Outsourcing companies in the Philippines, whose clients are mainly US companies, are worried that Donald Trump’s plan to bring jobs back to America won’t end at just manufacturing but extend into services.
The industry is considering hiring a US-based consultant to monitor the threat of rising American protectionism, Ike Amigo, the head of the Philippine association representing outsourcing companies, said in an interview on Wednesday.
“We are looking at hiring a consultant on the ground pretty soon, as early as March,” he said in his office in Manila. “We keep an eye on developments in the Trump administration. Certainly, it is a concern,” adding the consultant may be a lobbyist or a research group.
Trump is shaking up the global stage as he persuades companies such as Ford Motor Co. to put up factories and investment in the US to create jobs. While outsourcing companies have largely escaped his notice, his policies could hurt the industry in the Philippines, among the largest foreign-exchange earners, just as the peso is weakening.
“Trump is one of the biggest risks facing outsourcing revenue,” said Michael Wan, an economist at Credit Suisse Group AG in Singapore. “That comes on top of a more protectionist mood globally, not just in the US. The outsourcing sector will have to contend with that challenge.”
Philippine outsourcing revenue surged 160 percent in the past six years to an estimated $23 billion in 2016 and is forecast to rise to $39 billion by 2022. It is projected to provide 1.8 million jobs by then, about 4 percent of total employment.
To achieve their goal, the industry is moving to offering higher-skilled jobs in areas such as animation, medical, legal and game development, Amigo said. That will add to the Philippines’ natural advantages which include cheaper wages, accent-neutral English language skills, affinity with customer service and familiarity with American culture.
Philippine providers also seek to diversify their markets to boost clients from Japan, Australia, Singapore, South Korea, India, UK and Southeast Asia, he said.
The average cost of a full-time business process outsourcing employee in the Philippines is about $19,300 a year, compared with $72,300 in the UK and $91,100 in the US, according to consulting firm Everest Group. The cost calculation includes salaries and expenses related to benefits, administration, facilities, technology and others.
The risks of a slowdown in outsourcing, weaker remittances and mining production cuts could cause the Philippines’ current account balance to not just narrow, but disappear, Credit Suisse warned in a report this week. That could add pressure on the peso, which is Asia’s worst performing currency this year.
“Trump could try, he could try, but at the end of the day, the stakeholders of all these businesses will look at their bottom line,” Jonathan de Luzuriaga, president of the Philippine Software Industry Association, said in a separate interview. “The Philippines offers tremendous value to them. That’s why they’re here”•by the planeloads.”
