Bank bursts BPO bubble

Call centers alone can’t advance the economy

Despite the employment and the dollars that business process outsourcing (BPO) generates, the sector may not be the answer to the country’s need to advance its economy, the Asian Development Bank (ADB) said.

In a recent policy note, the Manila-based lender said that the BPO sector is helpful in boosting the service-led growth by employing a big number of Filipinos and spurring domestic consumption.

“However, it is not realistic to believe that the BPO industry can allow the economy to leapfrog the process of industrialization,” ADB added.
One reason was that the service-led growth in the Philippines did not create enough jobs for the country’s labor force, which is estimated to increase by over 14 million in the next two decades.

Despite the mushrooming of BPO call centers nationwide, the sector was only able to employ 1 percent of the total labor force and will only be able to recruit another 1 percent in the next few years.

ADB said that the impact of BPO’s job generation is limited given that only one-fourth of the total labor force is utilized, and that majority of jobless workers are unskilled and equipped with only primary or secondary education.

“They [unskilled unemployed Filipinos] cannot benefit from the job opportunities in the BPO sector,” the bank added.

Indeed, BPO employers have been complaining of the limited number of skilled workers that they could employ.

It seems that the government must develop its manufacturing sector and not rely solely on its service sector, particularly BPO sector, to sustain the country’s growth momentum.

Also seemingly, developments of the manufacturing and service industries must go hand-in-hand to improve the economy.

“Without dynamic industrial development, the country will continue to suffer from the long-standing problems of high unemployment, slow poverty reduction and stagnant investment,” ADB said.

The government, it added, should diversify its production structure into more sophisticated goods for export.

The Philippines already has accumulated capabilities to move to more skill and research-intensive segments of electronics and more sophisticated products such as machinery and chemicals.

Bu, ADB said, it has to do more to increase economy-wide productivity.

According to the Manila-based lender, the Philippines must solve its “chronic productivity growth deficit” that has resulted from the stagnation of manufacturing.

It also must improve basic infrastructure and business and investment climates, ADB said. –Likha Cuevas-Miel Assistant Business Editor, Manila Times