WASHINGTON/MANILA - United States President Barack Obama has not backed down on his stand to discourage American companies from outsourcing of US jobs despite concerns by India, the Philippines and other countries on the effects on their business process outsourcing (BPO) industries.
Already, there is a pending bill in the US Congress banning tax incentives on outsourcing of jobs to be able to give the jobs to Americans based in the US. House Bill 3596 or the “Call Center and Consumers Protection Bill” filed last December 7 by Reps. Tim Bishop (Democrat, New York), David Mckinly (Republican, West Virginia), and Mike Michaud (Democrat, Texas) would discourage US companies from outsourcing business like Call Centers, Medical Transcription and Accounting Services.
Reports from Washington indicated that the US President was firm on his policy of discouraging outsourcing of US jobs, saying it was his responsibility to support jobs and opportunity for the American people.
This developed as the President Benigno Aquino III and his Cabinet were urged to form a task force to monitor the effects on the local BPO of the American government policy and the proposed US bill on outsourcing in the wake of fears by local BPO employees may lose their jobs in the coming months if the US bill is enacted into law.
In the Philippine Congress, several congressmen have warned that a bill filed in the United States Congress last month could affect some 400,000 call center and other BPO employees in the country.
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BPO industry leaders, meanwhile, estimate that global demand for outsourcing services would triple to a range of about $250 billion to $256 billion by 2016 from the $125-billion-to-$130-billion market in 2010.
Last year, the local BPO generated $9 billion in income.
The BPO leaders said they could look to Europe, Australia and other countries other than the US for future growth.
To avert a possible loss of thousands of jobs, the Philippine lawmakers called for a campaign to be mounted by Philippine officials in the US to make sure that the bill will not be passed.
Reports from Washington quoted President Obama as saying that his administration is focused on America’s economic recovery, investing in America’s future, creating and keeping jobs in the United States.
The reports indicated that President Obama has underlined his determination to end tax incentives for companies that create jobs overseas, he will provide a generous tax credit to companies that create more jobs in the US.
In Manila, economists warned that the Philippines’ outsourcing sector should develop and market higher-value services to cope with the United States’ moves to “insource” more jobs, which could signal a long-term curb in demand for outsourcingservices.
That is, unless Manila-based companies differentiate their services from those that can be obtained in the US and from other outsourcing destinations such as India, according to Dr. Cid Terosa of the University of Asia and the Pacific.
It was learned that about 70 percent of business process outsourcing (BPO) firms in the Philippines rely heavily on US clients, although demand for outsourcing jobs is growing in Europe and Australia.
Since BPO firms, knowledge process outsourcing companies, and similar entities contribute greatly to employment and foreign exchange earnings, US insourcing “could lead to a decline in both (jobs and dollar revenue),” Dr. Terosa said.
Former Philippine Economic Secretary Benjamin Diokno, however, sees no immediate threat in the short term on the local BPOs, but pointed out that the new American policy may affect the growth of BPOs in the future.
Diokno said that it is not clear whether the proposal in the US Congress to remove tax incentives to outsourcing companies apply to all or only to new BPO investments.
“In any event, US firms have to figure out whether it is still worthwhile to outsource abroad should the tax incentives be withdrawn,” Diokno said.
The National Economic and Development Authority has not issued a preliminary impact assessment as it continues to monitor developments on the proposed “insourcing” in the US.
Industry group Business Processing Association of the Philippines (BPAP) also said it was “vigilantly monitoring” developments on proposed US measures.
BPAP executive director Martin Crisostomo said that the group’s member-companies hope to continue to give US clients cost competitiveness so they can grow and create more jobs at home.
“In a free and mature global market we believe that, as private enterprises assess best economic solutions to drive competitiveness and consumer value, global market forces will prevail,” Crisostomo said. “We are hopeful that those companies that have benefited from IT-BPO services can relay to the policy makers in the US that outsourcing will be more helpful to the economy.”
Labor Secretary Rosalinda Baldoz said local BPO workers who may be displaced could be absorbed in the tourism sector since they are fluent in English.
“Just in case this [US bill] is passed into law—which of course we don’t want to happen—one measure would be to retrain and retool our workers,” said Baldoz.
“We can quickly train them for work in the service industry like in hotels, restaurants and tourism-related establishments, or in merchandising and trading services,” she said.
Baldoz, however, said it was too early to tell if the US bill would pass into law.
Filipinos, she said, “should not worry about the proposed law known as The United States Call Center Workers and Protection Act” since indications were it may not pass into law.
“The signal we are getting is that we should not worry about it… we don’t know if it will pass into law considering past experience,” Baldoz said.
She said similar bills had been filed in the US Congress before but these did not become law due to the opposition of American businessmen.