Outsourcing industry needs to evolve to high-skill services

The Philippines will have to improve training for engineers, programmers, and other high-skill professions and expand broadband facilities to further strengthen the local busines process outsourcing (BPO) industry, amid the ongoing global economic slowdown, the Economist Intelligence Unit (EIU) said yesterday.

EIU pointed out that even as the country enjoys a "real competitive advantage" in its outsourcing sector due to an English-proficient workforce and good telecommunications infrastructure, the said sector is extremely vulnerable in the face of a slowdown and even a recession among the world's major markets.

"One of the reasons it has been successful is because the BPO sector does not need a lot of capital requirements. [It is] a footloose industry. If it all goes wrong, [investors] can quickly [leave]," EIU corporate network director and Southeast Asia expert Justin Wood said at the Economist Conferences' Business Roundtable with the Philippine government yesterday.

The sector, he said, needs to move up the value-added ladder by going more into outsourced operations for animation and engineering design.

Nokia Siemens Networks Asia Pacific region head Christian Fredrikson, for his part, said at the conference that the country needs to expand broadband access to the internet to rural areas.

But the Philippines' infrastructure for the BPO industry is in place, especially as the country has increased "redundancy" or created back-up internet lines with new landing stations in La Union and Cagayan, President Gloria M. Arroyo said at the conference.

The Education department is also integrating information and communication technology in public schools' curriculum, the President added.

Aside from the BPO industry, EIU also gave prescriptions for other sectors.

The Philippines needs to shift to the manufacturing industry and away from the lower-growth agriculture sector, Mr. Wood said.

Perceptions of corruption and the complicated business regulations need to be dealt with to prop up the investment climate, especially as Vietnam is gaining more ground in export-based production.

Mining also has a huge potential as the country is highly mineralized. The sector accounted for just 1.5% of gross domestic product last year, a figure far too low compared with other countries, Mr. Wood said.

Security issues, particularly the conflict in Mindanao, need to be resolved while more infrastructure outside of Metro Manila must be built to boost the promising tourism industry, he added.

Ms. Arroyo, however, side-stepped the security problem and said that the poor performance of the tourism industry is due to the weak carrying capacity of existing transportation networks. — Jessica Anne D. Hermosa