The Philippine outsourcing industry forms a vital artery of the Philippine economy. But could a changing relationship with the US put these industries in jeopardy?
By Oliver Ward
The exportation of services has been the driving force behind the Philippine economy in recent years as foreign businesses outsource services to the country, enticed by cheaper labour costs, a high level of English proficiency and government tax breaks. The sector is the country’s largest private employer, supporting more than 1.2 million workers.
Companies like Accenture drive the BPO industry in the Philippines
Accenture is the biggest business process outsourcing (BPO) firm established in the Philippines and booked a record US$32.9 billion of global revenue in 2016. The company established its first office in Manila in 1992 and employed more than 35,000 Filipinos in 2015. They provide jobs for many graduates who would otherwise have left for employment overseas.
Camille Joyce Calipjo, a 22-year-old student who is completing her accountancy course, was employed in a delivery centre opened in San Nicolas Town in 2016. She said, “I am graduating this month, but I was hired during a school job fair in which Accenture participated in last year.”
Remittance payments continue to grow
Many graduates still travel abroad for work and the payments they send home form a substantial part of Philippine annual GDP. Remittance payments from overseas workers reached US$26.9 billion from January to November 2016. This represents a 5.1% year-on-year growth, and the figure could hit US$36 billion in 2019. Overseas workers are one of the main reasons the country’s economy continues to grow despite uncertainties over foreign investment.
Nursing is one occupation which sends many workers abroad. There are 200,000 nursing graduates in the country each year but only 2,500 available nursing jobs. This forces graduates to move to countries where there are shortages of nurses, such as Japan, Canada or the UK. Tony Burke of the OMNI College of Nurses in Vancouver said, “Filipinos, anywhere they go, they make it, and they are successful.”
Singers and domestic workers also find lucrative employment abroad
Talented Filipino singers are working across the world in bars, on cruise liners and even fronting huge international bands like Journey. Jackson Gan, a music studio owner, estimates that between 25,000 and 30,000 Filipino musicians and singers are currently performing around the world.
Single mother, Joanna Talibong is currently recording her demo in an attempt to get a series of gigs on the South Korean circuit to build a path out of poverty. She said, “I did not finish college, so I do not have many options… overseas I can earn a lot more.” Singing offers her a way out of her US$3.50 a day job selling tobacco.
The Philippines is a significant exporter of domestic workers, such as household maids. More than 55,000 people were deployed from the Philippines from January to May in 2015 for this type of employment. Over 20,000 of these went to Saudi Arabia.
However, this number is falling thanks to improvements in education and the enforcement of a minimum wage. Figures showed a 20% decrease in the number of Filipino overseas domestic workers from 2014 to 2015. Labour Secretary Rosalinda Baldoz, hoped this shift represents the movement of household.
Could Rodrigo Duterte’s anti-US stance hurt the BPO industry?
There are concerns hundreds of thousands of outsourcing jobs could be lost because Duterte released a series of anti-America statements and showed the tendency to strengthen Chinese ties. American companies currently account for 77% of the Philippines BPO volumes.
Gary Calpito works in a call centre in Taguig City. When Duterte declared that he would break away with the US in October last year, he said he was, “worried about the implications of [Duterte’s] statement…. The government needs to clarify the statements he made.”
Industries depend on US investment, and US industries depend on cheap, outsourced labour
Diwa Guinigundo, Deputy Governor of the Philippines Central Bank, is confident that the sector will remain competitive as companies need to outsource non-core services to remain competitive and cut costs. He believes companies cannot afford to relocate their service centres to the US as people in New York have to pay eight to ten times more for their services than in Manila or Iloilo. It does not make economic sense for businesses to withdraw their investment from the Philippines.
Meanwhile, if Trump imposes penalties on the American firms outsourcing to the Philippines and sends all the economic migrants home, the Philippine economy could lose up to dollars annually. It will be paramount for Duterte to preserve this symbiotic relationship; the two need each other.
Trump is a foreboding threat to remittance payments and outsourcing
However, Trump has said he wants to bring jobs back to America. Businesses may have no choice but to remove their BPO from the Philippines or accept a substantial punishment.
The new President’s administration has also named the Philippines as one of the nine “terrorist nations” which threaten national security. This is a blow for the more than 1.8 million Filipino in the US (as of 2013). If these economic migrants were forced to leave there would be a significant dent in the Philippine GDP as 10.2% comes from overseas remittances, and 43% of those are from the US. Duterte will want to do all he can to protect this valuable source of income.
Recent bans on the citizens of several Muslim nations are of particular concern to overseas workers, and Trump has made no promises to maintain immigration from the Philippines to the US. There is a very real risk of Trump extending his ban to the Philippines. Duterte must find common ground and reach an agreement which preserves Filipino jobs and prosperity if this happens. Let us hope his shoulders can bear the hopes of the people whose livelihoods depend on it.