Turning to the Philippines for the ring of reassurance

The BPO sector is expected to replace overseas workers as the largest contributor to the Philippine economy within five years. AFP

In the Philippines, a country where more than 10 per cent of the workforce is employed overseas and a further 25 per cent are either jobless or underemployed, call centres have become a lifeline for the economy.

Late last year the Philippines replaced India as the call centre capital of the world, employing about 350,000 people compared with India's 330,000, according to data from the Everest Research Institute, which specialises in information technology (IT) and business process outsourcing (BPO).

Philippine call centres last year recorded higher revenue than their Indian counterparts, generating US$5.7 billion (Dh20.93bn) compared with India's $5.5bn, according to Everest - a significant achievement considering the Philippine call centre business started less than a decade ago.

While the Philippines can take some pride in the remarkable growth of the business - that is the number of people working in the sector - its BPO industry is way behind India's, with revenue of $9bn compared with India's $70bn. The Philippine BPO sector employs 520,000 workers, while India's employs 2.2 million.

Some industry experts estimate that the BPO sector will replace overseas workers as the biggest single contributor to the Philippine economy within five years.

Remittances from overseas workers last year are expected to exceed $17bn, or about 12 per cent of GDP, making it the largest foreign exchange contributor to the national economy.

This year, the IT-BPO industry expects to generate $11bn of revenue, up 20 per cent from last year, and generate 84,000 additional jobs, bringing the total number of local IT-BPO workers to 610,000, according to projections from the Business Processing Association of the Philippines (BPAP) and the Commission on Information and Communications Technology.

"The key to achieving the $11bn goal is aggressive marketing both locally and internationally," the BPAP chief executive, Oscar Sanez, told the Manila Bulletin recently.

"'We have to increase the awareness of our potential employees of job opportunities in IT and BPO companies, including those in the knowledge process outsourcing and other non-voice sectors. We also have to improve our visibility internationally to market new services in new territories.

"In the next five years, the global non-voice services sector [including financial services, health care, legal outsourcing, animation and game development] is expected to grow by as much as 25 per cent a year, while the voice BPO market is expected to double in size to $50bn," he said.

Ironically, it has been the Indian IT-BPO industry that has contributed to the growth of the Philippine call centre business with 24/7 Customer, India's biggest BPO firm, opening a call centre in the Philippines in 2005, Wipro doing the same in 2007 and TCS last month.

The annual Global Location Trends report by IBM said recently that in business support functions such as shared services and BPO, the Philippines took over the global lead from India for the first time, adding about 16,000 jobs through foreign investment in services, compared with India's 14,000.

Call centre work is low-value business and Indian firms are moving up the value chain to provide high-end services such as business analysis and knowledge process outsourcing (KPO) including legal services. It is inevitable that as an industry matures and moves up the value chain, it will vacate the lower end of the business to newer entrants, one analyst was reported as saying recently.

And answering calls is not just low-value work but quite thankless. Customers prefer to hear an accent they can relate to and the advantage for the Philippines is that as a result of its history, it has far greater cultural affinity with the US than India has.

But, for the Philippines to sustain its outsourcing growth, it needs more skilled operators. The country produces 430,000 college graduates a year, but most are considered unsuitable for outsourcing. On average, call centres reject 90 per cent to 95 per cent of applicants because of inadequate communication and technical skills.

"This is one of the fastest-growing employment and one of the highest revenue generating economic sectors in the Philippines today," an advocacy paper by the joint foreign chambers of commerce in Manila said recently. It noted that for the IT-BPO industry to grow, education would be a key factor.