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BPO sector still an ‘area of certainty’

/ 12:24 AM January 06, 2017

University of Asia and the Pacific economist Bernardo Villegas, also known as the country’s “prophet of boom,” has shrugged off concerns about the Philippine business process outsourcing (BPO) industry contracting under the term of US president-elect Donald Trump.

In a presentation during a macroeconomic briefing held by First Metro Investment Corp. Thursday, Villegas said the BPO industry—which contributes more than $22 billion in annual revenue— remained an “area of certainty” for the Philippines notwithstanding the looming Trump presidency.

“Even if it’s true that Trump can force some of the investors to try to redevelop manufacturing in the US, he won’t be able to do that in services, Villegas said. “The differences in wages in services are much more than wages in manufacturing. If you take a look at some wages that people in New York have to pay for BPO services, it’s anywhere from eight to 10 times what they pay in Manila or Iloilo or Dumaguete.

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“There’s no way Trump can force American companies to relocate their service-oriented companies back to the US,” he said.

At the same time, while the US could compete well in manufacturing, he said the Americans were “not exactly cut out for services.”

Villegas said outgoing US president Barack Obama had also talked about bringing back jobs to the US previously. “Nothing happened. These decisions are made by businessmen,” he said.

It’s also good for the Philippines that it is now developing BPO hubs in second-tier cities as these make the cost proposition even more attractive for multinational corporations.

The economist is also optimistic that President Duterte—despite all previous anti-US rhetoric—would be able to improve relations with the US under the Trump presidency.

On the rising tide of protectionism, Villegas said the Philippines had the advantage because the domestic economy was not dependent on exports.

“Our growth is from the domestic market, for as long as we can implement those infrastructure projects and continue receiving all of these remittances. Our consumer market will take care of 6-7 percent (annual growth), the additional 1-2 percent will be addressed by infrastructure. That’s not dependent on what’s happening to the rest of the world,” he said.

Villegas stressed that the jewel of the economy remained the country’s pool of young and growing English-speaking population.  As such, he said he disagreed with the Duterte administration’s bid to control population growth.  “That’s our source of competitive advantage,” he said.

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