Cielito Habito, Philippine Daily Inquirer
First Posted 20:01:00 11/09/2008
AMID ALL the jubilation that has widely greeted the historic election of America's first African-American President, not a few in the developing world are worried or at the very least, temper their celebration with some apprehension. The fear stems from President-elect Barack Obama's many campaign statements that vowed to "bring the jobs back home" for American workers.
Many in India, in particular, had closely watched his campaign and examined every statement he had made on the issue. What particularly struck Indians was Obama's reported lament on how American jobs have been "Bangalored," presumably alluding to that Indian city's prominence in India's outsourcing industry, particularly in information technology. If the Indians, whose outsourcing industry depends on the United States for 60 percent of the business, are fearful, shouldn't we in the Philippines, where our own outsourcing industry has an even higher 85-90-percent dependence on the United States, worry even more?
Senator from Punjab
Sen. Hillary Clinton, by the way, was much more acceptable to the Indians worried about their outsourcing industry because of her explicit support for outsourcing. In a visit to India in 2005, she declared in a speech before Indian industrialists: "There is no way to legislate against reality. Outsourcing will continue." In a March 2006 fundraiser in Maryland, Clinton was effusively introduced by Dr. Rajwant Singh, a prominent Indian-American leader in the area, as the senator not only from New York, but also from Punjab. Playing along, she had answered then, "I can certainly run for the Senate seat in Punjab and win easily."
The Obama campaign subsequently circulated an "off-the-record" memorandum to journalists entitled "Hillary Clinton (D-Punjab)'s Personal Financial and Political Ties," with the off-color "Democrat-Punjab" joke later publicly disowned and apologized for by Obama. Still, the incident underlined what appeared to be a major policy difference between Hillary Clinton and Barack Obama, with the latter appearing as "anti-outsourcing." Notwithstanding this, the Democratic Party is said to be broadly committed to outsourcing, but with a caveat: It does not "believe in tax giveaways that reward companies for moving American jobs overseas."
Carrots, not sticks
This "safe" stance is, in fact, reflected in the many statements Obama has made on the issue throughout his campaign. Typical of Obama's statements on the issue was what he said in a campaign speech in Dublin, Ohio: "We're going to take away tax breaks to companies that ship jobs overseas. We will give them to companies that invest right here." In Colorado, he said: "I've proposed a new American jobs tax credit for each new employee that companies hire here in the United States over the next two years."
Actually, US economists and legal advisers point out that there are no tax breaks enjoyed specifically by firms that outsource. They believe that Obama may be alluding to broader tax avoidance strategies, such as the ability of multinational firms to legally avoid taxes on profits by moving money overseas. Thus, his position really boils down to offering "carrots" in the form of tax incentives for US firms to keep jobs at home.
Some analysts believe that such tax instruments would have little real impact. "Any plans for a tax code change are like trying to plug a hole in a leaky dam with your finger--to believe (that) the US government tax code promotes outsourcing is a major misconception...," according to Joe Greco, director of California State University-Fullerton's Center for the Study of Emerging Markets. And tax incentives to keep jobs in the United States may not do it; Nielsen Co. recently chose to give up local tax breaks it was already receiving in Florida, when it decided to outsource to an India-based firm.
Manufacturing, not IT
He may have mentioned Bangalore, but does Obama really have the IT and business process outsourcing industry in mind when he talks about curbing outsourcing? His Ohio speech mentioned above was prefaced as follows: "You are working harder and harder just to get by. Tens of thousands, hundreds of thousands of manufacturing jobs have left." He was, in that instance, talking about manufacturing jobs lost as American firms relocate production operations abroad. Similarly, in Iowa, he said: "We may not be able to stop a company from moving, but we can stop providing it incentives to move." He was talking of companies moving, i.e., transplanting their core production operations abroad, not those who simply outsource their accounting, or transcription of records, or other backroom business processes to BPO firms in India or the Philippines. In that case there is nothing for us to fear, then, as there is little of American manufacturing activity in the country that we stand to lose at this point.
The media have asserted that Barack Obama won the US Presidency because the American people believed he would be the one who could fix the US economy, which 60 percent of Americans identified to be the foremost challenge facing them today. With that faith, the current euphoria over his victory, and the Americans' cooperation, chances are he will eventually succeed. In the end, a reinvigorated US economy will be good for the Philippine economy, too, just as it would be for everyone else. It's in that way that an Obama presidency would, in fact, be good for our economy.