Wednesday, November 30, 2005

IVP Batch 2005: Lost in New York

I remember Judith telling me that after watching Mama Mia!, each one of us will be humming Abba songs for week or two. Well, I’ve been humming their songs even until now. I purchased their gold collection and have been singing the songs all the time. “Take a chance on me” has been my favorite. That—besides Ground Zero, the subway, and the Museums—makes New York a wonderful place to see. David said he doesn’t like the musical because the story line is some kind of mushy. For me, it’s not really about the story but the vibrant music and the dancing.

Tuesday, November 29, 2005

Hello to the International Visitors' Program (Print Journalism), Batch 2005

Hello to all the participants of the International Visitors Program (Print Journalism)! I remember I've promised to send the pictures to all of you. I guess this is the most efficient way to do it. While viewing this picture, you may want to visualize that Judith Kliks, David Pitts, Lonnie Hilliard (our English language officers) are behind the camera patiently taking our pictures.

To the rest of the world, let me introduce my esteemed colleagues. At the back from the left are Esther Liu-Fang Liang (Taiwan), Salim Biryetega (Uganda), Pamela Makotsi Sittoni (Kenya), Robaet Ferdous (Bangladesh), Rolando Barbano (Argentina), Nihar Khotari (India). At the middle from left: Adiratha Akilesh Rapun (Mauritius), Gloria Caleb (Pakistan), Ramya Kannan (India), Reem Khalifa (Bahrain), Martin Rodriguez (Guatemala), Sanja Simic (Croatia), Segun Adio (Nigeria), Suzanne Sheppard (Trinidad and Tobago). In front from left: Achawaradee Buaklee (Thailand), Ciprian Rus (Romania), Marynna Rakhlei (Belarus), Madi Ceesay (Gambia), and David Llorito (Philippines). Where is Sipho Kumalo from South Africa? Talking to George Bush?

More pictures next time.

Filipinos are living in two parallel universes

IT seems that Filipinos are living in two parallel universes. One is fast growing economically, the other is a sloth enmeshed in the mundane but messy tangle of political intrigue.

In the third quarter this year, the country’s gross domestic product or GDP—the total value of goods and services traded within the country’s borders—grew only by 4.1 percent in the third quarter this year, the lowest since the third quarter of 2002. “The political uncertainty brought about by the impeachment case and the volatility of oil prices weighed in on the country’s gross domestic product…,” said Augusto B. Santos, director general of the National Economic and Development Authority.

However, if one looks at the gross national product (GNP) or the value of goods and services produced and contributed by Filipinos here and abroad, less the value added contributed by foreigners, one sees it surged to 6.5 percent, the highest in the last five quarters.

Thus one can easily observe that the gap between the GDP and GNP is huge. It used to be that this gap is narrow due to the relatively smaller contribution of the so-called net factor income from abroad that sums up the earnings of overseas workers and the incomes they generated from their properties abroad. This quarter, net factor income from abroad surged 39 percent, thus pushing up the GNP to 6.5 percent from 5.7 percent in the same period last year.

“The Philippine economy is undergoing structural transformation,” said Dennis M. Arroyo, director of the national policy and planning services of the National Economic and Development Authority. “It’s getting more and more globalized.”

To the extent that the GDP figure reflects economic activity within the country’s borders, one could sense that the typical Mang Jose in the streets would only feel the sluggish 4.1 percent, especially if he does not receive remittances from a son or a daughter abroad. And those who got those dollars are the ones feeling the “tiger economy” of 6.5 percent GNP. In the last several months ten months, dollar remittances have been growing at double-digit rates within the range of 18-35 percent year on year. These dollars are supposed to grease the wheels industry thus spreading benefits wide around. Problem is, those dollar earners have suddenly grown stingy. They would rather save their money than splurge it, thus constraining the local economy that is already burdened by political deadlock. So if there’s one sector that’s the happiest until December, these are the banks that enjoyed a 16.6-percent growth rate in the third quarter and a 13.2- percent growth rate for the entire first three quarters. So that’s structural transformation for you—a bifurcated economy that separates the OFW dollar earners from those who are not.

Santos says the trend towards high savings among OFWs augurs well for 2006 because it could mean higher expenditures for appliances, vehicles, shelter and durable equipment. Also, more savings may yet translate to more investments as some industrialists might yet be encouraged to mobilize the money for industrial expansion. This should suggest that we are going to have a better economy next year. That’s an optimistic scenario but no one really knows. The real reason could be that OFW families are holding on to their dollars because the country’s politics might get nasty next year. If the future is hazy, the natural instinct could be to store the money for the rainy days.

But there’s another “transformation” going on. For the first three quarters, the agriculture, fishery and forestry (AFF) sector grew only by 1.1 percent. In the same period, the industry sector grew by 4.6 percent and services by 6.1 percent. Estrella V. Domingo, assistant secretary of the National Statistical Coordination Board (NSCB) said that her agency is having difficulties getting information from the business process outsourcing (BPO) industry that has been growing at the rate of 70 percent each year. Thus, she admits that the growth rates of the services sector could be understated.

Understated or not, what the numbers suggest is that growth rates are spatially concentrated in urban areas while the rural sector—where almost half that population resides—stagnated. This is another manifestation of a dualistic economy with its attendant consequences of greater rural-urban migration, greater air pollution, urban congestion, overstretched social services, and the expansion of slums.

During the press conference, Santos and Estrella blamed the lingering effects of El Niño for the sluggish performance of the farm sector. They have a point there. However, what they have failed to account for is that the poor performance of the farms could also be traced to the government’s inability to provide money for rural economic infrastructure. This is shown in the 2.1-percent decline in government consumption and 3.8-percent decline in fixed capital formation in the third quarter. This is so because the government has perennially been suffering from a budget crisis due to its failure to collect taxes. So if the government could not put the country’s fiscal house in order, Filipinos will continue to live in two parallel universes no matter how the OFWs and call center agents spend their money on appliances, clothes, food, cars and shelter next year.

The Search for the Swaggering American

When French anti-globalization activist Jose Bové bulldozed that McDonald’s restaurant in Paris a few years ago and got jailed for it, I thought McDonald’s was the cultural representation of the United States. Thus after getting off the Reagan National Airport in Washington DC on September 14, I immediately started to figure out whether or not McDonalds could be as ubiquitous as Jollibee, the Filipino chicken-and-burger restaurant that has beaten McDo to the draw. In the Philippines, one could find Jollibee at every street corner.

I have so many preconceived notions about America before I actually landed there as a participant of the US State Department’s International Visitors Program (Print Journalism). The McDonalds as-cultural-representation-theory is one of them. Five days into the prowl all over Washington DC and Virginia, however, I’ve seen only at least three or four McDo stores. They were small, unlike the McDo and the Jollibee shops in the Philippines where you could have the entire clan from the boondocks for a kiddie party.

If there’s one restaurant that could probably represent America, it’s probably Starbucks. It’s practically everywhere. I like the idea of America being represented by Starbucks. It represents a place where people can meet to discuss issues, argue about ideas, and exchange gossip over a cup of coffee. It seems to represent democracy. In Washington and New York I practically lived off Starbucks. I usually had salads consisting mixed fruits, vegetables, and cheese for just about $5 dollars while discussing about lots of things with friends, colleagues, and even strangers.

Or is Victoria’s Secrets? All the malls I’ve visited from the East to the West Coast have it. It’s always full of people, buying all sorts of intimate stuff—from thongs to bras and everything in between. Does this trend say something about the Americans’ sexuality? I furtively watched Two Moon Junction and American Pie when I was younger and got the impression that Americans are probably casual about sex. All those American porn movies we devoured in college reinforced that impression. I guess I was wrong.

I walked through several blocks in Manhattan to see if I could casually pick up copies of Playboy or Hustler. I didn’t find any. A friend told me later on that I should have asked for it because those materials are usually hidden from view. At the Barnes and Noble in Sta. Monica (California), I finally had the courage to ask for Playboy from one of the staff and I was told it’s hidden behind the counter. “Why are you guys hiding those things?” I asked. “You know why!” he countered.

Americans could actually be very prude. Try cracking green jokes around and you’ll immediately get a sexual harassment suit, one Filipino friend in New York told me.

Eight years ago, Stanley Karnow—who got a Pulitzer for his book on Vietnam—came up with a hard cover entitled “In our Image: America’s Empire in the Philippines” where he described Filipinos as having the extravagant piety of the Spaniards and the swagger of the Americans, or something to that effect. So part of my personal quest therefore was to find the swaggering Americans. After three weeks, I lost interest. It seems like Americans walk just like the rest of us. At the end of the program in LA, one of the English Language Officers told me: “David, I believe you are not going to find your Swaggering American. Actually, there is one. He used to live in Texas, but he is in Washington DC now. I mean, the White House.”

But indeed, Americans are a bit different from us Filipinos. Like, they usually don’t blow their cars’ horns often, not even in the crowded streets of New York or Los Angeles. They feel it’s rude. Or maybe they really think pedestrian is king. In the Philippines, one of the most important parts of our vehicle next to the gas pedal is the horn. Filipino drivers use it all the time to send pedestrians scampering out of the way. (This probably has class basis. Maybe the first ones to drive cars were rich guys who never experienced being pedestrian. Their drivers simply took the attitude from them. But that’s another story).

However, that image of America as John Wayne with six shooters trying to bring “democracy” to the rest of the world does not seem to reflect the character of the “ordinary” American people. In fact, the average Joe does not seem to care much about the rest of world. Look at their TV or their newspapers. Save for the bombings in Iraq, their newspapers do not usually contain much foreign news. And why should they care? Since the mid-80s many observers say the American media has stopped being imperial about the world. Some Filipinos say it’s because Americans have a huge country and that they are overwhelmed by their own concerns like Katrina, rising petrol prices for their SUVs, difficulties in getting the latest Xbox 360, such that it’s hard for them to see beyond the borders, unless some bearded medieval crackpots from some forgotten desert send in planes crashing into their skyscrapers.

But even media colleagues like Esther Liu Fang Liang (Taiwan) and Ach Buaklee (Thailand) say the accusations that Americans are ignorant about foreign affairs are probably unfair. Esther for instance say if an American journalist would meet her mother, the same visitor would probably think the Taiwanese are ignorant about foreign affairs. “And why should my mother care about Tom DeLay or Scooter Libby or George Bush’s dog?,” she wondered.

For all its openness, however, America’s politics could be a bit puzzling for a Filipino. It seems like the there are only two types of people out there: one could either be a liberal (pro-government intervention, against invasion of Iraq, pro-choice) or a conservative (for “small government,” advocate of bringing “democracy” to the world, pro-life). There seems to be no neutral ground. It’s a bit intellectually stifling because in reality any person could usually have both liberal and conservative views. Retired Supreme Court judge Sandra Day O’Connor supposedly has conservative views on the economy and liberal ones on social issues.

In the Philippines being liberal means open-minded and conservative being traditional and old-fashioned. Thus, most intellectuals in the Philippines would rather see the Philippine government focusing its energies on areas where it can really do better. In history, “big government” in the Philippines has been associated with corruption, cronyism, and inefficiency. Thus, after the Edsa Revolution in 1986, reformists in governments—many of them leftist or left of center— immediately pushed for deregulation of the economy and privatization of many financially-ailing state-owned corporations. Besides, a smaller government is really a necessity. The continuing fiscal difficulties being experienced by the government means that we could never have a “big” government the way Americans define it.

Lastly, I almost had an identity crisis in America. The Latinos where talking to me in Spanish at the trains and subways. During the first day of the Visitors Program in Washington DC, journalists Rolando Barbanno (Argentina) and Martin Rodriguez (Guatemala) asked if I could speak Spanish. I said no, wondering why they asked. One day, I went to a Subway restaurant to buy sandwich. I was still at the door when the lady blurted out in Spanish. All she got was a blank stare so, exasperated, she asked: “Why can’t you speak Spanish?”

“Because I’m not a Spaniard, ma’am,” I answered.

“I mean, you look Mexican to me,” she said. “Or Guatemalan?

“Well, I’m sorry ma’am but neither am i a Mexican nor Guatemalan,” I said.

“So from where are you?”

“From the Philippines,” I said, handing her my money.

“Oh,” she said looking at my eyes while giving me my change.

I was on the way out when she called suddenly: “Hey mister! Where’s the Philippines?”

Sunday, November 27, 2005

Will newspapers go down the dinosaurs' way?

(The US State Department has chosen me as the Philippines’ participant to the 2005 International Visitors’ Program for Leadership in Print Journalism conducted from September 15 until October 6. Together with 19 other participants from Asia, Africa, Latin America, Middle East and Eastern Europe, the program brought me to several cities in the US including Washington DC, New York, Tampa Bay, Omaha, San Diego and Los Angeles, where we had opportunities to interact with executives from several media organizations. Below is my story.)

WASHINGTON DC—Bob Woodward, assistant managing editor of Washington Post and celebrity investigative reporter who helped uncover the Watergate scandal in the ‘70s, was in his element one cool September night at the McLean Hilton in Virginia. He was, after all, launching his new book The Secret Man: The Story of Watergate’s Deep Throat, a personal account of his cloak-and-dagger liaisons with Mark Felt, the FBI whistleblower whose revelations kicked off a political storm that ousted US President Richard Nixon in 1974 and changed the course of American history. Speaking before a huge crowd of admirers, Woodward’s reminiscences painted a glorious picture of the Post’s happy past.

However, that night may have also been a regression for him, a fleeting respite from the current storms ravaging his paper: declining circulation, readership, and advertising revenue, courtesy of the intensifying onslaught by “new media” like the Internet as well as cable and satellite TV.

Five days earlier at The Washington Post’s headquarters in the nation’s capital, Andrew Mosher, the deputy foreign editor, talked to the BusinessMirror—and 19 other print journalists from Asia, Europe, Middle East, and Latin America—about his paper’s dilemma.

“Last year, our daily circulation was 800,000; now it’s down to 700,000,” Mosher said unflinching.

In its heyday, The Washington Post’s daily circulation was more than a million. These days, Mosher said, these numbers are falling and no one in the top management could give a satisfactory explanation as to why this is happening. They have no clear ideas too on how to deal with declining readership, which eventually would hurt ad revenues and ultimately the company’s bottom line.

But the Post is not alone.

On Wednesday, the New York Times Co. said its earnings fell by more than half in the third quarter, even as sales rose, because of higher costs and a charge related to staff reductions, the Associated Press reported.

The company, which publishes The Boston Globe and the International Herald Tribune in addition to its flagship newspaper, had net income of $23.1 million for the quarter, down from $48.3 million in the same period a year ago.

In September, the Times said it would slash about 500 jobs over the next six to nine months.

At about the same time, the Philadelphia Inquirer (circulation: 388,000) also announced similar cost-cutting measures.

The big divide
MOSHER believes the problem facing US newspapers is part of a larger—possibly global—phenomenon.

“People are not really reading anymore,” he said, noting that consumers these days prefer to get their information from the Internet and other electronic media. People are just too busy to read, he said.

In reporting the story of the job cuts in New York and Philadelphia, Post reporter Frank Ahrens noted that national daily newspaper circulation in the US has declined every year since 1987.

“Newspapers once the only source of news, now compete not only with radio and network television, but also with numerous cable television networks and Internet news sources. In addition, other media—satellite radio, computer games, DVDs, Ipods and so forth—sap time required for reading daily newspaper,” Ahrens wrote.

“The death of evening newspapers across the country over the past three decades foretold the current slump.”

This depressing trend has ignited a debate within the company, and in newsrooms across the United States. On one side are young turks who are calling for a redesign of the newspaper, making it more readable to young readers by using more colors, graphics and pictures, with crisp and trendy stories. On the other side of the fence are the “dinosaurs” like Mosher who are resisting such changes for fear of alienating their current readers.

“If we change the look, readers might think it’s no longer the same Washington Post they used to read,” Mosher argued.

Politics in the US also tend to delineate between conservatives (or those perceived to be adherents of free markets and the war in Iraq) and the liberals (thought of to be adherents of big government). Hence there are views in newsrooms about the need to “play it to the middle” in order to capture the attention of the greater number of readers who are assumed to dwell in the gray areas of the American political spectrum.

“Should there be more analysis? Should it have more ‘attitude’? No one has a satisfactory answer,” Mosher sighed, reflecting the anxieties of an old media institution that is getting less sure of itself.

A changing audience
MEDIA experts from the Poynter Institute, a Florida-based journalism training center that owns the St. Petersburg Time, say multi-tasking is now the name of the game. Citing a recent study by Middleton Media Studies Project by the Indiana-based Ball University, Howard Finberg, Poynter’s director for interactive learning noted that 30 percent of American’s observed waking day is spent with media as a sole activity, while 39 percent of the day is spent with media while being involved.

Citing the same report, Finberg said Americans spent 240.9 minutes watching television and 93.4 minutes surfing the Internet. Only 32.8 minutes are being spent reading various print media. But for newspapers per se, Americans spend a mere 12.2 minutes a day.

Ken Auletta, a New York-based media critic who writes incisive analytical pieces on media and communications for the New Yorker magazine, said new forms of media are displacing the newspaper in significant numbers. In 1960, all daily newspapers in the US sent out 59 million copies a day in an effort to reach 180 Americans. In 2004, that figure dropped to 54 million even though the US population doubled.

This trend, he said, came at a time when Americans were increasingly getting cynical of traditional media. Around two-thirds of Americans think the press in general is biased, which Auletta pointed out, has contributed to the decline of print media. That most traditional media organizations are affiliated with large conglomerates only strengthen the perception that they represent powerful special interests groups. Hence, Auletta said, the younger generation tends to look at new media as an alternative source of “empowerment.”

Auletta believes this situation could be dangerous. “Every one seems to think their audience is shrinking, so media, both print and broadcast, tries to shout louder to get attention,” he said. Taking this approach, however, risks alienating audiences even further. This largely explains, according to Auletta, the rise of so-called “silly journalism” that’s focused on sensational stories, tasteless entertainment, and gossip.

Rising tabs
AS circulation numbers drop, news organizations are being forced to evolve as they grapple to find the business model of the future.

Just this week, the Asian Wall Street Journal scrapped its broadsheet printing style for a smaller tabloid format. In a letter to readers, its editor, Reginald Chua, said the new format “is designed to make it easier to navigate through the paper.”
The American edition of the Journal will also shrink its format slightly in line with other major US newspapers including the Los Angeles Times, The Washington Post and USA Today. The redesign of the US edition will save it $18 million per year, the company said.

The shift to tabloids, which started in the United Kingdom several years ago, is one of the most notable trends in the industry.

In February, the Examiner group began distributing tabloids free of charge to affluent households (with annual incomes of $75,000 and above) in Washington DC and Virginia. The group had launched a San Francisco tabloid earlier.

Established by the Anschutz Group, whose business interests include oil exploration, film, soccer teams, and entertainment, the Examiner focuses largely on local news that run no longer than 250 words.

“This is a newspaper for people who want to be informed about their community but are too busy to read,” said John Wilpers, the paper’s editor-in-chief.

It carries only a few stories on foreign events save for developments in Iraq because the editors believe their readers are not as interested in such news. Instead, Wilpers and the other editors are pushing for “civic journalism” or stories that are closer to home and which “connect with people’s lives.”

For Wilpers, the Examiner represents the future of journalism as its business model due to a lower operating cost owing to its lean staff.

“The Washington Post, New York Times and Wall Street Journal will still be there in the future but they will evolve into niche newspapers with significantly lower circulation, say 500,000 or less,” Wilpers predicted.

So far, several major broadsheets like The Washington Post, the Tampa Bay, Florida-based St. Petersburg Times and San Diego Union-Tribune have introduced their own tabloids to cater to younger readers while maintaining their own broadsheets. These tabloids are distributed free in subways, bus stops, hotels and other strategic public spaces.

In San Diego, the San Diego Reader, which feels like a folksy version of the New Yorker or Harper’s, regularly runs blogs of emerging creative writers in the city in an effort to get the attention of young readers.

The average reader in America is 50 years old. Hence, there are fears that broadsheets would lose their financial viability as readers grow old and die and the younger ones gravitate for “new media.” By introducing free tabloids, print media executives are hoping that someday these readers would “migrate” to broadsheets as they mature.

Still there is a fear that these free tabloids could cannibalize their broadsheets’ circulations. To avoid this, executives do not allow their tabloids, which have a separate staff and use different corporate identities, to use stories that appear in their broadsheets.

“Kids go college, graduate, get married, have kids, get involved in community affairs and start reading the newspaper,” noted Jim Booth, senior editor of St. Petersburg Times. “That’s the cycle then but not anymore. How to address this problem I don’t know. If I do, I’d be making millions by now.”

Other broadsheets like the Baltimore Sun and the Long Island, New York-based Newsday are freshening up their design in the hopes of winning back lost subscribers.

Many are apparently taking their cue from USA Today, whose colorful layout and feel-good stories enabled it to buck the trend of declining circulation.

Online news
THE one trend that everyone seems to agree on is establishing a presence on the Internet. News organizations in the US—and elsewhere— have poured huge investments into beefing up their online editions.

Media critics like Ken Auletta liken this to “planting a flag on the moon.” Many of the big names like New York Times, Wall Street Journal, and The Washington Post are experimenting on how to generate revenue from their online editions, from charging a few dollars for access to certain content to web advertising.

And it seems to be paying off for some.

After ten years, the Post has started to earn money from its online edition but others have not been as successful.

Still media executives are hoping that there will come a time when accessing online newspapers will become a daily routine that readers will pay for content.

Auletta himself is convinced that the future is on the Internet. There are indications, he said, that online advertising will continue to grow in the next ten years. If online newspapers could provide the kind of readers that advertisers want to reach, they could turn in tidy profits.

The San Diego Union-Tribune (circulation: 300,000 on weekdays and 400,00 on Sunday) seems to be doing just that. The newspaper’s not only contain breaking news to compliment the paper, but is a portal in itself as it also provides extensive information on jobs, real estate, cars and boats, shopping, travel, health and fitness, sports, restaurants, museums, and even wireless news for Web-enabled cellular phones, personal digital assistants, and other portable devices. To access the day’s paper, one has to answer a little questionnaire, thus enabling the company to continuously capture demographic data about their readership.

“Right now, we are primarily a news organization,” explained Todd Merriman, senior editor for news of the San Diego-Union Tribune. “In the future, we are going to be a news media organization.”

Despite such developments, some media executives are still wondering if there’s really room for print media in the brave new world of instant information.

Auletta himself conceded that print media is, technology-wise, obsolete. Data now flows at the click of the mouse, while the newspaper has practically remained unchanged since the Gutenberg Revolution, delivering tangible papers to readers a day after.

But no one’s giving up the fight.

“Are we a dinosaur? Yes, we are,” Auletta said. “But hey, dinosaurs lived for millions of years!”

Outsourcing 4: Opiate or change agent?

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.

Saturday, November 26, 2005

Outsourcing 3: Philippines' Jekyll and Hyde?

Outsourcing is rapidly transforming the Philippine economy. Harvard-trained economist Cielito Habito of the Ateneo de Manila University says the dynamics of this two-billion-dollar business is manifested in the rapid growth of the telecommunications sub-sector of the economy. Dan Sebastian Reyes, the chief executive officer of Client Logic, a call center firm, says that for every job a local BPO provides also creates ten others in complimentary industries like food and beverage, transportation, real estate, telecommunications, banking, among many others. It’s hard to verify this claim but the over P2 billion payroll that these companies provide their employees each month certainly has created a lot of business for a lot of urban services.

Since the last five years, many were wondering why despite all political squabbles, the Philippine economy showed it was capable of growing at 5-6 percent. Some observers were wondering whether or not the Philippine society has a split personality, with its politics always triggering the monstrous Dr Jekyll and its economy showing off a hopeful Dr Hyde. In this region of economic tigers and dragons where 7-9 percent growth is the norm, a 5 percent growth rate is necessarily mediocre. However, for an economy weighed down by negative political perceptions, a 5 percent economic growth, may represent an acceptable definition of the Promised Land. Certainly, the service sector, buoyed by the telecommunications and business services sector of which outsourcing is significant part, is carrying the torch for the Philippine economy in the last few years. (To be continued)

Outsourcing 2: Amoral force that respects no borders

What is remarkable is that outsourcing emerged when Philippine politics was its most volatile. President Gloria Macapagal-Arroyo came to power in 2001 after the administration of Joseph Estrada collapsed amidst accusations of corruption and involvement in an illegal numbers game. After she was declared winner in the 2004 election, Arroyo’s government soon suffered ignominy after a taped conversation seems to indicate that she might have cheated in the election. Until now, she continues to suffer from the continuing questions of her government’s legitimacy. In all these years, BPO has been growing at about 70 percent each year. It’s a kind of growth, industry analysts say, that even India did not experience on the way to the top of the global outsourcing chain. And the fun, many in the industry seem to think, has just begun.

What do these trends imply? On one hand, globalization—or that ability of companies and persons to shift operations or transfer jobs worldwide where the returns are higher and risks lower—is certainly behind this trend. It’s an amoral force that neither respects physical borders nor political systems, courtesy of Moore’s Law and the digital revolution. On the other, this trend may indicate that, to some extent, the Philippine economy seems to have developed some resistance to the pernicious effects of the country’s rambunctious politics. The BPO business therefore dramatically grew—not because—but despite of, the nature of the Philippine State. Its something that the current administration could not claim as the fruits of its own labors.

If there’s one that should claim credit, it should be the Presidency of Corazon Aquino whose cabinet members then—most of whom were baked in the free-market/Thatcherite ideals of the 80s—initiated wide ranging reforms including the demonopolization of telecommunications and other segments of the economy. Those reforms were not completely successful but the momentum for change continued during the Ramos time until the present. However, the greater glory should go to the new apolitical post-Edsa Revolt generation whose insatiable cravings for the magical worlds of Ragnarok, Friendster, and the other wonders of instant communication ushered in the wonderful technologies that make all those outsourcing businesses possible. As one cyber expert would put it: “It’s a classic case of content ushering in the technology.” (To be continued)

Outsourcing is transforming the Philippines

Skilled Filipino professionals go abroad to work as clerks, pencil pushers, phone operators, diaper changers, support staff, people behind computers, bank tellers, and all around doers of odd jobs. A few years from now, many of them should no longer have to do so. This is because many of these types of work are coming down here in droves via the new industry we call outsourcing, a sort of a “new international division of labor” that is currently transforming the Philippine economy. It may also help transform Philippine politics, hopefully for the better.

Those who are into this business call it “business process outsourcing” or “information technology and information technology-enabled services” (ITES). This kind of business ranges from voice outsourcing (essentially call centers) and non-voice which include long a list of activities including software development, medical transcription, animation, back office operation and shared services, engineering design, and even litigation support.” Activities like animation have been in the Philippines as early as twenty years ago. Yet outsourcing in general seems to have surfaced into the Filipinos’ consciousness since the last five years. Now it’s already a US$ 2 billion “export” industry. That figure is about one-fourth of what the country gets from overseas workers’ dollar remittances each year. Employment has reached more than 140,000 and still counting.