What a difference a tragedy makes

Michael Alan Hamlin

Posted on September 11, 2010

Less than a month ago I wrote here that executives in the business process outsourcing (BPO) industry are seriously contemplating the Philippines’ prospects for re-emerging as the Asia Pacific center for the regional headquarters of multinational corporations. The Philippines is already the number two offshore outsourcing destination in the world with about half of India’s share of the market, despite that country’s much larger population and longer history in the industry.

There hasn’t been much good news to report in subsequent columns, unfortunately, to cheer investors in other sectors, or even reassure BPO investors that the regulatory environment will be conducive to doing business in the Philippines. The week following my good news column, I mused that breaking government contracts with infrastructure investors won’t do much in the way of attracting investors.

The Aquino administration has frequently acknowledged that it doesn’t have the resources to build the infrastructure required to move people and goods efficiently around urban centers and the rest of the country. Late last month the Supreme Court issued a temporary restraining order blocking the implementation of a long-delayed toll rate hike on the rebuilt Southern Luzon Expressway. That hike is one of the conditions the Philippine government agreed to in return for the developer’s commitment to fund the project, which has been completed.

A week later I suggested that if the Philippines is to attain its potential, it must figure out a way to keep its best minds at home and doing world-class work here. About 10% of the Philippine population is working outside the country. A recent Gallup survey revealed that two and half times more Filipinos would also choose to work outside the Philippines if the opportunity presented itself. This at a time when the BPO industry is generating high-paying jobs almost faster than it can fill them, many at senior levels.

Then last week there was the debacle of the international hostage crisis. According to contacts in the hotel industry, occupancy in the aftermath of the bungled rescue-which resulted in the deaths of eight Hong Kong tourists-plummeted 60% overnight. Although Tourism Secretary Alberto Lim was relieved that about 100 foreign delegates showed up at an international tourism conference last week, one participant from Hong Kong told reporters that the Hong Kong market for travel to the Philippines dropped “80-90%” following the crisis, and will probably stay that way well into next year.

Because I write about place, organizational, and personal brand visibility, the topics I choose to focus on in this weekly column are meant to demonstrate how the quality of visibility can build or destroy perception of brands in target markets. As we can see from the visibility the Philippines has achieved in recent weeks, much of the country’s brand visibility is far from positive.

Much of the negative visibility impacts a broad range of sectors, too. Although BPO executives are mostly concerned about efficiency, quality, and costs, they also believe that a place should be attractive to Philippine-based employees as well as visiting executives and clients and potential clients. It’s not unusual for a high-ranking executive to visit a place on a private vacation and be so impressed that he makes or influences an investment in that place in his professional capacity.

In the same manner, if government fails to honor its contractual commitments in one sector, investors in other sectors naturally wonder if their own contracts will be honored. Take the example of the Freeport Area of Bataan. Originally an investment zone operating under the regulatory authority of the Philippine Export Processing Zone Authority (PEZA), late last year Congress passed a law converting the zone into a Freeport.

Investors operating in the Freeport have valid contracts with PEZA, although PEZA is no longer empowered to oversee operations in the Freeport. Freeport officials have intimated that investors must be re-certified by the Freeport and sign new contracts. Although Freeport authorities acknowledge that investors are entitled to incentives granted in their contracts, the conditions of their contracts include renewal. Who will renew those contracts?

Philippine BPO is moving rapidly up the value chain. As this shift accelerates, the Philippines’ relentless brain drain threatens to become a significant obstacle to growth and development of the industry. Tourism truly does hold enormous potential for the Philippines, but if investors can’t depend on government to keep its commitments, infrastructure necessary to facilitate travel to and within the country won’t get funded.

The Philippines must understand that actions-and inactions-have consequences, and that those consequences have ripple effects that can rapidly turn into viciously destructive cycles. It’s important to turn them into virtual cycles. It won’t be easy, and time is of the essence.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author. His latest book is High Visibility: Transforming Your Personal and Professional Brand . Write him at mahamlin@teamasia.com and follow him on Twitter, Facebook and LinkedIn.). Copyright © 2010 Michael Alan Hamlin. All Rights Reserved.)

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