America-first policy could dampen growth in BPO industry — ING
GROWTH in the business process outsourcing (BPO) sector could slide over the next few years should the US government discourage companies from tapping foreign labor markets for their operations, an analyst at ING Global Markets Research said.
“We expect the growth of outsourcing exports to settle in the midsingle digits in the medium term,” Tim Condon, head of research for Asia at the bank, said in a daily market report sent yesterday.
The BPO sector has been a key growth driver for the Philippine economy, posting double-digit expansions over the last few years and employing about 1.1 million Filipinos.
Total BPO revenues have reached $ 15.5 billion as of end- September, against a full-year forecast of about $25 billion.
Combined with the steady stream of remittances sent by overseas Filipino workers, BPO receipts helped provide Filipinos with disposable incomes, fueling consumer spending — which, in turn, has supported economic growth to an average 7% during the first nine months of 2016.
Some analysts have even said that they expect BPO receipts to overtake total remittances, given a “softer” growth trend observed after hitting a peak in worker deployment in 2014.
The inflows have also helped keep the current account in surplus, more than making up for a drop in merchandise exports, Bangko Sentral ng Pilipinas Deputy Governor Diwa C. Guinigundo previously said.
Donald J. Trump assumed office as US president on Jan. 20. During his inaugural speech, Mr. Trump stressed an “America first” policy.
Economists have said that they are currently waiting for more concrete policy statements from Mr. Trump, who earlier announced that he wants to bring jobs home by adopting protectionist policies to discourage US firms from setting up shop outside the country.
“We believe the Philippines is the most exposed country in Asia excluding Japan to a Trump shock to US outsourcing. Since 2005 the US has been the origin of an average of 33% of the Philippines’ FDI (foreign direct investments), ranging from a high of 61% in 2014 to a low of 17% in 2006,” the ING report read.
“The Philippines exported $18 billion of technical, trade- related and other business services in 2015, which was a 23% increase from the previous year. Through September 2016 growth was 10.9%.”
Credit rater Moody’s Investors Service earlier said that the Philippines would be among the hardest-hit economies should Mr. Trump adopt policies that would “disincentivize” foreign outsourcing.
Reuters also reported yesterday that Mr. Trump formally withdrew the US from the Trans-Pacific Partnership — an alliance formed by his predecessor Barack H. Obama — that effectively loosened its ties with Asia, saying he would opt to pursue “oneon-one” trade deals with other economies. —