Should Filipinos worry about Obama’s anti-BPO bill?

Paterno Esmaquel II
A bill to punish American companies that send jobs abroad is worrying some outsourcing players in the Philippines, but some shrug it off as just an offshoot of the political goings-on in the US

 

MANILA, Philippines – A bill to withdraw incentives from American companies that send jobs abroad is worrying some outsourcing players in the Philippines, but some shrug it off as just an offshoot of the political goings-on in the US.

On Wednesday, Jan. 11, 2012, President Aquino described House Bill 3696 or the US Call Center and Consumer Protection Act, which US President Barack Obama himself supports, as “election-related” and will not likely prosper.

“We have to take into account that this is an election year, and so it may be an election-related statement,” he said when he graced the inauguration of EXL Service Philippines Site II, a new call center in Mall of Asia in Pasay City. 


A few days ago, local industry players expressed concern about the implications of the bill, which seeks to disqualify American firms that outsource their operations from receiving incentives. But it is a reincarnation of similar efforts in the run-up to the 2004 and 2008 elections in the US. These previous moves by the American lawmakers did not prosper as major businessmen lobbied hard against legislation that, to them, did not make business sense. 

But while outsourcing jobs to cheaper providers abroad allowed American companies to stay globally cost competitive, it’s a strategy that has backfired politically. The US continues to suffer from serious financial troubles triggered by the housing bubble in 2008, and while the trillions-worth of their taxpayers’ dollars were used to bailout ailing American firms, the number of jobless and the and lines for unemployment welfare remain a worry.

Obama is running for reelection in the US that has 13.1 million citizens unemployed as of Dec 2011. This represents an unemployment rate of 8.5% – one of the highest in the past decade but certainly an improvement compared to record high of 10% in 2009.

Being the target of political finger-pointing has been unnerving to Filipino outsourcing players since it is a source of uncertainty. When there is uncertainty in the business environment, investments are often held back or not pursued at all.

Cost-competitive

The Philippines is the world’s top destination of call center investors who take advantage of shared culture, hospitable nature of the Filipinos, and a more discernible spoken English — all crucial to “voice”-based businesses that usually involve catering to customers’ complaints or queries.  

These edge over India, which, in turn, lords over the more profitable non-voice outsourced businesses, has created a key investment driver to the Philippines, generating over $7 billion revenues annually and, more importantly, creating roughly 640,000 jobs for Filipinos, most of whom would have left for greener pastures abroad as did over one-tenth of the population.

This makes up 1.6% of the entire labor force in the Philippines last year, according to the latest data from the Bureau of Labor and Employment Statistics. 

The BPO subsector that the bill will potentially hit – call center companies – employs at least 57.5% of BPO workers, according to a 2009 study by the Bangko Sentral ng Pilipinas that was published in 2011.

Call centers also contribute the most revenues among BPOs, at 50.9% when the survey was conducted.

The call center business, however, is a low margin and pretty footloose enterprise as investors have only to replicate a couple of computer units when setting up in another proficient English-speaking country with good Internet-based services.  

As part of their business strategy to survive and thrive, members of the Business Process Association of the Philippines (BPAP) try to lure their clients to invest and outsource more of their business processes here by first allowing them to get an initial experience of having a call center. Their goal is to slowly work their way up thru the value chain. BPOs that tap highly skilled professionals, like lawyers, financial experts, engineers, journalists, among others, are more profitable and tend stick to the host country longer than do call centers.

It’s a value proposition that clients abroad, including American businesses, have found irresistible in the past decade, and which became more valuable in recent years amid a global business and economic environment where budget conscious customers rule.

“Outsourcing is not about taking away jobs of other economies but it is providing cost efficiency for businesses to be able to expand and create jobs in their homeland in the long run,” shared Martin Crisostomo, BPAP executive editor for external affairs.

“At the end of the day, like any other country, the US would want to make their companies more effective, more competitive. And if  outsourcing is one of the keys towards that, then I will assume that it will continue,” President Aquino said at the call center launch.

OUTSOURCING. The business process outsourcing industry in the Philippines is a dollar-earner and key provider of jobs

Lobby  

President Aquino also said the Philippine government is not inclined to lobby against the US bill, reflecting his confidence that the measure would not prosper.


“This issue was brought up during the last elections in America and from that time, which was 4 years ago and now, the situation has not changed. Perhaps there isn’t that much of a need [to lobby] yet,” he said. 


Earlier, Trade Secretary Gregory Domingo told reporters that the Philippines will “lobby against the bill through our embassy led by Ambassador Jose Cuisia and also through the Filipino communities in the US.”

“We are very concerned about it and we will lobby in the US Congress,” Domingo said.

On the other hand, the BPAP said they are banking on their American investors to influence their legislators in the US and stress how outsourcing had contributed to these companies’ profitability.

“We are hopeful that those who benefited from outsourcing can relay to the policy makers in the US that outsourcing will be more helpful to their economy,” said BPAP’s Crisostomo.

He said this recent development keeps Filipino BPOs on their toes because these could put them in stiffer competition against American companies that offer similar services.

“That will encourage us… to step up (our) game,” he said, citing the need for better product knowledge, customer service orientation, and sharper skills in speaking English

He also noted that Obama’s previous campaign against outsourcing didn’t actually kill the industry in the Philippines. The BPO industry has even grown by an average of 20% a year since 2008, he said.

Don’t beg

For its part, Kabataan party-list said it anticipates Obama’s pronouncement to “stem the influx of BPO industries into the Philippines.”

“However, the Philippine government should not beg for the continuation of such influx of outsourced jobs, but should instead focus on creating the conditions for actual job generation where we rely not on (the) push and pull of the international market such as (in) the BPO industry,” Kabataan party-list spokesperson Terry Ridon told Rappler.

“What young workers need are permanent and regular employment, where they are not mere temporary voice agents of a Wall Street blue chip,” he said.

Ridon added that his group knows “the pernicious effects” of graveyard employment on BPO workers’ physical, emotional, and social well-being.

Crisostomo, on the other hand, stressed that BPOs are in fact “anti-poverty” as they offers salaries higher than in other industries.

Proposed law

The specific impact of US-based insourcing moves remains unclear for the Philippines, however. US President Obama has yet to outline his renewed campaign against outsourcing after he delivered a strong statement about it late last week. (Watch Obama’s latest speech on BPOs here)

“We’ve got to keep creating jobs. And we’ve got to keep rebuilding our economy so that everyone gets a fair shot, everyone does their fair share – and everyone plays by the same rules,” Obama said in a message as he described 2012 as “a make or break moment for the middle class and all those working to get there.”

“We can’t go back to the days when the financial system was stacking the deck against ordinary Americans. To me, that’s not an option. Not after all we’ve been through,” the US president added.

The proposed law also wants to require call center agents to disclose their physical location to callers. – Rappler.com

 

Paterno Esmaquel II

Paterno R. Esmaquel II, news editor of Rappler, specializes in covering religion and foreign affairs. He obtained his MA Journalism degree from Ateneo and later finished MSc Asian Studies (Religions in Plural Societies) at RSIS, Singapore. For story ideas or feedback, email him at pat.esmaquel@rappler.com.