The Philippines must develop its basic industries and reduce reliance on business process outsourcing (BPOs) and overseas Filipino workers (OFWs) to sustain growth in the coming years, said the chair of conglomerate SM Investments Corp.
Compared to last year when most foreign investors’ worries were political in nature—as President Duterte settled in office then—most of the concerns this year were economic, SMIC chair Jose Sio said in a keynote speech at the Shareholders Association of the Philippines (SharePHIL) forum on Friday.
Aside from questions on infrastructure-building, Sio said it was a concern that the Philippines still lacked basic industries —referring to the factories that employ semi-skilled workers.
Based on first quarter data, manufacturing accounted for about a fourth of the domestic economy.
“Our economy is being supported by the OFWs, call centers, but then these are the industries that are not sustainable. Who knows? Call centers can be gone five years from now. Robots will take their place,” Sio said.
“[On] OFWs, social cost is so much, it can’t be made into a national policy,” Sio said, referring to children being separated from their parents and spouses being separated due to the need to earn money overseas, especially for low-skilled workers.
Being the dominant player in banking, property development and retailing, the SM group benefits from consumer spending supported by BPOs and OFW remittances.
The BPO sector generated $23 billion in revenue for the Philippines while cash remittances from OFWs hit $28 billion in 2017.
But Sio is convinced the Philippines must also strengthen the manufacturing and agriculture sectors to sustain growth for the long haul.
On call centers, he told reporters after his presentation that India was the biggest player globally 10 years ago, before it was dislodged by the Philippines. But now, he said key players were looking at territories with lower labor costs.
The BPO industry may also be affected by growing protectionist policies in the US alongside the emergence of new technology—particularly artificial intelligence—that could lead to the disappearance of jobs in this sector, Sio said.