Business Process Outsourcing
No Quick Fix
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| The local BPO industry is still largely shaped by the contact center subsector |
One million new jobs from BPOs by 2010? Impossible. An Asian Development Bank study, entitled “An Analysis of the Philippine Business Process Outsourcing Industry,” says the best-case scenario is actually 500,000 to 600,000 new jobs. The much-hailed industry will not be delivering any quick fixes for the country’s unemployment woes.
The newly released study also reveals that the BPO sector is not a key driver of the economy. Despite the huge investments that have been poured into it, it has been unable to significantly stimulate production in other sectors. Using an input-output framework, ADB found that out of 240 economic sectors, the BPO industry requires inputs from 40 other sectors, most especially from banking, power, and telecommunications. On the other hand, it could only contribute to 3 other sectors, namely, tour and travel agencies, wholesale and retail trade, and banking. The ADB report points out that the industry has limited interaction with the rest of the economy because its clients are found outside the country. About 92% of its output is exported.
Compared to India, the local BPO sector still has to reach maturity. It is still largely shaped by the contact center subsector, which accounts for 70% of the industry’s revenue pie. The government, for one, has been focusing most of its support on call centers. In 2005, out of the 65,100 training certificates issued by the government to prospective BPO workers, 60,000 went to call center “near hires.” The government needs to support and pay more attention to the emerging opportunities presented by knowledge process outsourcing, especially in the information technology, science, engineering, business, and finance sectors.
According to the ADB study, the growth of a country’s business process outsourcing industry is dependent on the country’s existing and potential workforce, infrastructure support, and policy environment. Unfortunately, it seems that in the Philippines, BPOs will be faced with a low hiring rate, high attrition rate, costly electricity, and weak governance.
Environmental Report
The Philippines’ Inconvenient Truth
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| The archipelago has already lost half of its mangrove sites |
On the occasion of the country’s observance of Earth Day on 22 April, Environment Secretary Angelo Reyes sounded the call on the alarming state of the Philippine environment and the need to protect the archipelago’s natural resources.
The quality of the country’s water resources is in a “terrible state,” declared Reyes. About 16 major rivers, including 5 in Metro Manila, are biologically dead during the summer season. Water pollution, largely traced to household wastes and the lack of a comprehensive sewerage system, is a serious problem. The environmental cost of the damaged rivers is estimated to be around P62 billion. According to the Department of Environment and Natural Resources, the Philippines suffers the distinction of having the second-most polluted air in Southeast Asia. About 70% of the carbon emissions that pollute our air come from the five million vehicles plying our streets. The health cost from the air pollution is valued at P20 billion. Meanwhile, the amount of solid waste the country is generating is expected to double in 2010. In Metro Manila alone, about 6,169 tons of garbage is produced everyday. Apart from collection, part of the problem is proper disposal. There are only seven sanitary landfills accommodating the mountains of trash; the rest go into open dumps. The Philippines has the lowest forest cover in the region. From 19 million hectares of forests in 1920, this has been depleted to a mere 7.2 million hectares. The country is one of the world’s top biodiversity hotspots due to the extent of habitat loss, overuse, and poaching. The archipelago has already lost half of its mangrove sites. Then there is the unusually warm climate that Filipinos have been experiencing recently, which is being linked to the rise of temperatures worldwide. Worsening pollution, garbage woes, denuded forests, depleted coral reefs and mangroves—these compose the sad reality of the country’s natural resources.
Given this distressing picture, the government is now planning to push for the inclusion of environmental awareness in the science curriculum of public elementary schools, among other remedial measures.
| Signals |
 The fiscal deficit of the government shrunk 53.9% to P18.6 billion in January and February from P40.4 billion a year ago. Revenues rose 18.5% to P162.3 billion from P136.9 billion. On the other hand, spending under a re-enacted budget went up slightly by 2.0% to P180.9 billion from P177.3 billion.
The government’s outstanding debt dropped 0.9% to P3.85 trillion in end-2006 from P3.89 trillion in end-2005 due to reduced borrowings. Domestic debt went down 0.5% to P2.15 trillion from P2.16 trillion. On the other hand, foreign debt decreased 1.5% to P1.70 trillion from P1.72 trillion. As a ratio to GDP, the overall debt of the national government dipped to 64% from 72%.
After 10 straight months of deficits, the balance of trade posted a surplus of US$272 million in January. Exports of goods rose 21.8% to US$3.99 billion from US$3.27 billion a year ago. Meanwhile, imports of goods increased by a mere 1.0% to US$3.72 billion from US$US$3.68 billion.
Investments approved by the Philippine Economic Zone Authority and the Board of Investments expanded 125.4% to P26.8 billion in January and February from P11.9 billion a year ago. More than half of the project cost, about P14.3 billion, went into manufacturing. Japan, Netherlands, and the U.S. accounted for close to 86% of foreign direct investments.
The volume of manufacturing production grew 2.0% in January, reversing 12 consecutive months of decline in 2006. But the average capacity utilization rate in manufacturing dropped to a 9-month low of 80.1% in the same period. At the same time, the volume of net sales in manufacturing increased 4.0%.
 The ratio of nonperforming loans among universal and commercial banks rose to 5.72% in January from 5.66% in December 2006. The level of bad debts, however, contracted 23.3% to P119.0 billion from P155.1 billion.
Self-rated hunger incidence rose to 19.0% of households or families in the first quarter from 16.9% a year ago. Meanwhile, the Social Weather Stations reported that self-rated poverty incidence went down to 53.0% from 55.0%.
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