By Samuel P. Medenilla & Recto Mercene, May 20 2019; Business Mirror
Image Credit to Business Mirror
Deployment of overseas Filipino workers (OFWs) is no longer as profitable as it used to be, forcing some local recruitment agencies to abandon their business.
In a statement, recruitment consultant Emmanuel S. Geslani said he was able to get reports of some licensed recruitment agencies, which are now being sold for low prices by their owners due to smaller profit margins.
“There is an ongoing fire sale,” Geslani said adding that deployment to the Middle East was down by 20 percent.
“Other agencies are contemplating to return their licenses to the Philippine Overseas Employment Administration [POEA], as the recruitment industry continues to absorb losses for the past years due to the declining market in the Middle East,” he said.
Geslani said the decision for local recruitment agencies to call it quits could be because of the declining market for OFWs in the Middle East.
“The previous benchmark price for fully accredited agencies that used to be in P10 million to P14 million has gone down to P6 million to P8 million including those agencies with provisional authority to operate and even agencies with cases are being eyed by some buyers,” Geslani said.
Thankfully, agencies catering to Household Service Workers (HSWs) sector continue to soar with over 200,000 domestic workers deployed to Saudi Arabia in 2018, he explained.
He said among the said agencies that are now being sold are 10 medium-size establishments that send OFWs to the Middle East.
“I cannot give you names since it would be prejudicial for them,” Geslani told the BusinessMirror via SMS.
RECRUITER Loreto B. Soriano confirmed that these firms are being bought by foreigners.
“Instead of being closed down, the said agencies are being bought by Arab [nationals], who have agencies in the Middle East,” Soriano, the president of LBS Recruitment Solution Corp., said via SMS.
He added that foreigners are allowed by law to own 25 percent of a recruitment firm. However, Soriano noted that some firms are able to circumvent this by having Filipinos acting as “dummies.”
The trend of selling recruitment firms is expected to continue until demand for OFWs abroad recovers.
The Department of Labor and Employment (DOLE) earlier projected the decrease in the deployment of OFWs in the Middle East will continue to persist in the coming years until the countries there resolve their economic woes.
Based on the latest figures of the POEA, the number of deployed OFWs abroad in 2017 dropped by 3.19 percent to 2 million, from 2.1 million in 2016.
Among the countries that registered the biggest decline in deployment in 2017 were the Kingdom of Saudi Arabia, United Arab Emirates and Singapore.
Geslani said the third phase of the “Saudization” policy has gone into effect as early as April 7, which will result into further losses in the government’s overseas employment hiring efforts.
The Saudi Ministry of Labor and Development identified the jobs affected are in the skilled sector, including supervisory and managerial positions mostly held by OFWs.
“These jobs are now reserved exclusively for Saudi nationals which will mean an estimated drop in new hires for the Kingdom will be as much as 100,000 OFWs,” he said.
Rehires from Saudi Arabia are also expected to drop by as much as 40 percent as Filipinos holding positions in these positions reserved for Saudi only will not be rehired at the end of their contract.
He added that some companies will reduce the number of expatriates to comply with the 70 percent nationals ruling.
Geslani said the Saudi Ministry of Labor announced the job types and activities limited to their nationals to include light-vehicle driver, director of tourism programs, director of the front office and director of staff relations, among others.
But while Qatar has been reported to slow down construction activities for the World Cup 2022, it continues to import more skilled workers at a slower pace for the new hotels and restaurants.
Geslani added that deployment of skilled workers is also expected to decline by 10 percent to 15 percent (about 80,000 to 100,000 potential jobs for OFWs), due to the unstable price of crude oil.
“The volatile oil market has been the cause of the precarious financial situation of Saudi Arabia and other Middle East countries directly affecting their economies that will dampen business and government spending,” Geslani said.
Saudization refers to the Saudi nationalization scheme marked by replacing foreign workers with Saudi nationals through a quota policy.
With nearly half of the native population under the age of 25 and a national native unemployment rate of more than 12 percent, jobs for Saudis are a priority, he added
Beginning in September, the Ministry of Labor and Social Development has expanded the policy to include 12 retail sectors, including automotive, apparel, kitchenware, electrical and electronics, and furniture stores. Businesses in these sectors now have to employ at least 70 percent Saudi nationals.
Saudization started in the 1980s and has largely been a success in public employment. In 2018, the public sector saw a 20-percent drop in expatriate workers compared to 2017. Saudi nationals now make up more than 95 percent of public-sector worker. The government aims to reach 100 percent by 2020.
In the private sector, however, results have been more modest—except in sectors like banking and telecommunications, where the authorities claim the 90-percent Saudization threshold has been crossed.
The reduction of deployed HSWs in 2018 in addition to the lower forecast of OFW deployment this year will have a devastating effect on the country’s volume of dollar remittances, aside from the loss of employment opportunities for OFWs in the Middle East, Geslani said.