BPO: A mistaken priority?

The Asian Development Bank (ADB) has essentially thrown cold water on the Philippine government’s euphoria over the growing business process outsourcing (BPO) sector.

In its Asian Development Outlook 2007 (released March 27), the ADB says that the industry’s positive features need to be kept in perspective, particularly because "it is highly unlikely that the advent of BPO services signals a paradigm shift that will put the economy on a higher trajectory."

Yes, while the BPO industry indeed has brought tangible benefits to the country, generating about $2.4 billion in revenues and employing 163,000 workers in 2005, its contribution to national growth merely shadows the input of, say, our overseas Filipino workers.

The ADB comments that if considered in relation to the size of the economy, the BPO sector’s revenues were just about 2.4 percent of total gross domestic product (GDP), and its employment not even a fraction of the country’s 36 million workforce.

Even probing deeper, 70 percent of the workers in BPO services are in call centers, which is the least knowledge-intensive part of the industry, and only about 13 percent are in IT-related industries, in contrast to India ’s 70 percent.

The ADB, citing the findings of the 2006 Workforce Development Summit, also notes mismatches between labor supply and industrial demand. While there are opportunities for expansion as far as the Philippine BPO is concerned, the supply-demand disparity should to be taken against a backdrop of the kind of workers and graduates we have.

Putting BPOs in the right perspective

But before we get the ADB all wrong, this is not say that the agency is urging government to drop the BPO sector like a hot potato and walk away with its commitment to support the growing industry.

Estimates show that by 2010, the Philippine BPO sector could create 500,000 to 600,000 jobs, and possibly another 300,000 jobs in retail trade and other areas as the sector pays well, and salaries of much of those working in call centers are relatively on the higher side.

What the ADB simply wants to stress is that the services sector alone cannot provide the kind of growth that would substantially lift the economy. As such, developing other sectors need to be prioritized.

On top of the ADB list is the industry and manufacturing sector, which since the 1990s had posted a flat, if not declining, share to both total economic output and employment.

The Philippines cannot simply bypass industrialization, stresses the ADB, since countries that have embraced industrialization and increased its share to both output and jobs are the ones which grew more quickly. These are the likes of China, Indonesia, Korea, Malaysia and Thailand .

Looking at RP’s manufacturing sector

The ADB laments the fact that while a sophisticated manufacturing sector emerged in the Philippines in the 1950s, it is now lagging behind compared to its regional peers. Perhaps, the ADB suggests, it is now time for government to focus on boosting investments in the manufacturing sector.

But would this be the best tack for the Philippines now? Shouldn’t government instead look at new sectors to focus on, such as those where our neighbors still do not have a dominant hold?

With China, Thailand, Korea, even Indonesia already far ahead in terms of putting up manufacturing plants and building related industries, it would be extremely difficult for the Philippines – or for any developing country, for that matter – to play catch-up.

In the first place, the Philippines lacks the basic ingredients that would ensure the competitiveness of its existing and new industries. We need good roads, bridges, ports and other similar vital infrastructures. We still have to improve on our telecommunications services.

And don’t forget the most important element: power. We continue to have one of the highest electricity rates in the region, not to mention the continued threat of a power shortage likely to happen several years from now.

Our greatest asset

While recognizing ADB’s research expertise and capability, I cannot make myself fully accept their prognosis that a revitalized manufacturing sector, and the need to encourage more direct foreign investments in this field, is still top priority for the long-term solution to our anemic economy.

Yes, I agree that government must not rely solely on the BPO sector to liven up the economy to grow at a pace that will alleviate poverty. In the same breath, over-reliance on earnings remitted by overseas working Filipinos should not lull our bureaucrats into a false sense of economic stability.

As I have harped over and over again, the key to the future stability of the country’s economy is a stronger agricultural base. While those in the agri sector may lack the glamour and the sophistication of those in BPOs or those working on high-tech modern manufacturing complexes, agri workers and producers are the ones that will bring food to the tables of every Filipino, and keep prices of basic commodities at a relatively stable keeling.

We have to take things one step at a time. Let’s get back to basics. Only then can we move to bigger things.

Poker satellite matches take a break

Satellite/qualifying competitions for the 3rd Philippine Poker Tour (PPT) Million-Peso Hold’Em Philippine Championship will resume next week as poker tournament enthusiasts take a five-day holiday break in observance of the Holy Week and Bataan Day on April 9.

For the month of April, the following are the venues and schedules of satellite/qualifying tournaments: every Wednesday and Friday at San Mig Alabang Town Center; every Thursday at Elbow Room, Metro-Walk, Pasig; April 14 at Airport Casino Filipino; April 21 at Hyatt Manila Hotel and Casino; April 29 at CF Cebu-Lahug and at CF Angeles.

Details of prize structure and tournament rules for the 3rd PPT Million-Peso Hold’Em Championship are posted in the official PPT website, www.PhilippinePokerTour.com. Interested parties may also call the PPT secretariat (c/o Cindy) at 817-9092 or 812-0153.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street , Salcedo Village , 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. For previous columns, you may visit my website at http://bizlinks.linkedge.biz.