Philippine labor connection with the Middle East begins to run dry

The Philippines is watching developments in the Iran-Iraq war with quiet desperation. The war has thrown Iraq's economy in chaos, compelling the government to defer payment on its foreign debts. The Philippine government has been warned that the bulk of payments to Filipino contractors and workers will have to be suspended for two years.

Iraq's failure to pay most of its obligations to Filipino contractors and workers could in turn seriously affect the ailing Philippine economy.

There are now a total of about 700,000 Filipino workers abroad, almost 80 percent of them in the Middle East. The workers are at a premium because of the generally high level of education, good grasp of English, and professional adaptability. Saudi Arabia is host to the largest number of Filipino workers, estimated at more than 250,000.

Jobs in the Middle East have been a handy solution to two of the Philippines' most urgent problems - rising unemployment and a growing gap in its balance of payments. The Philippine unemployment rate is estimated to be almost 18 percent, and overseas jobs have helped to abate labor unrest.

There are now some 32,000 Filipino workers in Iraq - the third largest number in the Middle East - while outstanding projects undertaken by Filipino construction companies are valued at $650 million. But for the past few months, only 40 percent of the workers' salaries have been paid and the Iraqi government has proposed that payment of the remaining 60 percent be deferred for two years.

Iraq is not the only country that is creating anxiety among Philippine economic officials. Most other Middle East states have announced plans to cut spending on development projects, and this could reduce the demand for Filipino labor and put a brake on the flow of precious dollars into the country.

Salary remittances from overseas workers are now the Philippines' biggest source of foreign exchange. The central bank estimates that last year, expatriate workers earned about $1.6 billion. This surpasses the earnings of traditional exports. The single largest commodity export, coconut oil, brought in about $638 million, while electronics and semiconductor devices, the country's largest manufactured exports, earned $921 million.

Middle East money has, in fact, brought new prosperity to many villages and depressed urban areas. Television aerials have sprouted up in villages, and Japanese stereo and radio sets blare at every other corner. Often the owners of these new status symbols turn out to be relatives of Filipino contract workers in Saudi Arabia, Kuwait, Iraq, and other Gulf states.

But as the Middle East countries start reviewing their spending in the light of this 9ear's falling oil prices, the Philippine government is forced to brace itself for a cut in the flow of remittance money. A slowdown in the flow of petrodollars could play havoc with the government's efforts to bridge the yawning deficit in its balance of payments, which last year hit a record $1.1 billion, double the 1981 shortfall of $560 million.