Trump policies may hurt outsourcing in Philippines

US President-elect Donald J. Trump’s protectionist policies could spell trouble for the Philippines’ business process outsourcing (BPO) sector, economists warned.

GlobalSource Country Analysts Diwa C. Guinigundo and Wilhelmina C. Mañalac said Mr. Trump has repeatedly claimed Americans have lost jobs to other countries and vowed to “punish” American firms that manufacture outside of the United States.

“This policy stance could negatively impact the Philippines’ business process outsourcing (BPO) industry, especially since it has been reported that around 70% of its earnings come from the US,” they said in a commentary.

Mr. Guinigundo and Ms. Mañalac said the BPO industry has been one of the Philippine economy’s fastest-growing sectors, generating much-needed foreign exchange revenues and jobs.

“The BPO industry has in fact been comparable to foreign exchange revenues sourced from overseas Filipino workers’ remittances. Thus, executing these (protectionist) policies may have a stifling effect on the growth of the BPO industry,” they said.

The information technology and business process management (IT-BPM) industry is expected to book between USD 38 billion and USD 40 billion in revenue this year. It also aimed to increase staffing to between 1.82 million and 1.84 million by yearend.

The industry caters to the banking, financial services and insurance, healthcare, retail and IT sectors.

“Given the size of business in the BPO sector and the high attrition rate in the industry at 40% due to limited career progression, low pay and an unhealthy work-life balance, the uncertainty of the Trump policy on the business contracting industry could therefore have non-trivial effects on the Philippines’ output growth and employment,” the GlobalSource analysts said.

The Philippines is one of the top destinations for US firms seeking to outsource services.

An earlier report by the Center for Strategic and International Studies showed 395 US firms have invested USD 22.4 billion in the Philippines between 2003 and 2021, of which USD 7.8 billion or 35% went to IT-BPM.

Mr. Trump, who had pushed for an “America First” policy during his first term, is expected to continue his protectionist stance when he assumes office in January.

“On the basis of Trump’s ‘America First’ policy under his mantra ‘Make America Great Again,’ a reduction in foreign assistance extended by the US globally, including the Philippines, may also be expected,” the GlobalSource analysts said.

During his election campaign, Mr. Trump has also vowed to deport millions of immigrants living in the United States illegally.

“Stricter immigration policies may make it more difficult for overseas Filipino workers to find job opportunities in the US, even the highly skilled ones,” Mr. Guinigundo and Ms. Mañalac said.

“Considering that an average of 40.9% of total cash remittances from 2021 to 2023 came from the US, the implementation of more stringent immigration policies may result in lower remittances, without consideration of other foreign job markets.”

Cash remittances increased 3% to USD 28.07 billion in the January-to-September period from USD 27.24 billion a year ago.

The US accounted for the biggest share (41.3%) of cash remittances in the first nine months.

Mr. Guinigundo and Ms. Mañalac also flagged the possible negative impact of Mr. Trump’s trade policy.

Mr. Trump on Monday said he will slap a 25% tariff on all products from Mexico and Canada, and will charge goods from China an additional 10% tariff on his first day in office. He had earlier threatened to impose tariffs of up to 20% on imports from other countries.

“The US is a major destination for Philippine exports, making up an average of about 16% of total export trade for the last five years. While the share-to-total has slightly declined due to the trade diversification policy of the Philippine government in recent years, a further drop in exports to the US definitely does not bode well for the country,” the GlobalSource analysts said. — ARAI