Two current developments that have gotten people because of their adverse impact on the economy prompted me to write this piece. These are the election of real-estate billionaire Donald J. Trump as US president and the weakening of the peso.
News interest, in general, trends toward the negative, so the adverse effects of Trump’s surprise victory in the November 8 US presidential election and the drop in the peso’s value in terms of the US dollar caught first and wide attention.
Trump’s election victory added fuel to apprehensions, which were based on his statements during the campaign period that American companies in the business-process outsourcing (BPO) industry in the Philippines would be compelled to go back to the US.
On November 17, or nine days after the election, Moody’s released a report that said Trump’s plan to bring jobs back to the US would affect the Philippines’s BPO industry and remittances from overseas Filipino workers (OFWs). The report specifically mentioned India and the Philippines, which are the biggest BPO hubs in the world.
I don’t think it’s that simple. BPO companies from the US will not just pack up and leave right after hearing their new president’s plans.
First, I think the influence of a president in the US on his country’s businessmen is not as much as the influence of Xi Jin Ping on Chinese businessmen. When President Xi tells his countrymen “this is where we go”, that’s where they will go.
On the other hand, when Trump, who is not even that popular among Americans, says the same thing, US investors will proba bly say, “Wait a minute, we’ll think about it, we’re making money here.”
Second, the BPO investors are putting a lot of capital and infrastructure in the Philippines. They already have a system in place here with their clients.
The depreciation of the peso is also a boon to the BPO industry because it lowers further their costs, which means they make more money. So, to me, the BPO companies are happy, and they will be inspired to put in more investments.
The BusinessMirror carried a report about the Global Investment Forum early this month, during which a speaker said it would be hard for the US government to bring back BPOs to the US even if it offered tax incentives.
Prime Philippines Managing Director Jettson Yu said during the forum: “When he [Trump] made his statement about bringing back BPOs to the United States, one question that we ask among ourselves is that how can the US beat the salary and the office space-rental rates in Manila or the Philippines?”
Thus, I still feel the BPO business will be governed by economics, and investors, as in other industries, will be driven by the profit motive.
And now, even the so-called weakening of the peso is making the BPO companies happy. In the past, they got worried when the peso strengthened and hovered in the P40 to $1 range, because it was cutting on their profits.
The Information Technology and Business Process Association of the Philippines (Ibpap) estimates that the information technology-business process management industry will generate $22 billion in revenues and employ 1.15 million workers this year.
Another reason I see no reason to worry too much about the exchange rate is because remittances continue to grow. In September cash remittances sent by OFWs reached $2.4 billion, up 6.7 percent from the same month in 2015 and the highest monthly remittance for this year.
This brought total remittances for the first nine months of 2016 at $20 billion, up 4.8 percent from a year ago.
With the exchange rate hovering over P50 to a dollar, the OFWs and their families are happy because their salaries effectively increased, in peso terms.
In sum, the BPO industry (which I expect to continue growing) and the resilience of remittances will continue to fuel consumption, which, in turn, will drive the economy forward and strengthen the Philippines’s attractiveness to investors, even those from the US under President-elect Trump.
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