Accessibility links

Trump, 'Trump East' Unnerve Philippine Outsourcing Firms


FILE - Young Filipinos fill in forms at a state-organized job fair for outsourcing firms in the Philippines outside the presidential palace in Manila, Oct. 9, 2004.

When Philippines President Rodrigo Duterte, the man dubbed "Trump of the East," told U.S. businesses to pack their bags if they didn't like his anti-American rhetoric, the huge and growing outsourcing industry got a little nervous.

It's now the real Donald Trump who has businesses worried here, after the U.S. president-elect vowed to bring offshored jobs home from places such as the Philippines, a big provider of back-office services for corporate America.

The Southeast Asian country accounts for 12.6 percent of the global market for business-process outsourcing (BPO), which has been growing 10 percent a year for the past decade, according to the IT & Business Process Association of the Philippines.

The industry body predicts the BPO industry could be adding 100,000 jobs annually, earning revenues of $38.9 billion, by 2022, although global outsourcing consultants believe that could even reach $48 billion within four years.

Three-quarters of the $23 billion sector services U.S. firms.

"It's a U.S.-centric business," said Manuel Pangilinan, president of PLDT, which provides telecoms for the sector. "To the extent that Trump compels, persuades or incentivizes the BPO businesses to return ... it will impact our business or the industry as a whole.

"It's going to be a tough one, not only for us, but for the economy as a whole," he added.

Trump tweets

In a string of tweets Sunday, Trump threatened "retribution or consequences" for companies that moved operations out of the country, as well as a 35 percent tariff on their goods sold back to the United States.

That could leave the Philippines exposed, with companies such as Citibank, JPMorgan, Verizon, Convergys, Genpact and Sutherland Global Services key to jobs that were forecast to increase to 1.8 million full-time Filipinos by 2022.

It's not just companies in the Philippines that are worried.

Anticipating a more protectionist U.S. technology visa program under a Trump administration, India's $150 billion IT services sector will speed up acquisitions in the United States, industry sources there say.

Companies also plan to recruit more heavily from college campuses, expecting the Trump administration to tighten up on temporary visas for India's high-tech workers.

Some firms rattled

Philippine businesses and BPO firms that spoke to Reuters said some trade delegations had deferred visits and potential foreign investors in the industry were taking longer with their due-diligence procedures.

And they were doing so even before Trump won the U.S. presidential election on November 9.

Duterte's volatility has drawn comparisons to Trump and his hostility toward Manila's longtime ally the United States has shocked investors and even his own cabinet.

He told President Barack Obama to "go to hell" over the U.S. president's concern about Duterte's war on drugs, threatened to scrap U.S.-Philippines defense pacts, and in October announced before China's political elite his "separation" from the United States.

FILE - Call center agents work overnight daily to cater to U.S. clients in Manila's Makati financial district, Feb. 6, 2012.
FILE - Call center agents work overnight daily to cater to U.S. clients in Manila's Makati financial district, Feb. 6, 2012.

That remark rattled some U.S. firms, said Juan Victor Hernandez, an IBPAP trustee, who told Reuters that four companies put their decisions on hold immediately. He declined to name them.

Hernandez said uncertainties over Trump's policies affected potential investors rather than existing ones, such as JPMorgan, which is staying put.

"So far, they are still hell-bent on the Philippines, number one," he added.

Duterte defiant

Philip Goldberg, who until recently was the U.S. ambassador in Manila, said he took more calls from investors in his last three months than during his whole tenure. All were about Duterte's anti-American vitriol.

"They are very nervous," Goldberg told news channel ANC. "They don't know what it means."

While aware of those concerns about him, Duterte was defiant: "Go ahead. Pack your bags," he told reporters before flying to Japan in October. "We will sacrifice. We will recover."

Julius Guevara, head of research at Colliers Philippines, said while U.S. investors were concerned about Duterte and Trump, firms already in the Philippines were unlikely to leave.

"If it's more profitable for them to continue having operations here in the Philippines, I don't think Trump can do anything about it," he said.

Charito Plaza, an ally of the president and director general of the Philippine Economic Zone Authority, said Duterte would ask Trump to be kind to U.S. firms looking at the Philippines.

But it wasn't clear whether Duterte did that when the two spoke last Friday. Duterte said he felt a rapport with Trump and "assured him of our ties."

But the only policy issue Duterte mentioned afterward was his drug crackdown, which he said Trump understood.

Challenge of automation

Policymakers have been banking on BPO overtaking remittances as the mainstay of one of the world's fastest-growing economies.

The BPO sector's recent growth plan said it wasn't Trump or Duterte that posed the biggest challenge to the industry but automation.

The plan aims to boost mid- to high-skilled labor from 53 percent of the workforce to 73 percent by 2022 to meet that challenge. That would push annual incomes from $19,100 to $21,600 with jobs that diversify beyond voice services and focus on higher-value IT support.

The economic planning minister, Ernesto Pernia, told Reuters he was optimistic the Philippines' competitive costs and services would insulate its BPO sector from Trump, and the BPO jobs that Filipinos do might not appeal to Americans.

Duterte's talk shouldn't be taken too seriously, either, Pernia said.

"I think investors should listen to the economic planners and not the president," he said.

XS
SM
MD
LG