Philippines outsourcing sector holds up amid AI concerns

MANILA, Philippines — The Philippines has yet to see an artificial intelligence (AI)-driven collapse in its outsourcing industry, with business service exports and related employment continuing to expand, according to HSBC Global Investment Research.

In a report, HSBC said Philippine exports of other business services have risen steadily in recent years. These revenues come mainly from the business process outsourcing (BPO) sector, which handles business functions for client companies.

The findings suggest that AI has so far failed to trigger the sharp downturn feared for economies heavily dependent on outsourcing.

“Export revenues from ‘other business services’ (in the Philippines), mainly from the BPO sector, rose steadily in recent years, with no collapse evident,” HSBC said.

HSBC acknowledged that Philippine export growth since 2023 has been slower than in the years leading up to the pandemic. Even so, it said the sector continued to expand at a healthy pace.

The Philippines and India were central to HSBC’s analysis because of the important role outsourcing plays in both economies.

The bank said the prospect of automating large portions of outsourced work has raised questions about whether AI could weaken the business model of providing services across borders and reduce employment.

So far, however, regional export and employment trends have not shown such a collapse.

Across much of Asia, average annual growth in other business service exports after 2022 was faster than in the three years preceding the pandemic, according to the report.

Still, HSBC cautioned that the continued expansion does not mean workers have escaped disruption. Some jobs have become obsolete while demand for other roles has increased as employers’ skill requirements change.

“Sure, there are changes beneath the surface: some jobs have become obsolete, others are in greater demand, but the outsourcing sector is adjusting,” it said.

HSBC offered two possible explanations for the industry’s resilience: AI may have yet to make its full impact felt, or it may be helping outsourcing firms operate more efficiently.

The technology could support outsourcing to countries such as the Philippines and India by improving worker productivity, making quality control easier and enabling more work to be handled remotely, the bank said.

For now, HSBC said the continued need for human involvement is helping sustain demand for services supplied from abroad.

“So far, then, the arrival of AI has not undermined the need to source certain business services across borders,” HSBC said.