Wednesday, September 12, 2007

Talent war hits the Philippines hard

By David L. Llorito, with Jesse Edep & Louise Francisco (Researchers, BusinessMirror)

When the management of Fairchild Semiconductors, a global electronics firm, offered industrial engineer Manuel Villa, 32, a management job in Singapore three years ago, he didn’t hesitate to grab the offer. Not only was the pay great—five to six times higher than what he is earning in the Philippines—moving to Singapore, he believed, could also open doors for future career advancement.

“The No. 1 factor [for my decision] was exposure—the opportunity to work and be trained in a different culture, in a headquarter-corporate level setting, which should open a lot of other doors for me in the future,” Villa explains. “It will greatly help my marketability should I decide to pursue a position in our US office or other companies, either in Singapore, other countries, or even back home in the Philippines.”

Fairchild has multiple operations in the region, including South Korea, Penang in Malaysia, Suzhou in China and Cebu in the Philippines. Since most of the sites are in Asia, the company decided it was time to set up a regional office.

“Singapore is the central and best location. A group was formed, by picking out specific individuals already working for the company, to form the pioneer team. I was one of those picked and endorsed from the Cebu site,” boasts Villa.

Villa is a typical beneficiary of what human-resource experts describe as the intensifying global “war for talent,” as companies—both local and foreign—fight tooth and nail for skilled workers all over the world. And while the stiff competition for talents is benefiting Filipino professionals, private companies are concerned that the loss of local talent would hamper the competitiveness of the domestic economy as companies find it hard to match the offers from multinationals.

A growing concern
In a study by Grant Thornton International released by the accounting firm Punongbayan & Araullo (P&A), 43 percent of Philippine companies picked the scarcity of skilled labor as the “major roadblock” to their expansion plans. Last year, only 15 percent of Philippine companies complained of the same problem.

With the steady exodus of the country’s best and brightest, it was only a matter of time, the study warned, before local businesses would begin to show signs of strain over the brain drain.

“The results this year clearly reflect the problem that employers across industries are experiencing, which is the draining of our local talent pool,” says P&A’s managing partner and chief executive Greg Navarro. “Even in the accounting practice, we are struggling to compete with foreign firms that see the Philippines as a good resource for highly trained, English-speaking certified public accountants.”

Indeed, official statistics from the Philippine Overseas Employment Administration shows that the country has been practically bleeding talents. Since 2000, the Philippines has been sending an average 79,000 professional and technical workers, 500 managers, 4,000 clerks and 70,000 production workers a year, many of whom are college graduates.

Within the same period, 10,000 nurses have left the country each year for Saudi Arabia, the United Arab Emirates, the United Kingdom, Ireland, the US and other destinations. On average, close to 13,000 caregivers, many of whom have nursing backgrounds, have left the country annually, many of them going to Taiwan, Israel, Canada and the United Kingdom. Japan and South Korea were the favorite destinations for performing artists, averaging 55,000 a year, while IT workers have been leaving at the rate of 300 a year to countries like Saudi Arabia, the US, Malaysia, Singapore and the United Arab Emirates.

The actual deployment of IT workers should be higher as most of them who are now working in countries like Singapore and Malaysia were directly recruited by their would-be employers. Others simply packed their bags and applied directly to companies. It’s so easy to do so because Singapore, being a member of the Association of Southeast Asian Nations, does not require visas from travelers from the Philippines.

“There are many Filipinos here [in Singapore], especially the professionals, middle-income class,” says Villa. “They are into IT and other fields as well, like management, restaurants and hotel-related, engineering, and logistics. Besides domestic helpers, I have met Filipinos working as waiters, department-store personnel, clerks, engineers, managers, academicians, church workers, airline personnel and others more. The Filipino population here has already reached 120,000, and still rising.”

Affecting all sectors
Analysts used to think that the diaspora of professionals only affected a few sectors of the Philippine economy, like seafaring, aviation, engineering, construction and nursing. But in the last three years, it has started to affect almost every sector of Philippine society. The Philippines is sending journalists to Singapore, Saudi Arabia and the United Arab Emirates; engineers and oil-rig workers to Nigeria, Russia and the Gulf states; speech and physical therapists to the US; and mining engineers and geologists to Australia and China. There are now Filipino accountants in Silicon Valley in California, and some are heading for Australia.

According to the Personnel Management Association of the Philippines (PMAP), industries suffering from high turnover rates these days include pharmaceuticals, banking, consumer goods, hotels and restaurants, electronics and semiconductors, and telecommunications and computers. About 33 percent to 59 percent of employees leaving their jobs in these industries, according to a PMAP survey, went abroad.

“In just 12 months, we lost about a dozen human-resource officers to other companies,” says a human-resource officer for a pharmaceutical company.

Even the public sector is increasingly being affected by the war for talent. The country’s weather bureau and the Mines and Geosciences Bureau are losing weather forecasters and geologists to the private sector here and abroad. The Department of Science and Technology (DOST) is hard hit as well. Sources from the DOST reveal that out of almost 3,000 scientists with PhDs in various scientific disciplines, almost 500 have already left the country in the last few years.

Even the military has not been spared from this phenomenon. Sources from the Philippine Army say the Australians are currently recruiting Filipino soldiers.

“They [the Australians] know that Filipino soldiers are well-trained in the different occupational specialties—infantry, cavalry, armor, signal, engineer, etc.—which makes them competent and efficient and can communicate or verbalize very well,” says an Army officer who doesn’t want to be identified. “The Armed Forces of the Philippines is using American military doctrines, and it is compatible with Australian military doctrines.”

The military officer adds that the Australians are luring Filipino soldiers with citizenship offers. Filipino soldiers are also being recruited because of their exposure in asymmetrical warfare or counterinsurgency operations. “For several decades, our soldiers have been fighting the NPA [New People’s Army], secessionists and terrorist groups. The Australians do recognize this Filipino talent,” the officer says, adding that Filipino soldiers who once served as United Nations peacekeepers “established connections during their tour of duty and after they retire or resign, they join the US or UN as civilian contractuals.”

Peter Goellnicht, principal migration officer of the Australian embassy here in Manila, however, denies that Australia is recruiting soldiers from the Philippine Armed Forces. In an interview, however, he admits that he is aware of “a couple” of former Filipino soldiers who were granted visas on the strength of their professional qualifications as soldiers.

Drivers of the global talent war
Noel de Luna, country manager of Mercer Consulting, a global human-resource company, attributes this increasing competition for workers in the Philippines to demographic changes in the US and the Asia-Pacific.

“There’s a war for talent out there because China is growing so fast and its population is aging,” says de Leon. “Japan also has an aging population. If you look at the demographic profile, its working population has been going down since five years ago. But the trend about rising demand for skilled workers is really Asia-Pacific-wide.”

In a region-wide survey by Mercer Consulting this year, de Leon reveals that 50 percent to 77 percent of companies in Japan, South Korea, China, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, Indonesia, Vietnam, Australia and New Zealand have expressed hiring intentions even as many of them are experiencing double-digit attrition rates.

“And where are they going to get new talents? Naturally, many of them would recruit from the Philippines,” says de Leon.

Besides demographic factors, the larger forces of globalization seem to be the bigger explanation. In a paper entitled “Global Competition for Skilled Workers and Consequences,” Manolo aAbella, a Bangkok-based labor-migration expert formerly connected with the International Labor Organization, says that the raging war for talent results from the growth of global supply chains as liberalization of trade policies has made it possible for transnational companies to move production to cheaper locations.

“The emergence of these global production structures have been everywhere, accompanied by greater movements or transfers of technical and managerial personnel,” says Abella. “Another important development has been the growth of informal as well as flexible forms of employment, opening markets for foreign workers willing to enter occupations or sectors abandoned by natives.”

Still another factor is the rapid expansion of the knowledge economy and the demand it has created for a ready supply of young IT professionals, he adds.

According to economist Dieter Ernst, senior research fellow of the East-West Center based in Honolulu, the trend towards “downsizing” among American firms, is also a major factor. Ernst explains that because many American companies operate on a very lean staff, they have to scramble for specialized skills once demand from buyers shifts to new products that require new technologies.

“For many high-tech companies, competing for scarce global talent has become as major concern,” says Ernst. “As a result, global sourcing for knowledge workers now is an important global manufacturing and supply chain strategies. The goal is to diversify and optimize a company’s human-capital portfolio through aggressive recruitment in global labor markets.”

But what’s adding fire to the global talent war is that countries, especially those suffering from low population and labor-force growth, are engaged in systematic recruitment in response to the growing skills scarcity. The US, Canada, Australia and Singapore are among the most aggressive.
Canada and Australia have been offering permanent residence and citizenship as incentives for skilled migrants. Through its H1-B visa, Americans have been luring IT workers to Silicon Valley. Middle-East countries like Saudi Arabia and the United Arab Emirates have been giving temporary admission to skilled engineers, welders, pipe fitters, accountants, journalists, and advertising people from the Philippines and other Asian countries. Australia has also been using its universities as “academic gates” for attracting skilled migrants from all over the world.

Singapore has an office, Contact Singapore, that actively recruits talents from all over the world, offering incentives to would-be immigrants to become permanent residents and eventually become citizens.

“The government does encourage permanent residents with good standing to stay,” says Villa. “They extend all of the basic services they offer to their citizens, including medical services, wherein the social system will help you pay only a fraction of the medical costs. There are tax exemptions—tax rebate payouts—if the government performs well and has a budget surplus.”

Winners and losers
Certainly, skilled workers like Villa are the main beneficiaries of this global competition. Because of the increasing scarcity of talents, vulnerable companies are upgrading pay scales for their skilled workers in an effort to stave off staff piracy from other companies.

Patrick Marquina, an associate consultant for Watson Wyatt, a human-resource firm, notes that this year, 148 companies in manufacturing, business-process outsourcing, banking and other industries operating in the Philippines have raised their pay scales by an average of 9.21 percent, almost three times over the country’s inflation rate. Rising pay scales, Marquina explains, are particularly high in outsourcing and IT-related businesses.

Mercer-Philippines, another human-resource outfit, confirms the trend in a similar survey. Floriza Molo, information product solutions business leader, said 180 companies involved in the consumer, computer and telecommunications, pharmaceutical and other industries have, in the past year, increased their pay scales by an average of 8.13 percent and forecasted an 8.34-percent pay hike in 2007.

“In the Philippines, the scarcity of skilled workers has led to continuous increase in compensation and benefits for all the industries,” says Molon. “Though most companies remain conservative in giving increases, overall national competitiveness has driven local companies to compete with multinationals to be more aggressive in terms of base pay and giving premium to the employee.”

Analysts and corporate executives are worried that the continuing diaspora may hurt the country’s prospects for development. A critical mass of native people, Abella explains, is necessary to create new knowledge and technologies that are essential for progress.

“Experience has richly shown that human capital, rather than natural-resource endowments, is the key to economic development,” says Abella. “The current competition for the highly skilled has naturally raised alarms that it will further aggravate the problems of developing countries in creating a critical mass of professionals and technical workers needed to raise productivity.”

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