$4.8-B investments in BPO to boost jobs creation

by Dennis D. Estopace, Business Mirror

Posted at Oct 27 2010 01:26 AM | Updated as of Oct 27 2010 05:40 PM

MANILA, Philippines - The Philippine business-process outsourcing (BPO) industry estimates an annual investment of $800 million from the private sector to push its goal of generating an average 216,666.67 jobs a year up to 2016.

“We’re not a capital-intensive industry. We don’t build plants or are not into mining. That amount is what we estimate that are investments in people,” Business Processing Association of the Philippines (BPAP) chief executive Oscar R. Sañez said on Tuesday at a press conference for the International Outsourcing Summit.

Sañez said the investment in talent is necessary “if the government wants this to remain a sunshine industry.”

According to Gaurav Gupta of the Dallas, Texas-headquarted Everest Group, the Philippine BPO industry has posted a compounded annual growth rate of 30% since 2006 to an estimated $9 billion in revenue for 2010.

Citing the Roadmap 2016, the Everest Group managing partner and country head for India said the information technology and BPO sector has contributed between 4% and 5% of the Philippines’ annual gross domestic product.

“There is, hence, a need to communicate to the government that after overseas Filipino workers [OFWs] and tourism, the BPO is the third-largest contributor to the economy in terms of net import earnings,” BPAP chairman Alfredo Ayala said in the same press briefing.

Ayala added that he expects the industry to be equal to remittances of OFWs’ share of 10% to GDP.

“If we resolve that talent issue, we can do that in relatively short period of time.”

Sañez cited estimates of direct employment in the BPO sector hitting 530,000 this year, or about 19% higher than the 440,000 jobs the industry generated last year.

But while the demand for talent has never been a problem, according to Ayala and Gupta, the industry has been saddled with a supply constraint. Sañez admitted that the industry has “not been able to tap real good candidates out there.”

We hope that we could have as well that level achieved by the nursing sector that has drawn people to take up that course, he added.

Ayala said doing so means communicating “to parents and young people that being in contact centers is not a dead-end job.”

Hence, Ayala said this would take zero investment on the part of the government “to attain the lower end of the target” $25-billion revenue by 2016.

However, Ayala noted an amount higher than Sañez’s of $2.083 billion annually for the next six years—or a total of $12.5 billion—as he estimated that for every dollar of revenue, five cents of investment is required.

The issue of talent-supply constraint comes at a time when “more people opted to stay out of the labor force and hence, there were lesser persons competing in the labor market,” according to the Bureau of Labor and Employment Statistics’ July 2010 labor force survey.

The BLES estimates the total number of unemployed persons stood at 2.708 million–a decline of 214,000 from year-ago level.

Still, employment growth in the service sector where BPOs belong “fell sharply to 1.5% [+283,000] from 5.4% [+934,000] in July last year,” the survey noted.