DURING the administration of President Gloria Arroyo, in about 2003, is when the Philippine call-center business first began to show signs of the potential to be a sustainable business sector. The outsourcing industry was properly supported by government policy and programs unlike is so many other instances.
It would have been more typical if the government had taken a heavy-handed approach, trying to control and shape the industry. But, instead, there was a series of small but important steps that allowed the industry to thrive and flourish at its own speed.
The law establishing the Philippine Economic Zone Authority (Peza) was approved by former Philippine President Fidel V. Ramos in 1995. Peza was designed to offer incentives to companies that exported goods. But the government had a rare stroke of common sense and expanded the definition of ‘exports’ to include ‘service exports’. As of last years, there were over 300 fully operating economic zones around the country.
But, in 2003 and later when India controlled the global call-center business, there were concerns about finding enough qualified employees. Government programs were launched to try to help what the industry calls ‘near-hires’ with training to improve their English. It all worked.
The call-center business was not universally welcomed to the Philippines. One commentator in another newspaper talked about the business being only for the ‘rich kids’ with college educations. Of course, over the years, his attitude has changed. Now call centers are factories only for the lower economic groups that learned English from watching cartoons.
Today, the Philippines is the No. 1 destination for the call-center business, putting India far behind in the dust. Estimates are that as many as 3 million Filipinos benefit from direct and indirect employment from outsourcing, as each direct job can generate as many as two more. It is a critical source of both foreign investment and foreign currency inflow.
India lost to the Philippines because the industry was never respected as an economic opportunity. Jobs at a call-center were only stop gap measures for most employees and even today, job attrition runs at 30 percent to 35 percent in the large cities. The damage to India is this: A new study estimates that, in the ongoing decade, India might lose $30 billion in terms of foreign-exchange earnings to the Philippines.
One of the reasons for success is that the local industry has been able to solve some of the inherent problems in the industry, the primary being after- qualifications employee attrition.
From the BusinessMirror: “According to a survey by Towers Watson, a global professional services company, the Philippine BPO industry has managed to retain employees, resulting in a 20-percent turnover rate, the lowest since 2007. The percentage is a marked improvement, compared to the 33-percent, 24-percent and 26-percent attrition rates from 2011 to 2013, respectively”.
The growth of the industry is also seeing growth of wages. “The overall salary increase in the outsourcing industry in the Philippines in 2014 was 7 percent on average, and is expected to be stable in the next two years at 7 percent to 7.5 percent”. That is well above inflation.
This important industry must be respected and continued to be encouraged.
Image credits: Jimbo Albano