural Change”, Labstat Updates, Vol 10 No. 5, May 2006.

[4] As amended by Presidential Decree 1412 on June 9, 1978.

[5] POEA, “2007 Overseas Employment Statistics”.

[6], Based from the 2002 Revised Rules and Regulations of the Philippine Overseas Employment Administration (POEA)

[7] POEA, 2007 Annual Report.

[8]  http://www.manilatimes.net/national/2008/nov/23/yehey/top_stories/20081123top4.html.

[9] Dovelyn Rannveig Aguinas.  “Managing Temporary Migration: Lesson from the Philippine Model”, Insight, (Washington DC: Migrant Policy Institute, 2008), 19.

[10] http://globalnation.inquirer.net/news/news/view_article.php?article_id=66462

[11] Aguinas, 19.

[12] The legal amount is equal to a worker’s one month salary.  The collection of placement fees household service workers (HSWs) was abolished as part of a package of reforms introduced by the POEA in December 2006.  See POEA Governing Board Resolution No. 4, 5 and 6.

[13] POEA, 2007 Annual Report, 19.

[14] Commission on Audit, Sectoral Performance Audit Report on the Overseas Workers’ Welfare Program
of the Government (CYs 2005 and 2006),2007.

[15] Aguinas, 17.

[16] Aguinas, 23.

[17] Oishi, 68.

[18] Philippe Legraine. “Waves of Fear”, The Economist, 11 January 2007.

[19] In a statement issued by President Gloria Arroyo in celebration of Bonifacio day, she referred to OFWs as modern-day heroes “who sacrifice family ties for the chance to earn more”. http://www.news.ops.gov.ph/archives2007/nov30.htm

(Published in: Focus on the Philippines November 2008, http://focusweb.org/oldphilippines/content/view/225/6/)

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