Last week, space was devoted to discussing the tourism industry, which, by all accounts, appears to have been severely affected by the pandemic. This time, though, space will be devoted to another services subsector that has performed quite well.
Business-process outsourcing, as a casual Google search would reveal, is defined as the act of outsourcing an aspect of the operations of a business to a third-party vendor or service provider. A BPO call center is a team of outsourced agents who handle incoming and outgoing customer calls for other businesses. In this pandemic situation where community quarantines and work-from-home arrangements have become the norm, the BPO industry has proven to be highly essential in ensuring the continuation of many economic transactions.
In fact, the most recent data from the National Income Accounts published by the Philippine Statistics Authority show that, despite the ongoing pandemic, “Information and Communication” (where the BPO industry is categorized) has consistently exhibited positive growth rates from the first quarter of 2020 to the first quarter of 2021. In particular, it posted +4.7 percent in Q1-2020, +10.7 percent in Q2-2020, +3.0 percent in Q3-2020, +1.9 percent in Q4-2020, and +6.3 percent in Q1-2021. Only two other services subsectors have exhibited the same positive trend: 1) “Financial and Insurance Activities” and 2) “Public Administration and Defense; Compulsory Social Activities.”
Perhaps, just for comparison, it should also be noted that the services sector posted the following quarterly growth rates: +0.1 percent in Q1-2020, -17.1 percent in Q2-2020, -10.6 percent in Q3-2020, -8.0 percent in Q4-2020, and -4.4 percent in Q1-2021. Gross domestic product (GDP), in turn, posted the following quarterly growth rates: -0.7 percent in Q1-2020, -17.0 percent in Q2-2020, -11.6 percent in Q3-2020, -8.3 percent in Q4-2020, and -4.2 percent in Q1-2021.
Now, in terms of shares, the contribution of the “Information and Communication” subsector to the services sector increased from 4.76 percent in 2019 to 5.50 percent in 2020. In Q1-2021, its contribution to the services sector was 5.78 percent. The contribution of the subsector to GDP also increased from 2.87 percent in 2019 to 3.34 percent in 2020. In Q1-2021, its contribution to GDP was 3.45 percent.
Recent news reports about the BPO industry appear to cohere with broad macroeconomic trends. According to a statement released by Leechiu Property Consultants, office space demand has recently surged to its highest level since the start of the pandemic, and such demand is backed by growing interest from outsourcing firms. From Q1-2021 to Q2-2021, demand for office space has increased by 38 percent to 169,000 square meters. Total office space demand in the first half of 2021 has reached 291,000 square meters—already 75 percent of the demand for 2020. The BPO industry accounts for about 92,000 square meters—more than half of second quarter demand. According to LPC, the 160-percent growth since Q1-2021 is being driven by increasing economic stability in Western countries. LPC also claims that investor sentiment has improved amid the rollout of Covid-19 vaccines.
In connection with ongoing vaccination programs, there have been some changes to the priority categories, one of which is the inclusion of BPO workers in the A4 priority group. Included in the A4 priority group are the following: 1) private sector workers required to be physically present at their designated workplace outside their residences; 2) employees in government agencies and instrumentalities, including government-owned and controlled corporations and local government units; and 3) informal sector workers and self-employed individuals who may be required to work outside their residences, as well as those working in private households.
Indeed, the inclusion of BPO workers in the A4 priority group is a welcome development, in light of the reported vulnerability of BPO companies to Covid-19 outbreaks. News items reveal that not all BPO employees are given the chance to work from home. Some BPO employees who work on-site claim that they have often failed to observe physical distancing by sitting close to co-workers, sharing headsets, and sleeping on mattresses spread on the floor. What is deeply ironic is that the government itself is even seeking the help of BPO companies to augment contact tracing efforts.
In sum, the country is fortunate to have a strong BPO industry that has significantly contributed to its economic resiliency. In the immediate term, it is only fair that both BPO employers and the government strictly ensure BPO workers’ health and safety. In the long term, there should be a stronger commitment to invest on human and physical capital to ensure the viability of the BPO industry. A well-educated, highly-skilled workforce will ultimately be crucial for the survival of this economy.
Dr. Ser Percival K. Peña-Reyes is the Associate Director of the Ateneo Center for Economic Research and Development.