To what extent would the outsourcing transform Philippine economy is a big question. What is certain, according to industry leaders, is that more BPO businesses are coming the Philippines’ way. This is because of several factors.
First, doing BPO here is very cheap (i.e. about a tenth of the cost of the same activity in the US). Second, there is a trend for big outsourcing companies to establish a network of BPO operations worldwide to minimize risks. Third, the expansion of broadband and the availability of a cheap labor pool make the Philippines very attractive. More than 60 percent of the 400,000 graduates that join the labor pool each year finished courses required by outsourcing companies (e.g. medical and allied professions, engineering and technology, law, fine arts, computer science, business and related professions among others). Many of them may not qualify for voice services, but a greater number could easily fit into the fast growing non-voice services (e.g., medical transcription, engineering and architectural design, animation, litigation support, and financial services including auditing, payroll processing, among others).
By 2010, the Board of Investments expects BPO revenues to reach US$6.4 billion, investments by P45 billion, and cumulative number of jobs by more than 640,000. With that scale of business, one could expect several possibilities.
One, outsourcing would further strengthen the role of cities in the Philippines economy. In last thirty years, the government have been granting fiscal incentives to encourage “countryside development” and a “balanced economy.” To some extent, investments have been spreading albeit gradually towards regions outside the National Capital Region, particularly the Calabarzon region, Visayas (particularly Cebu and Negros Occidental), and the major cities in Mindanao (e.g. Davao, General Santos, and Cagayan de Oro in Misamis Oriental) in the last 15 years. With outsourcing, the trend towards “balanced development” may reverse, particularly if the government could not attract more investments into agriculture as well as the infrastructure sector. That could mean accelerating urban primacy with its attendant consequences, e.g., overstretched social services, greater rural-to-urban migration, traffic congestion, environmental stress, among others.
Two, there might a moral hazard associated with higher growth through the services sector. The problem with the BPO type of business, is that—as economist Cielito Habito would put it—they don’t have much linkages with the rest of the economy. Thus, achieving equitable growth would still hinge on the traditional trick of providing greater government investments in rural infrastructure. In would also mean implementing reforms such as deregulation of shipping to spread the dynamics of urban growth to the rural areas. The danger is that the government might postpone reforms, knowing that the economic is not performing badly because of the continuing buoyancy of the services sector, courtesy of outsourcing and the continuing inflow of dollars from overseas workers.
And three, BPO may yet transform Philippine politics as well, for better or worse. The rapid growth of the urban services sector, buoyed by the fast growing outsourcing industry may help expand the ranks of the middle class (or at least the number of people with middle class consciousness and aspirations). In theory, the middle class are the most articulate people in society who are expected to demand greater transparency, efficient social services, clean bureaucracy, and a better-managed economy. We have yet to see this trend in the Philippine context.
When the “gloriagate” tapes surfaced a few months ago, some people expected the middle class—or at least the young cellular phone-bearing people—to another “Edsa revolution.” That did not happen. The reason, perhaps, is that the young cellular phone-bearing ones are now working at the call centers, medical transcription companies, and back office operations businesses. Those who are not yet working at the BPOs are just too busy polishing their English or brushing up their resumes. Hence, those who want to see another instant “revolution” against Gloria Arroyo might feel betrayed.
Has the BPO become an “opiate of the masses”? Maybe not. Maybe the young ones want change, but having acquired a little stake in the system, after learning the importance of rules-based behavior due to greater exposures to foreign ways, they would rather want change to come within certain sets of predictable rules.