The ultimate goal

Michael Alan Hamlin

Posted on October 28, 2009

Just when you thought it was as bad as it gets…

Despite the ongoing struggle to address the devastating impact of Typhoons Ondoy (international designation: Ketsana) and Pepeng-and debate over government’s ability to stay relevant to that struggle-the Philippines was not without its feel-good moments last week. The contrast between individuals struggling to survive and others celebrating business success may seem callous, but it’s not. As I argued two weeks ago, the ultimate goal is not to survive, but to move on and build better lives.

For that to happen, the private sector must continue to maintain and create jobs. While life might have seemed to stand still as streets, homes, and villages disappeared under flood waters and mud, it did not. But for the private sector to continue to do its work, it needs the support of government, especially when the hurdles to successfully doing business have been raised. Typhoons Ondoy and Pepeng also made the private sector’s work more difficult.

What was there to celebrate last week? For one, the Business Processing Association of the Philippines (BPA/P) successfully conducted its International Outsourcing Summit (IOS), demonstrating to this global industry the Philippines’ role in and influence on the future of outsourcing. It was broadly acknowledged among delegates and speakers that the Philippines has become an important force in the industry as the number two offshore outsourcing center in the world after India.

The business process outsourcing (BPO) industry is the Philippines’ best and most efficient generator of jobs. According to IOS speakers such as Larry Jones, StarTek CEO, those jobs will continue to grow because the Philippines is the global number one choice of the industry’s clients for customer care. And there’s more. The quality of these already high-paying jobs is getting better as clients increasingly rely on services providers to exercise judgment on their behalf, and not just execute a process.

Yet BPO investors do have concerns. Topping that list is the Philippines’ capacity to educate the future workers the industry needs to grow. While the Philippines’ rapid population growth provides plenty of raw product for the industry, it’s crumbling educational infrastructure-hobbled by government corruption, neglect, and populist public policies-is struggling to meet demand for a new generation of workers.

Surveys conducted by BPA/P reveal other concerns as well. Not surprisingly, weather and how prepared the Philippines is to confront the next big storm are top-of-mind not just among BPO investors and services providers, but among their clients. Although the industry quickly resumed near-normal operations following the typhoons in most locations, executives say their clients are anxious to mitigate risk by moving some work that might have come to the Philippines elsewhere, despite the Philippines’ preferred status in the industry.

A third concern is general perception of the Philippines, which is closely tied to government and public policy. The Philippines has not performed well in this area, in part because of lack of effort to take control of its brand identity, and in part because reactive public policy appears to take precedence over the provision of a reliable playing field that investors can depend on as they run their businesses.

Despite the challenges of these times, government made two announcements last week that had investors rolling their eyes. The first was the announcement of Proclamation 1808, proclaiming November 27-28 national holidays in an already holiday-studded season. As investors know, work will go on despite the holidays, but they will be paying higher labor rates with the result that the work done becomes less profitable or even unprofitable. The work must go on because of commitments to clients. Investors’ hands are tied.

The second act of government was Executive Order 839, which in effect provided the administration the power to dictate not just what labor rates investors pay, but what they can charge their customers. Clearly a populist political ploy and a hapless attempt to improve its deeply unpopular status among voters, the EO requires oil companies to roll back oil prices to their levels 12 days prior to the date the EO went into effect, which was Friday. The EO itself was apparently kept under wraps until Monday. A government spokesman described it as a way for investors to “give back a little.”

No one likes to defend oil companies. But when government begins to manipulate the cost of inputs and the prices of outputs, investor sentiment turns sharply south. Edgar Chua, country chair of Shell in the Philippines, reportedly told Department of Energy officials, “We will comply. We have no choice. But (the executive order) has serious implications not only to the supply of products in the country, but also to investments.”

It sure does. Sometimes it’s hard to make a bad situation worse. But there are some who have talent for doing just that.

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