Trump win a threat to BPO industry

Philippine Daily Inquirer, November 10, 2016

The Philippine business process outsourcing (BPO), a key pillar of the domestic economy, is seen at risk now that America has picked Donald Trump—who espouses US job protectionism—as its next president.

In a research note issued on the eve of the US elections, Citi Philippines economist Jun Trinidad said a Trump presidency highlighted trade protectionism that could be linked to support for strong onshore job creation.

“For the Philippines, we think a material risk from a Trump presidency may be a US job protectionism, which could weigh on global outsourcing/offshoring activities from which Philippines (and other emerging markets) benefit,” Trinidad said.

Based on Bangko Sentral ng Pilipinas data, it was estimated that 70 percent of BPO revenues were sourced from the US.

Property consulting firm Colliers has estimated that the information technology/business process management industry currently generates $168 billion in revenues in India and the Philippines.

“Not that existing US-based IT (information technology)/BPO firms operating in the country would be likely to leave abruptly under a Trump presidency, but ’prospective’ BPO business may diminish, already wary of (President Rodrigo) Duterte’s anti-US rhetoric and shift to a more independent foreign policy,” Trinidad said.

Trinidad estimated that the US election could put at risk $1 to $2 billion or about 0.4-0.7 percent of Philippine gross domestic product (GDP) in lost BPO business opportunities. This, in turn, is seen to translate to foregone consumption growth of roughly 0.8 to 1.7 percent, precluding multiplier effects.

Trinidad said discretionary spending items, such as those spent in restaurants and hotels, may be the first to fade away.

“Since BPO office requirements sparked the commercial office segment building boom, lost BPO opportunities may shade real investment gains as well. Upbeat construction jobs, up recently by 655,000 (based on July labor survey) due to strong investments, would be affected, reinforcing potential consumption weakness,” Trinidad said. —Doris Dumlao-Abadilla

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