RP call centers may bear brunt of US recession

The Philippine call center industry may likely feel the brunt of a looming US recession as large global corporations cut back on investment spending.

Analysts said a US recession would lead to a significant and serious slowdown of growth in the rest of the world, including the Philippines.  One sector that could be hit hard  by a downturn in the global economy is the outsourcing industry.

“Most call centers here are operated by big US corporations.  Those companies which have expressed interest to put up more facilities in the country may need to reassess their business strategy.  A US economic slowdown might force US companies to cut their budgets, ” an analyst at a local brokerage house said.

“We benefit when foreign companies expand operations here because it would create thousands of well paying jobs for Filipinos.  But with the slowdown in the US economy, I don’t think they would be aggressive enough to beef up operations,” the analyst said.

  US consumers and businesses are being increasingly squeezed by a downturn that threatens to spread the pain being felt everywhere from the gas pump to the unemployment line.

The call center industry, which does outsourced call center work for foreign clients,  has contributed 10 to 15 percent to the country’s gross domestic product.

Call center operator Paxys Inc. disclosed yesterday  that one of the most important clients of its wholly-owned unit has filed for bankruptcy protection in the US.

 “PRC LLC, an important US customer of Advanced Contact Solutions Inc., filed for Chapter 11 protection in the US. PRC informed ACS that it is filing not to liquidate or cease operations but to achieve financial stability so as to emerge as a stronger and more competitive company,” Paxys said in a disclosure to the Philippine Stock Exchange.

Protection under Chapter 11 will enable PRC to reorganize its capital structure while continuing to operate its business in the normal course, Paxys said. 

 According to Paxys, PRC’s filing for bankruptcy protection would not have any bearing on ACS’ financial health. “Currently, ACS believes that PRC’s Chapter 11 filing does not have a materially adverse effect upon ACS’ financial condition.  While any further weakening of PRC’s financial condition could materially adversely affect ACS and Paxys, the relief afforded by the Chapter 11 proceedings provides PRC an opportunity to alleviate its financial burdens and rationalize its operations,” Paxys said.

 In view of ACS’ importance in ensuring that there is no disruption to the day-to-day activities of PRC’s customers, it will ask the US Bankruptcy Court to allow PRC to perform and become current on its financial obligations under its existing contract with ACS. 

Paxys said it will continue to monitor the situation and take all appropriate steps that are within our control to protect ACS and its rights under the contract with PRC.

From only four call centers in 2000, the number of call centers in the country has grown to over a hundred, making the Philippines one of the world’s major players in offshore call center outsourcing.

 The call center industry is one of the fastest growing sectors in the Philippines, which has a large pool of college-educated workforce easily trained for English-language customer assistance.

According to a recent study, the local call center industry is expected to grow to $5 billion to $7 billion by 2010.