Outsourcing: The wave of the future

Citing urgent and extraordinary steps they have taken to strengthen economic growth, leaders who attended the two-day APEC Summit in Peru believe the global crisis will be over in 18 months. The simmering resentment between China and the US showed, however, with Bush pleading for world leaders to sustain free and open market policies, which was in stark contrast to Hu Jintao’s cutting remark that “a new international order” called for “fair and just” – meaning better – regulations to prevent a repeat of the financial meltdown. Nevertheless, the overall sentiment was positive particularly with most everyone agreeing this is not the time for countries to adopt “over protectionist” measures.

This should offer some measure of hope for the Philippines considering that substantial cut-downs are expected on its number one export – our overseas Filipino workers or OFWs. OFWs have been almost single-handedly keeping the economy afloat with their billion dollar remittances. Despite the crisis, the Bangko Sentral disclosed that a monthly inflow of around $1 billion is still sustainable for the rest of 2008 until 2009. Remittances from January to September this year reached $12.3 billion, or an increase of 17.1 percent over the same period last year.

The Department of Labor and Employment had earlier predicted a worst-case scenario where up to 50,000 OFWs could lose their jobs due to the US financial crisis, but recent reports from DOLE and NEDA show a bleaker picture with the prospect of hundreds of thousands of OFWs losing their jobs.

Just last week, more than 500 workers from Taiwan were retrenched and sent home because their employers have gone bankrupt. Some 268,000 factory workers in South Korea, Taiwan and Macau are facing job cuts, and the same goes for 130,000 Filipinos employed in cruise ships who are also in danger of being laid off. With Singapore and Hong Kong already in recession, Filipino domestic helpers could also be sent home, although some say these workers have better prospects since their employers will be busy seeking better financial prospects and thus will need the helpers to look after the kids and home.

According to DOLE, contingency measures are in place to assist these returning OFWs. These consist mainly of setting up businesses for those who are no longer keen to work abroad, or helping the displaced workers find employment in other countries. Labor Secretary Marianito Roque disclosed that negotiations are being made to open up employment opportunities in Canada, Australia, Japan, New Zealand and other countries. British Ambassador Peter Beckingham also said employment opportunities will continue to be open for OFWs especially nurses, engineers, doctors and teachers.

Surprisingly, a bright spot comes from the business process outsourcing industry with news that Citigroup has chosen the Philippines as a regional BPO hub and will be employing an additional 1,000 employees by next year. A Citibank executive confirmed there will be a lot of employment opportunities for the Philippines from call centers to financial reporting and service centers, among others.

The local BPO sector is apparently optimistic that prospects will continue to be good for the industry particularly for “non-voice” services such as animation and graphics, accounting and other back-office services, software development and other technical support services. By the end of 2008, an estimated 400,000 will be employed by the BPO industry, whose gross revenues are expected to reach $6.8 billion this year, or an increase of $1.9 billion over 2007 revenues.

While the local outsourcing industry may not hit its projected target of employing one million workers by 2010, this is still an upside considering that India, the world’s biggest outsourcing center, is reportedly headed for a “flat to negative growth” and may even cut down as many as 50,000 jobs. Countries with a substantial number of call center workers have become jittery with US President-elect Barack Obama’s statements that tax breaks will not be given to US companies shipping jobs overseas.

Analysts, however, believe the statement was mere “rhetoric” and that it was more in the context of manufacturing jobs, and will not likely affect the offshore business. Analysts say the US will soon come to realize that it will need to cut costs to effect a quick economic recovery – and outsourcing is a major factor in cost-cutting.

In 2006, India’s revenue from the outsourcing industry was estimated at $11 billion, with projections that it could reach $30 billion by 2012. The Philippines is acknowledged to be the second biggest off-shoring center after India. Government and the private sector must work together to strengthen the great potential of the local BPO industry, since this will bring in billions of dollar revenues without Filipinos needing to leave the country. While OFW remittances have continued to shore up our economy, more often than not the billions of dollars they send home come at great cost to their families.

One astute businessman told me that for every business turmoil, there is always an opportunity. When the BPO sector was just starting, it was hailed as the Philippines’ sunshine industry, and with good reason. Today, it is shaping up not only as the proverbial silver lining behind dark economic clouds – but more importantly, it is turning up to be the wave of the future.

***

Email: [email protected]