Call centers to help wean RP away from OFW dollars

By Doris C. Dumlao Inquirer

THE Philippines looks to the booming business process outsourcing and call center industry to help wean it from its reliance on the money that overseas Filipino workers bring in and to boost its potential for economic growth, according to National Economic Development Authority.

The government will also be investing heavily in infrastructure, knowing how the country's shortcomings here may well turn off investors, said Dennis Arroyo, the Neda's director for policy planning and research.

"We'll slowly be replacing [earnings from] OFWs with BPOs [business process outsourcing] over the medium term," said Arroyo, in reaction to a cautionary report on the Philippine economy from the Asian Development Bank.

The ADB, in its annual Asian Development Outlook released on Thursday, warned that sluggish investments along with high dependence on consumption and overseas workers' remittances were stunting the Philippines' growth prospects.

Only 5% growth in '06

The regional bank's report predicted that Philippine gross domestic product would rise by only 5 percent this year against the government's down-scaled growth target of 5.5 to 6.2 percent and the 5.1 percent growth posted in 2005.

The ADB lamented that the country's growth performance was falling short of what was required to make "significant inroads into persistent high levels of poverty and unemployment."

Arroyo said the government was confident that the country could post a GDP growth of at least 5.5 percent this year.

"This growth target is even conservative given that we've had strong growth in the services sector led by telecommunications and the BPO/call center business," Arroyo said.

He said the telecom sector would remain competitive with the advent of the VOIP (voice over Internet protocol), which allows users to make long distance calls using the Internet, and even 3G technology which allows real-time video broadcasting through the mobile phone.

Arroyo said OFW inflows would remain strong as it would be driven by the global aging phenomenon which would boost demand for migrant workers in industrialized countries.

By 2009 to 2010, the lucrative BPO sector would become even bigger, allowing the country to earn more foreign exchange without more Filipinos having to join the worker exodus abroad, Arroyo said.

Cost of migration

The ADB report warned that the high level of out-migration, though it generates high-remittance income, comes at a high cost to the country in terms of loss of knowledge and social problems.

Aside from call centers, Arroyo said the BPO sector would be boosted by other services such as medical and legal transcription, animation and software development.

The services sector, of which BPO is part, now accounts for about 48 percent of the country's domestic output, edging out agriculture and industry which respectively contribute 19 percent and 33 percent of GDP in 2005.

Arroyo also noted that OFW remittances were being directed into the stock market and even real estate.

"OFWs are looking more into investing in blue chips, especially now that the stock market is trading at a seven-year high," Arroyo said.

Shift to real estate

He said the shift of OFW money from pre-need plans to real estate would help the construction sector.

Cash remittances sent by OFWs through the banking system amounted to $10.7 billion in 2005, 25 percent higher than the previous year, according to the Bangko Sentral ng Pilipinas.

If inflows through informal channels were to be included, OFW remittances were estimated at about $13 billion in 2005.

To address infrastructure bottlenecks, Arroyo said the government was committed to devoting a bigger portion of the annual budget to infrastructure spending.

"Now that we've implemented the VAT (value-added tax) reform, we have more resources for capital outlays," he said.

Enhance highway systems

A major priority is to enhance the highway systems connecting the three major economic growth areas of Luzon-the National Capital Region, the Clark-Subic development area and the Calabarzon (Cavite-Laguna-Batangas-Rizal-Quezon) growth corridor-whose combined output accounts for 55 percent of the country's GDP.

Based on Neda estimates, the Philippines needs P1.1 trillion ($21.25 billion) in fresh investments from 2006 to 2010 to ease the gaps in transportation, power, water, communications and social infrastructure in the next five years.

According to Arroyo, the thrust is to encourage the private sector to undertake those projects "with positive financial and economic returns" while the government focuses on "essential projects with high economic returns despite poor financial viability."
Fiscal discipline

But to maintain fiscal discipline, the government will focus on projects that will not burden it with contingent liability and encourage the participation of local government units whenever feasible.

Of the amount required for infrastructure spending over the next five years, the national government is expected to shell out P171.56 billion from its budget and another P108.98 billion outside the budget (such as those involving LGUs), on top of its contribution to joint venture projects with the private sector.

Projects involving public-private partnership, or the build-operate-transfer (BOT) scheme, are expected to amount to nearly P500 billion.

Arroyo said partial liberalization of air transportation in key areas as well as further improvements in the nautical highway system through the ro-ro (roll on, roll off) mode, would also boost the investment climate.