A CNN Money reports today that the Kingdom of Saudi Arabia is running out of money. This bit of news is practically unsurprising considering the drastic movements in the traditional energy market seen in recent months.
Within less than two years, oil prices have dropped from $100 per barrel to just $36. Why is this bad for Saudi Arabia? Because of the following numbers:
– Oil funds 75 percent of the Saudi government budget
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– Almost 90 percent of Saudis are employed by the government.
– Saudi citizens do not pay income tax.
Over a prolonged time of abundance, Saudi Arabia had built a super welfare state that stands on a single pillar — oil. It is a single point of failure that puts at risk not just the wellbeing of Saudi citizens but the livelihoods of more than a million overseas foreign workers (OFWs) from the Philippines.
Because of the price drop, the Saudi government is now operating at a severe deficit. It racked up a $100 billion shortfall last year and is expected to continue this way so long as low oil prices prevail. According to the International Monetary Fund (IMF), Saudi Arabia “needs to sell oil at around $106 a barrel to balance its budget.” Saudi Arabia also has a growing unemployment problem thanks to the big part the state plays in keeping its people busy and the deeply-entrenched culture of entitlement that is a legacy of decades of oil-funded welfare. This does not bode well for the on-going stability of this desert kingdom and its ability to continue to host foreign workers who will likely be increasingly seen by local Saudis as undesirable aliens competing for increasingly scarce jobs.
Many factors contribute to downward pressure on oil prices, but it is mainly an increase in domestic oil and alternative energy production in North America, more efficient vehicles, and increasing competition amongst oil-producing countries to supply the rapidly-growing economies in Asia that account for the price drop for the most part.
Ironically, Saudi Arabia is one of the member states of the Organisation of Petroleum Exporting Countries (OPEC) that refuses to cut production to stabilise prices. OPEC is a cartel of oil-exporting countries that account for about 60% of petroleum traded globally. As such, how much or how little of the product it pumps and ships could influence world oil prices significantly.
Back in the Philippines, many Filipinos who see their fuel needs as a household or business cost are rejoicing as the effects of weak oil prices start to be felt on the street. However, with an economy propped up by the remittances of its vast army of OFWs, the Philippines may not be laughing all the way to the bank over the longer term. OFWs have long been seen as a failure on the part of Philippine society to sustain its enormous population on the back of its domestic capacity to create capital and generate employment.
Is the the OFW-funded Philippine fiesta over? Only time will tell. Even if oil prices recover and the music starts again for Filipinos, maintaining OFW deployment as a key source of foreign currency is an unsustainable economic strategy as it levies social costs that are likely to negate the benefits of the remittance flow in the long run.
benign0 is the Webmaster of GetRealPhilippines.com.
24 Replies to “OFW party could be over for the Philippines as Saudi Arabia runs out of money”
Saudi Arabia – a state that stands on a single pillar — oil
Philippines – a state that stands on a single pillar — OFW’s
True. But, this is human capital. They can just change locations and still produce the same effect in our economy, if not better. Hahanap at hahanap ng paraan ang mga OFWs umalis ng Pilipinas, that’s just how we are.
That’s not entirely true
PH has strong local economy, BPO Industry and more and more foreign companies starting in the PH today
To say “Philippines – a state that stands on a single pillar — OFW’s” is WAY overstatement
For the record, I am an OFW for almost 10 years now
Here are some alternative options for Pinoys:
1. Become an export-oriented nation: we need to go beyond bananas and dried mangoes. Innovative and quality products that the world will buy are needed. Is the Pinoy mind up to the challenge?
2. Strengthen our BPO industry: go beyond just language based skills (Pinoy English level already sucks) and offer more IT based sophisticated services.
3. Boost tourism: fix our infrastructure and remove all eyesores -esp. Squatters. For one, we at least need a train line from NAIA to MRT!
We should not elect people we say:
“at pag hindo ho nangyari ito, … dalawa na kaming magpapasagasa SIGURO sa tren.” – PNoy’s legacy quote
Empty promises, with matching empty consequences for failure will lead this nation to you know where.
Totally in agreement with three points. Pero, I would like to modify points 1 and 2.
1. Help entrepreneurs – loan money or give grants to wannabe entrepreneurs. This will create domestic consumption, lessening imports. And, if it scales, exports would follow.
2. More funding for education – more educated individuals means more sophisticated services.
thats what we need. Focus on exportation. i already shared it here convert the public tansportation to manufacturing industries and apply benchmarking.
focus on innovation and invention. Creative people are the source of employment.
develop the rural areas (agriculture) so we dont import rice and other scarce natural resources. develop agricultiral science and marine science
On squatters, these communities should be destroyed. We are not going to allow them to build a community to avoid “tyranny of majority”.
on tourism, houses should look like a hut but modern in the inside. fishermens boats should have tribal designs. baybayin characters should be part of modern architecture. dont copy western design which doest represent the country. It causes disorientation to the filipini people as well.
Unless the Philippines starts learning something, OFW’s will likely to remain for a long time. Nobody wants any alternative way, they want what they thought is the easiest way to earn money never thinking the consequence. Especially never thinking of saving some, just spend all they want and ask for more like one day millionaires.
What future will that bring?
Personal conviction and beliefs: I will become a millionaire in my native land. Going abroad means I did not exhaust all my resources and potential to do my best. In other words, tamad akong gamitin ang isip ko para magbasa ng maraming libro, attend trainings and seminars to learn a new skill or boost my skills to start a business. There’s a lot of opportunities in the Philippines if we only teach our brains not to be lazy. For me, going abroad is the short cut approach to money-making route that becomes a long way to achieve this country to be a first world country. Almost every one I talk to has a plan to go abroad to earn good income. And I always told them I don’t have a plan ever. I want to go abroad for vacation or to conduct business only. I am looking forward to this event. I am reading a lot of articles online and stumble upon this site since then I visit this site almost daily.
Yet our oligarchs, especially that one bald guy and his cahoots, are still hardheaded that they still refuse to open the country’s economy. And Failipinos are still just as hardheaded for voting for the same kind of people as well as supporting economuc protectionism while sending out some family members then mooching off to their hard-earned income…….
Speaking of which, could this be the prelude to the events of Gundam 00: oil is finally gone, at least three solar towers were built, thus dividing the world into three groups centered around these towers and so on……?
Wonder where we’ll end up, HRL or the Union.
HRL if political tensions keep going in the current direction.
You do realize oil is not gone. The issue is too much oil has reduced the price to a level that is insufficent to maintain the budget of Saudi Arabia.
Hate to say it, but maybe read the article before replying to it ……
In the book “The Next 100 Years” (which is a non-fictional extrapolation revealing our likely future), what you might find really intriguing is the caption on the cover “2080: Space-based energy powers earth” -which kind of matches a prophecy I heard of before that wireless energy transmission will be our future.
Here’s a summary:
Among the technological predictions made in the book are the development of hypersonic aircraft and missiles, new space-based technology that will foster the development of military bases on the moon and manned military orbiting platforms (referred to in the book as “Battle Stars”), and armored robotic battle suits for infantrymen that run on solar power. In addition, the earth will come to be powered by solar energy collected from satellites beaming the energy down in the form of radiation to receiving stations on earth, which will end dependence on hydrocarbons, and dramatic advances in robotics and genetic science will lead to a great increase in labor productivity, unemployment as robots phase out jobs, and significant increases in human longevity, including the possibility of a massive increase in longevity. It also hints at more widespread nuclear proliferation, claiming that Japan, Turkey, and Poland will have nuclear weapons by mid-century, as the technology will be a century old by that time, and “there won’t be any mystery to how to build and deliver them.”
So how about asking our government to invest more in our space program guys? And let’s cross our fingers on the launching of our Diwata sattelite.
Not only the Saudis have problem with their economy. They have now problems with their Shiite minority; and Iran. The execution of the Shiek leader of the Shiites in Saudi Arabia, complicated the relation with the Shiites, which are lead by Iran.
Iran is Shiite…Saudi Arabia is ruled by a family monarchy; and by Sunnis.
New energy sources, other than fossil fuels, will soon be introduced. This energy is abundant and free.
So, all Filipinos OFWs in the Gulf States, must be ready to be laid off, sooner than later. Find other places, where you can go.
Oil will be like the Silk Trade in the past. China dominated the Silk trade, in the ancient past. The Silk Road was established. Then, the demand for Silk declined. The Silk Road fell into not being used and into disrepair.
We have to have other sources of cheap energy, other than fossil fuels; in order that our civilization will move forward and advance.
I blame the Aquinos for letting this OFWs, as the sole source of income for the government and the people. These Politicians have no programs to create jobs.
Leni Robredo is right. what we are now is the product of the past. but who mess the past? Marcos or Ninoy?
Both Marcos and the Aquinos are to blame. I blame more the Aquinos’. It was in their era, that they solved the unemployment problems with OFWs.
Sadly, from a global prospective, Filipinos (OFW’s) are becoming known as the world’s gypsies-home is where you lay your mat. Adapt to the surroundings or go back home in shame (not fair). In a family oriented culture, where the family unit has such strong bonds, economic necessities for a better quality of life have required one or both parents to leave the sacred family unit for years at a time with children to be raised by relatives-no Mom and/or Dad. Often times this is to pay for a qualty (relatively speaking) education for those children only to find in reality after getting that coveted degree and being thrown into the corrupt society that there are so many limitations -so many dead ends-so few real opportunities in earning an honest decent living for the next generation, so they go overseas for more money and so the cycle continues. Sacrifices such as these OFW’s make are only patch work-and are not the real long term solution.
Why Serfdom-Reliance and Protectionism Will Undo Any Economic Growth in the Long Run?!
as predicted by Nostradmus, Philippines is the number 1 wealthiest country in the world…
The question remains: which will commit to creating a pillar of social change, and which will become casualties of their own outdated thinking?
If you want to become rich our country Philippines,remove the corruption,change the the rules against human rights,stop steeling ,what we need to do help others like a brooms and stop talking others problem and keep our self busy all the time if needed. Don’t blame anyone ,because everyone make mistake and no one’s Perfect.
my top 10 of changes, I would like to see in order for your country to be one of the Big Players in Asia.
1. Stop electing famous people and start electing educated people! I cannot URGE THIS MORE!
2. Start disowning landlords, re-distrubte the lands and re-start the agriculture! stop hanging around in Metro Manila which only creates tons of slums!
3. Stop the Filipino Thinking and start thinking out-of-the-box! Pretty much, Ask yourself. Is the Current Filipino Way the best way to live and die?
4. Use your VAST population as an asset! Attract investors with low corporate taxes but introduce better labor treatment and laws!
5. Give Mindanao what they want! after that, start treating Mindanao as your trade partner! The less you administrate the more you can focus on more important things!
6. Start giving more budget in Education and agriculture! Subsidise the farmers and teachers!
with all the 6 points being completed, you can now move on to the following points:
7. Re-furnish and clean the Phillipines. Use the natural beauty of the Phillipines to attract tourists! Your country is very beautiful! Use it!
8. DO NOT EVER ELECT AGAIN FAMOUS PEOPLE! KEEP ELECTING EDUCATED PEOPLE!
9. Treat Philippines as a Company! Think about growing! The world is full of possibilities.
10. Listen to the voice of the people. Introduce Direct Democracy!
I am not inventing this whole thing. Im just relating what my country, Austria, did after the First World War and as a Business Analyst of a Multi-Million Dollar Company in Switzerland, I have the insight and knowledge.
Greeting from the Alps.
Apart from the fall of oil prices, the reason for Saudi Arabia’s economic downfall is the cost they spend for the war in Yemen.
Hmmm… I wonder what those OFWs who snickered at me when I said this would happen would say now…