MANILA -- Foreign businesses are moving beyond call centers in the Philippines and seeking more sophisticated, value-added work, bolstering local incomes and potentially aiding growth this year and beyond.
Business process outsourcing, or BPO, involving office work in such fields as law and medicine, is hot in the Philippines. U.S. and European companies are drawn to Manila by low labor costs and a workforce proficient in English.
U.S. law firm Baker & McKenzie creates legal documents for branches around the world at its Philippine location.
At a Philippine outpost of Japanese medical information services provider Inforesta, employees search through medical literature in Japanese and English. Since the local workers cannot read Japanese, they match the characters by sight without understanding the meaning.
Roman Romulo, chair of the Higher and Technical Education Committee in the House of Representatives, has high expectations for the BPO industry.
"We are confident that BPO firms will be able to add an average of 124,000 well-paying jobs annually from 2014 to 2016," Romulo told local media Jan. 1.
"This will help address unemployment, especially among college-educated Filipinos," he said.
Sales for the industry likely rose 21% in 2013 to $16 billion, accounting for 7% of gross domestic product, according to the Information Technology and Business Process Association of the Philippines. This is expected to reach $25 billion by 2016.
The association's figures show 960,000 people employed in the field in 2013, a figure expected to rise to 1.3 million by 2016.
They generally earn 30,000 yen ($283) or more a month, a relatively large sum that helps to drive individual consumption. In search of even lower labor costs, major firms such as IBM are moving into other areas, such as the islands of Cebu and Mindanao, which may boost local incomes.
The National Statistics Office estimates the country's unemployment rate for 2013 at 7.3%, up 0.3 point from a year earlier. Despite economic growth exceeding 7%, local industries have not kept up with the increasing population, and unemployment remains stubbornly high. On the other hand, this assures a steady flow of labor for the BPO industry.
The population of the Philippines will soon reach 100 million, and the unusually large ranks of English speakers make the country highly competitive. The government extended compulsory education by three years in 2013, aiming to improve English skills. Although the country's manufacturing sector pales in comparison to those of Thailand or Indonesia, its success in the BPO field is something neighbors cannot match.
As China and Vietnam face increasing pressure to raise wages, many Japanese manufacturers are looking toward the Philippines, where pay growth is slower. If blue-collar work can supplement the BPO boom, which benefits chiefly college graduates, it may kick the economy into high gear.