Tech fails to lift RP poor–UN

WHILE the Philippines shares with India the world’s top spot in outsourcing and technology, a study by the United Nations Commission on Trade and Development (Unctad) reveals the benefits are far from trickling down to the rural poor.

“While outsourcing and offshoring may contribute to poverty reduction, benefits to the poorer segments of society are not automatic… .The successful cases of India and the Philippines illustrate that most direct and indirect job creation has occurred in a few major urban agglomerations,” the Unctad said in its recent Information Economy Report 2010 focusing on information and communications technology (ICT), enterprises and poverty alleviation.

The Unctad data on people living on less than $1.25 a day shows, for example, that the poverty rate in the Philippines increased from 22 percent to 22.6 percent in a decade ending 2005.

The number of poor in the Philippines at 15.411 million in 1996 grew to 19.13 million in a span of 10 years, when the country considered business-process outsourcing (BPO) a sunshine industry.

Nonetheless, the country’s poverty rate was still below the 26.1-percent average for the whole of Asia that the Unctad report said had 894.132 million poor in 2005 from a third of its 3-billion total population in 1996.

In contrast, Pakistan, which the Unctad data cited as having the same poverty rate as the Philippines, saw its poor population halved in 10 years to 35.188 million by 2005.

The report noted that while the country’s BPO industry provides a good example of how information technology (IT) services and ICT-enabled services as a potential source of employment generation and export revenues, the benefits are focused on urban areas and leave out the poor who are many in rural areas.

The report said that as much as 80 percent of all BPO activity is concentrated in and around Manila. “One effect has been more migration into the rapidly expanding cities.”

The report concluded that “poor classes whose livelihoods are most likely to be affected by IT- and ICT-enabled services production include those who live in major cities or their urban peripheries (or who are willing to migrate to a major city), and those who command at least basic education and English-language skills.”

Still, the report commended companies in the Philippines who are targeting to locate in second- and third-tier cities.

Unctad has noted that the Philippine ICT manufacturing industry employed some 222,000 people in 2005, “corresponding to about 22 percent of the entire manufacturing work force, and 23 percent of total wages and salaries paid in the manufacturing sector.”

“ICT goods exports have soared, amounting to $27 billion in 2008, or more than half of the country’s total merchandise exports.”

“Moreover, although the average wages in the electronics industry are relatively high compared with other parts of the manufacturing sector, they are often well below what has been deemed a ‘living wage’. Thus, the main potential impact on poverty would have come through direct-job creation and various indirect and second-order effects.”

However, the report noted that most direct-job generation in the IT- and ICT-enabled services industry “has benefited the middle class but not so much the very poor.”

“Those working in the IT-BPO sector are typically paid 50 percent to 100 percent more than in other service jobs, and tend to fall into the top income quintile. Consequently, the entry barrier to be employed is relatively high, making it difficult for poor people with limited or no education to be hired.”

The report said the greatest chances for poor people to find direct employment are in segments with the lowest-entry barriers and the lowest compensation levels, such as facility maintenance, security, transports and low-end data entry. –Dennis Estopace / Reporter, BUsinessmirror