The BPO sector moving forward

BPO Sector Donald Trump

The election of Donald Trump as US president last November brought mixed reaction in terms of its impact on the Philippine economy and the business sector.

Some analysts and businessmen feared that with his protectionist “America first” statements during the campaign, a Trump presidency would slow down, or even cause a withdrawal of investments from the Philippines.

Others believe that the Philippines’ many advantages as an investment hub would continue to attract investors, who are generally driven by the profit motive.

My own view, which I discussed in previous columns, was that his election would not drive American investors in the Philippines to pack up and leave, despite Trump’s strong rhetoric about bringing back jobs to the United States.

I also said that while there might be uncertainty under a Trump presidency, American businesses will not just follow whatever their president said. The ongoing controversy over US President Donald Trump’s immigration ban also showed that he could not always get what he wanted despite being known as the most powerful man in the world.

Last month, Trump issued an executive order suspending immigration from seven predominantly Muslim countries—Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen—for at least 90 days and the refugee program for four months.

The state of Washington filed a lawsuit in federal court challenging the ban. In response, a federal judge in Seattle early this month issued a nationwide temporary restraining order to block Trump’s immigration ban.

Subsequently, the US Department of Justice filed an appeal with the US Court of Appeals for the Ninth Circuit in San Francisco. On February 9, a three-man appellate court panel denied the appeal.

The unanimous decision by the three judges was described in news reports as a sweeping rebuke of the administration’s claim that the courts have no role as a check on the president.

As far as the Philippines is concerned, the business process outsourcing (BPO) industry had been identified as the sector that could be heavily affected if Trump’s protectionist stance prevailed. It employs more than a million Filipinos and generates foreign exchange exceeding $20 billion a year, providing another major dollar stream for the country, in addition to remittances.

The strength of institutions in the US, which also include (aside from the judiciary) the legislature and the press means that the strong statements made by Trump during the campaign, particularly those affecting investors, could eventually fizzle down, allowing US companies to go back to their routine: doing business and making money, such as in their outsourcing operations in the Philippines.

The Philippines, with a strong domestic market and a robust economy, offers competitive advantages as an outsourcing hub for American companies, which dominate the local BPO industry. For example, labor costs in the Philippines are estimated at about 25 percent of US wages. Filipino workers in the information technology and BPO sector are also preferred for their English fluency, compatibility with western culture and excellent work ethics.

The government also has thrown its full support for the BPO industry through incentives. For its part, property developers continue to ramp up construction of office buildings to satisfy the requirements of the BPO companies.

Google, which opened an office in Makati in 2013, says the Philippines is a key market in terms of its digital economy and tech-savvy population. The entry of the technology giant is expected to encourage more technology companies to invest here.

Going forward, I don’t see the BPO industry dying or slowing down significantly. It will survive as long as it remains cost-effective, and as long as the economy sustains strong growth.