Politics & business

Michael Alan Hamlin

Posted on February 19, 2008

Building the Philippines’ country brand

As international delegates and speakers arrived in Manila early last week for the 8th e-Services Global Sourcing Conference & Exhibition, they were greeted by front-page headlines and news stories alleging high-level government corruption on a grand scale. Some stories included remarks by a spokesman for an association of business leaders who reportedly told reporters the allegations leveled against the administration of President Gloria Macapagal-Arroyo by former government executive and consultant Rodolfo “Jun” Lozada, Jr. could lead to another abrupt, unconstitutional change in government.

The timing, never good under any circumstances in the case of government corruption scandals, couldn’t have been worse. In a survey conducted by Outsource2Philippines (O2P) and the Business Processing Association of the Philippines (BPA/P) late last year, 60% of respondents said the Philippines needs to improve perception of political stability. Responses to another question show why: 92% of respondents said the Philippines’ country image facilitates client acquisition.

The annual e-Services event is undertaken by the Department of Trade & Industry (DTI) and one of its promotions agencies, the Center for International Trade Expositions & Missions (CITEM), to position the Philippines internationally as a tier-one destination for business process outsourcing (BPO), or what BPA/P has started calling offshoring and outsourcing (O&O), services. When e-Services started eight years ago, a handful of O&O service providers were reporting revenues in the low hundreds of millions of dollars. This year, they will report $7 billion in revenue.

As investments and revenues rose over the last decade, so did positive perception of the Philippines – at least in the O&O industry. In the O2P-BPA/P survey (Full Disclosure: I am a director of O2P and played a principal role in the development and administration of the survey.), 53% of respondents said the Philippines enjoyed a positive or very positive perception. And 29% were neutral, indicating that the Philippines is no longer significantly hobbled by negative perceptions within the O&O industry.

Incidentally, according to BPA/P, the O&O industry presently accounts for two percent of gross national product, and that contribution is continually expanding. More significantly, when the industry is viewed in the scope of both direct and indirect participants, its impact on the economy is significantly greater. Indirect participants include a broad range of sectors, everything from hospitality and entertainment to real estate development to networking and telecom infrastructure. BPA/P estimates that the industry will account for P6.7 billion in annual salaries and benefits only in just indirect sectors alone by 2010.

As the O&O industry accelerates its expansion to tier-two cities throughout the Philippines, there are few industries and families that will not be directly or indirectly connected in some way to it. The bottom line is that the O&O industry reflects not just the state of technology-enabled businesses in the Philippines, but business in general. So the Philippines has a lot riding on the continued rapid development of this sector.

Has this latest corruption scandal really threatened the industry’s prospects? There’s no way to know without surveying executives, and in many respects it’s too early to tell. As late as this week, reports were appearing in newspapers quoting O&O executives waxing enthusiastically about the sector and the Philippines magnificent labor force. And I’m willing to bet that while eyebrows will be raised in home offices, the crisis has had, and will have, little negative impact on the Philippines’ image within the industry.

Respondent perceptions notwithstanding, for years analysts and pundits like me have noted the increasing irrelevance of government to business. A few weeks ago Senator Manuel A. Roxas II remarked publicly that government and business appear to exist in parallel universes. And this is seen as a more positive state of affairs than if government were seeking to abuse the industry, say by enforcing archaic labor laws that outlaw late night hours for women. The theory is simple, “Government may be corrupt, but at least it leaves us alone.”

That’s not being completely fair with government, however. O&O executives consistently point to DTI and the Board of Investments as positive influencers of their investments in the Philippines. They cite the proactive contributions officials in these agencies make to the industry, and as we’ve seen over eight years, CITEM and e-Services has done much good in increasing the visibility of the Philippines within the industry.

But there is also little doubt that a more positive perspective among investors of the executive branch of government could have a further and significant positive impact on the industry. While neither this nor succeeding scandals may significantly slow the O&O industry’s momentum, good government can make a positive economic force even better.

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