The apprehensions in the BPO industry

Updated October 22

Did you know that the  Information Technology and Business Process Management (IT-BPM) industry has grown to be the second largest source of dollar income for the Philippine economy ? According to the Information Technology and Business Process Association of the Philippines (IBPAP), the industry generated 1.2 million direct jobs and US$ 22 billion in revenues in 2015. By one estimate, 77% of BPO services are for American companies.

But there is confusion over President Rodrigo Duterte’s announcement on the Philippines “separation” from the US  (Update :Duterte says he will not sever U.S. ties).  The Business Process Outsourcing or BPO industry are concerned over Duterte’s strong statements.  Trade Secretary Ramon Lopez says that the statement of the President simply means “maintaining relationship with the West and just breaking dependence with western allies, but (we) don’t need to necessarily sever ties and stop trade and investment.”  Even the Department of  Information and Communications Technoloy (DICT) issued a statement that  “business investments, contracts and commitments, local and international, in the country and for our country will be honored by the Philippine government.”

Socioeconomic Planning Secretary Ernesto Pernia clarifies that “BPOs will continue. BPOs will not be touched. They have provided us with foreign exchange and it’s now even higher than or it’s going to be higher than OFW [overseas Filipino worker] remittances”.

READ: Are We Willing And Ready To Cut Ties With The US? 

Still the President’s announcement is causing this American  BPO owner to be worried.  On Reddit, the American BPO owner with username bovine_somatotropin  added that “other foreign business owners are worried too. Indonesia and Vietnam are beautiful countries but it’s not as easy to do business there as it is here. India? I’d rather go back and work a desk job in America than run a business there – even if my cost of doing business is far lower.” The American BPO owner will “begin the arduous process of researching alternative locations to run” his  business in the event that the Philippines will no longer be a viable option. “.

So I asked the sentiments on twitter.

Dean Bocobo tweets that “the possible loss of BPO revenues looms large. ”

The possible loss of BPO revenues looms large. No way China can replace lost business from the West.We DON’T SPEAKA DA CHINQUI @lesliebocobo

— Dean Bocobo (@SagadaSun) October 21, 2016

Dave who has a senior position in a BPO says his co-workers ” fear that they’ll lose their jobs cuz clients may pull out and they won’t get another job easily”

They’re scared. US is still the major market for BPO. https://t.co/S9ILLTrpR7

— Dave Si (@DaveSi) October 21, 2016

They fear that they’ll lose their jobs cuz clients may pull out and they won’t get another job easily https://t.co/S9ILLTrpR7

— Dave Si (@DaveSi) October 21, 2016

Dave adds that “anytime clients are exposed to risk they move. And when clients leave BPOs lose money. That means less jobs for Filipinos”.  He says “clients outsource to save money, not to invest. Most BPOs just rent so it’s easier to pull out in risky situations”.

.@momblogger Anytime clients are exposed to risk they move. And when clients leave BPOs lose money. That means less jobs for Filipinos

— Dave Si (@DaveSi) October 21, 2016

A memo will be issued soon in one BPO center.

@momblogger this is true. An American BPO where a cousin of mine works will be releasing a memo soon in view of Duts recent pronouncements

— KookiePie (@slmontes1025) October 21, 2016

Another is positive that the US businessmen won’t leave the Philippines.

@DaveSi @momblogger US businessmen are for revenue if PH US cut ties it doesn’t mean they will leave PH. Business as usual.

— iamlee (@iamleeback) October 21, 2016

On another positive note, Wilson Ng shares a note from a BPO executive that he is “confident that our company does not make business decisions based on current foreign policies. Policies and positions change, presidents have term limits, etc. Our operation will outlast anyone in office.”

While I agree that the existing BPOs may not be affected , some may choose not to expand their operations in the Philippines. Pert Cabatana in a comment says that it is “correct to say that security of the operations that are already here is assured. The big negatives are:

1. postponement of expansion of existing operations,
2. cancellation of planned projects,
3. blacklisitng of PH for future investments.

A friend is hopeful that the BPO industry doesn’t contract. “That’s a US$30 billion opportunity by 2022, currently a bit more than half that. ” He will be attending the “launch of the IT-BPM Roadmap 2022, which happens to be concurrent with the Duterte administration (barring Constitutional tweaks), and I hope the news is just as bullish as it was four months ago when the team developed the roadmap.”

Just as I published this commentary , the president clarifies that he will not sever U.S. ties.

“Separation of my foreign policy, that it need not dovetail the foreign policy of America. That’s what I meant actually…Separate is just to chart another way of doing it”

Whether the Philippines will separate or sever ties, the strong statements of the President is causing some jitters among the BPO industry.  The problem according to the American BPO  owner is that nobody really has a grasp on how far he’s willing to take things or what he’s going to do. It’s this uncertainty that is scary. With all these jitters, what will happen to the BPO industry in the Philippines?  Duterte needs to clarify quickly and  exactly “where the BPO industry falls into all his anti-US rhetoric. Millions of jobs are at stake and people are naturally concerned.”

The President must talk with the BPO industry and assuage their fears.

This post is supported by a writing grant from the Philippine Center for Investigative Journalism (PCIJ)