BPOs need to ‘level up’ as protection against Trump – NEDA

MANILA, Philippines – The country’s fast growing business process outsourcing sector will have to push into higher value services in the face of United States President-elect Donald Trump’s potentially damaging trade war, the National Economic and Development Authority (NEDA) said.

Trump was swept to power last week on the back of a campaign platform that promised, among others, to increase trade barriers in a bid to bring jobs back to the US.

In the aftermath of his victory, analysts and lawmakers have warned that his policies could start a trade war globally and could hurt the Philippines’ BPO sector, which derives around 90% of its export revenue from the US market.

“In case trade war does happen, we are looking at several transmission channels and one of the sectors that could be affected, although were not saying it would be, will be the BPO sector,” said NEDA Deputy Director General Rosemarie Edillon during the Ambisyon Natin 2040 Expo held on Tuesday, November 15.

“In terms of BPOs, we really need to level up. We might lose the English voice sector so we really have to go non-voice into more value-added business processes,” she added.

Examples of this, she said, include creative processes like animation as well as legal, accounting, and medical outsourcing.

The NEDA official also pointed out that the BPO industry had already formulated a new roadmap that would help the sector graduate into these higher value services.

Another option for BPOs, she said, is to take advantage of the opportunities presented by the new Asean Economic Community (AEC). While not an English speaking market, it still presents lots of opportunities for outsourcing.

Despite the looming threat, NEDA remains confident that a trade war would not materialize. Edillon echoed the opinion of Finance Secretary Carlos Dominguez III that “Trump the candidate will not be Trump the President.”

“He’s a [political] newbie and it’s a very strong political party system in the US and therefore he would have to toe the Republican party line. So what he said during the campaign, including the promise to slap a 15% tax on all US firms who outsource, would probably not hold if he has to,” Edillon said.

The philosophy of the Republican party, she explained, is really more of free market, free trade, lower taxes so if that is the case then the trade war would probably not happen.

She continued, “This strategy of outsourcing also makes US firms competitive so I think pressure will be there for him to tone down that part of his policies.”

New development plan

NEDA has been pushing for the workforce to move into science and technology. It has incorporated this strategy into the new Philippine Development Plan (PDP) that it is working on.

The PDP will be used to dictate the direction of development policies between 2017 and 2022 and is expected to be released by the end of January next year. It also targets reducing poverty incidence to 14%, from the current 21.6% and for per capita income to double by 2022.

In this, NEDA is hoping to emulate the examples of Malaysia and South Korea in utilizing science and technology to generate growth.

“We’re hoping that a lot more products and technology will originate from the Philippines. For this PDP, we actually have a separate chapter dedicated to science, technology, and innovation,” Edillon said.

“There will still be technology and innovation that is meant to address current problems, like raising agricultural productivity and manufacturing. But apart from that, we want more cutting edge technology so we’re talking artificial intelligence, biotechnology with the emphasis given to indigenous materials,” she added.

Additional focus, Edillon said, will also be placed on disaster risk reduction research because the country “can do a lot of experimentation given that [it] is frequently hit by natural disasters.”

The NEDA official said the new PDP will address the planning concerns for skills needed and the budget to be allotted for it.

She also noted that the Senate has gone one step further by increasing the budget for scholarships for those who are involved in science, technology, engineering agriculture and fishery research, and mathematics (STEAM) courses.

“We’re looking at Malaysia as a model because they were able to increase their per capita income by threefold in 33 years, and we are also looking at South Korea because they were able to do it in 20 years. We want to be able to do it in 25,” Edillon said. – Rappler.com