Philippines Frets as US Targets Outsourcing

MANILA: In a bustling reception area, two 21-year-old college graduates clutch their application papers and anxiously await job interviews.

To pass the long minutes, Manuel and Liza wearily eye television coverage of the US Democratic National Convention as a parade of keynote speakers deliver an ominous message: outsourcing is hurting the United States and should be curtailed.

“Hopefully these are just more empty promises,” said Manuel, as he waited with friend Liza for a chance to join US firm Convergys Corp, one of the main call centre employers here.

“I don’t know what would happen to the Philippines if the US was serious about ending outsourcing.”

The two are among a growing number of Filipinos who appear daily in offices such as this for a chance to do work outsourced from the United States and other first-world countries.

They are being cast as villains as Democrats and Republicans raise the protectionist rhetoric in the run-up to November’s presidential election, blaming firms for exporting American jobs to India and the Philippines.

For Philippine graduates, working in call centres or processing documentation for foreign firms represents one of the few hopes they have of finding a decently paid job at home rather than being “outsourced” themselves to work in a foreign land.

With unemployment at 13 percent, the highest rate in Southeast Asia, the fast-growing industry is a rare bright spot for an economy unable to create enough jobs for its 300,000 graduates a year and stop a brain drain of migrants to wealthier countries. Given that the United States accounts for 90 percent of outsourced work in the Philippines, stricter tax steps being threatened against firms that transfer work abroad could prove disastrous, some industry executives say.

“Outsourcing is the line of hope for this country,” said Ramon Dimacali, head of Outsource Philippines, a federation of companies actively promoting a greater foreign presence in the country. “A lot of people in this country dream of going to America. Now they realise that they can have a global mindset here, stay with their families, and earn in their own country.”

While India has borne the brunt of US angst over outsourcing, the Philippine industry is growing fast and employs more staff relative to the country’s total population.

Around 130,000 people work in Philippine call centres and back office service centres, compared to 245,000 in India. The number of agents in call centres alone has doubled to about 40,000 over the past year and industry executives expect that number to double again by the end of 2005.

Benefits ripple out: A Columbia University survey of 45 US-based companies found the Philippines was the second-largest recipient of outsourcing, capturing nearly 30 percent of the market. “Recruitment is not just concentrated in Metro Manila, but is creating much needed opportunities in the provinces, spreading the wealth across the country,” said Karen Batungbacal, president of the Business Process Association of the Philippines.

The benefits are rippling out to other areas of the economy, which has struggled to attract foreign investment due to perceptions of corruption, bureaucracy and security worries.

Tax revenues from outsourcing firms are helping the government plug a $3.5 billion annual budget deficit that is one of investors’ biggest worries about the debt-ridden economy.

Trade Secretary Cesar Purisima said the call centre industry alone was expected to generate revenues of up to $800 million this year, easing the government’s fiscal headache.

“This contribution is extremely substantial,” he told Reuters. “It definitely helps our economic concerns.”

Purisima pointed to the seamless continuity offered by the 12-hour time difference with New York, a large pool of English-speaking graduates, and low business costs as the main incentives for foreign companies looking to outsource here.

The real estate industry, only now recovering from the 1997 Asian financial crisis, is another beneficiary.

“It is what is saving the office building industry right now. We have plans for three structures dedicated to BPO (business process outsourcing),” said Maria Anonuevo, vice president of Ayala Land Inc, the country’s largest property firm.

Incentives too big: Despite the fiery campaign rhetoric, industry officials in the Philippines and US experts say Philippine graduates may not need to worry too much.

Nirumpam Bajpai, co-author of the Columbia University report, found that companies saved between 5 and 50 percent in costs by outsourcing, margins that would likely outweigh any negative impact from tax changes.

“The revenue returns to America are large. These companies are benefiting greatly by coming (to the Philippines),” said Outsource Philippines’ Dimacali. A report on outsourcing released by the US Bureau of Labour Statistics revealed that just two percent of all mass layoffs in the first quarter of 2004 were associated with the movement of work outside the United States.

But other studies have fuelled US voter anxiety with findings that millions of jobs are set to flow to Asian outsourcing centres in the coming years.

Such fears may weigh on the Philippine and Indian industries for years to come, despite appeals for Americans to bear the short-term pain and think of the longer-term benefits.

“Companies should respond by retraining within the US instead of putting up barriers,” said Dimacali.

“Americans should think (outsourcing) can help the companies to grow and create more high-paying jobs in the US while creating jobs in the outsourcing location.” reuters