BPO not enough for PH: economist

THOUGH the flourishing business process outsourcing (BPO) industry in the Philippines is a “beautiful story”, a senior economist of the Asian Development Bank said it is not enough to keep its economy afloat.

“The BPO cannot save the Philippine economy,” said Norio Usui, senior country economist of the ADB Philippine Office, during an economic forum held yesterday.

Usui pointed out that BPO companies require all their workers to be at least college graduates. He said this leaves out a huge chunk of the population unqualified to work in these companies.

Though the services sector continues to support the Philippine economy, Usui said the sector is not as productive as the manufacturing and industry sector. He said that in later years, when workers from the agricultural sector decided to shift jobs, most decided to join the services sector.

This, he said, is where the Philippines, differs from its neighbors in South East Asia, saying Indonesia, Malaysia and Thailand have strength in manufacturing.

When it comes to labor productivity, Usui said the Philippines lags behind its neighbors and he believes it is because it is slow in the manufacturing and industry sectors.

High wages

He also disagreed with some arguments that high wages can be a hindrance to productivity, pointing out that Japan has more expensive wages than the Philippines but they are so much more productive. And while power rates in the Philippines are the most expensive in Asia, surpassing that of Tokyo, he believes this will not hinder manufacturing companies from operating here.

He presented a graph that showed the share of electricity in total production costs of most manufacturing plants is about two to three percent.

Usui suggested that the Philippines diversify its export products by making the most of its capabilities. He cited the need to identify high-value products that the country is capable of producing.

But should the country wish to produce more things beyond its capabilities, Usui said the best option would be to attract foreign direct investments (FDI). Again, he lamented that the Philippines only took in $18 billion in (FDI) last year, as opposed to Thailand’s $71 billion, Malaysia’s $51 billion, Vietnam’s $43 billion and Indonesia’s $42 billion.

With the strength of the BPO, Usui said the country will prosper even more if it
builds on its manufacturing sector, and the country can “walk on two legs” instead of just relying on the BPO and overseas Filipino workers’ remittances.

ADB Philippines director Neeraj Jain said the country’s source of economic stability is in the BPO and OFW remittances, which allows for strong consumption.

However, he noted some problems that the country faces including weak labor market indicators, slow poverty reduction and slow labor productivity growth.

Despite glowing economic indicators, Jain noted that unemployment and underemployment in the country remains unchanged. “You expect that when an economy grows, there are more jobs. But that is not happening.” He said 25 percent of the country’s labor force is either looking for a job or are looking for better ones.

Unacceptable

Jain also finds “unacceptable” the poverty situation, which saw an addition of three million poor people from 2003 to 2009 and poverty incidence growing from 24.9 percent in 2003 to 26.5 percent in 2009.

And while the Philippines saw an 83 percent rise in government spending for the first five months this year, Jain said this is still low by Asian standards, as the spending is less than two percent of the country’s GDP while China’s public spending accounts for seven to eight percent of its GDP.

He cited the strong consumption, increased public spending especially in infrastructure and strong business sentiment from both domestic and international entities as factors that will support the Philippine economy. However, he cautioned against global oil prices and the state of the US and European economies as risks that need to be looked out for.