The Philippines started attracting business-process outsourcing (BPO) companies more than two decades ago. With our cost-competitive work force and infrastructure, a positive business environment that supports 24/7 operations, large pool of English-speaking, college-educated workers, effective government incentives and a service-focused culture, the country managed to become a preferred investment destination for global BPO firms. Since then, the BPO industry’s growth has been unstoppable.
Lately, however, industry analysts warned that the country’s outsourcing empire is facing mounting risks. They said China is rising quickly as a competitor. With the government’s intention to cut incentives, it is important to look back and see how our BPO industry managed to attain rapid growth. Before the Philippines became a global player, Indian outsourcing reigned supreme. However, with our English proficiency, accent neutrality, comparable costs and government backing, our BPO industry gained significant ground at India’s expense.
Last year the industry generated $23 billion in revenues and provided direct employment to 1.15 million Filipinos. Amid the jitters caused by US President Donald J. Trump’s “America First” policy, particularly his avowed intention to bring BPO jobs back to America, major American players didn’t blink and stayed on our shores. Analysts said they do not expect a large number of BPO jobs to leave the Philippines given the significant wage differential between the two countries. In a recent report, Glassdoor, a jobs and recruiting site based in the US, said the hourly wage for a call-center agent in the Philippines is around $2, while the hourly wage of a call-center agent in the US is at $10.50.
The BPO industry is expected to remain as the country’s biggest source of private jobs. And we can’t overemphasize the industry’s importance for the country’s dollar supply, especially now that pundits are saying the Philippines might slip into a current-account deficit this year—the first in 15 years. Thus, the risks of a slowdown in our BPO industry, coupled with faltering remittances and higher trade deficits, may exacerbate the weakness in the peso, which is being dubbed Asia’s worst-performing currency this year.
We have to defend our BPO industry by putting our act together. As the head of the Philippine association of outsourcing companies said, other countries know how big this business-process outsourcing pie is globally, and they want to increase their share. Government support would help ensure the health of our BPO industry. Instead of setting up infrastructure and operational roadblocks, the government must provide support for expansion, training and technological upgrade.
In a recent report, advisory firm Tholons warned that our reign as top BPO destination is now under threat, with China ranked ahead of the Philippines in terms of competitiveness. This should serve as a wake-up call for us. We have to remember that the countries that compete with us in this industry are enhancing all the parameters that make them competitive—talent, infrastructure and incentives.
Bloomberg recently reported: “In recent years, China has built state-of-the-art technology parks and funded universities to offer courses specifically on outsourcing. China is targeting $100 billion of outsourcing revenue by 2020, focusing on digital, high-technology services, according to a plan by the Ministry of Commerce.” This, indeed, is an alarming report, which should jolt us to our senses. We need to defend our BPO industry from emerging global competitors. We do not want to wake up one day to discover that a neighboring country is eating all our BPO pie.
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