19 January 2019
The Philippines accounts for 12.6 percent of the global market for business-process outsourcing. Photo: Internet
The Philippines accounts for 12.6 percent of the global market for business-process outsourcing. Photo: Internet

Philippines outsourcing firms hit by Trump and ‘Trump East’

When the Philippines’ President Rodrigo Duterte, the man dubbed “Trump of the East”, told US 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 US president-elect vowed to bring offshored jobs home from places such as the Philippines, a big provider of back-office services for corporate America, Reuters reports.

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 (IBPAP).

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

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

“It’s a US-centric business,” said Manuel Pangilinan, president of PLDT, which provides telecommunications for the sector.

“To the extent that Trump compels, persuades or incentivises 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.”

In a string of tweets on Sunday, Trump threatened “retribution or consequences” for companies that move 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 US technology visa program under a Donald Trump administration, India’s US$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.

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 US presidential election on Nov. 9.

Duterte’s volatility has drawn comparisons to Trump and his hostility towards the US, Manila’s long-time ally, has shocked investors and even his own cabinet.

He told President Barack Obama to “go to hell” over the US president’s concern about Duterte’s war on drugs, threatened to scrap US-Philippines defense pacts, and in October announced before China’s political elite his “separation” from the US.

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 JP Morgan, which is staying put.

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