I said it before and I will say it over and over again until our political leaders get it.
There are some facts we must face. First, our import dependence is unsustainable and this is reflected in our alarming trade and current account deficits. The former stood at -$58.43 billion and the latter stood at -4.4 percent of GDP last year. If not mitigated by an increase in investments and/or exports earnings of merchandise and services, our deficits will lead to ballooning debts, a weaker currency, constrained economic growth and economic imbalances. In other words, an economic bust.
Second, the country will never generate real inclusive wealth, neither will it have enough resources to modernize the military and to provide quality social services unless tax revenues, foreign investments and export earnings increase. Third, unless the country becomes a global leader in at least one industry, the probability of being caught in the middle-income trap increases significantly. Fourth, a country whose largest source of income are remittances from the export of its people is indicative of failed governance and an uncompetitive economy.
Let’s face it. Our very own laws and prevailing conditions make it impossible for us to become a manufacturing powerhouse. Expensive power cost, relatively high tax rates, a paralyzing bureaucracy, lacking infrastructure and a labor force shamefully poor in science, technology, engineering and math constrain us from competing with Vietnam, Indonesia and Malaysia.
But we have an ace up our sleeve. Our competence and competitive advantage lie in information technology-business process management (IT-BPM). This is our place under the economic sun. Government will be wise to channel its full support toward it. We have a clear shot at becoming the global leader in IT-BPM and, in the process, generate meaningful wealth for the country.
Yes, the industry is doing good, but it can do better if government gives it the support it needs. The immediate challenges are three-fold. First, to fill the talent gap. Second, to mitigate the effects of artificial intelligence. And third, to diversify and climb the value chain to such fields as AI, software development, machine learning, robotic automation, nanotechnology and the like.
At present, voice-based contact centers comprise 60 percent of our IT-BPM industry. This should alarm us all, given the rapid adoption of AI. Other services include animation, health care service, global back office management and financial services. As you can see, the need to diversify is urgent.
Before getting into how our political leaders can render meaningful support to the IT-BPM industry, let me first cite the extraordinary work of the IT-Business Process Association of the Philippines (IBPAP), led by Jack Madrid. IBPAP has achieved impressive growth despite the challenges.
From just $8.9 billion in revenues in 2010, the industry is poised to pull in $35.9 billion in 2023 and employ well over 1.4 million workers. That’s 23 percent annualized growth! For the first time ever, IT-BPM revenues will surpass OFW remittances.
Based on the medium-term roadmap crafted by IBPAP, the industry aims to generate $59 billion in revenues and 2.8 million jobs by 2028, a 100-percent increase from 2023 levels. Whether or not this ambitious goal will be met largely depends on the extent of government support.
See, there is no shortage of foreign investors intending to set up IT-BPM-related operations in the Philippines. The stumbling block is the availability of skilled workers. There is an alarming shortage of workers who are proficient in English, who possess an IQ above 85 and capable of critical thinking. Even more worrisome is the dearth of graduates with a working knowledge in software coding. The current crop of fresh grads was not adequately prepared by the former administration.
Hence, comes the first set of “asks” to government. That at least 500,000 qualified students be granted scholarships for advance learning through funds from the Office of the President and the Private Sector Advisory Council. This is essential to fuel the industry’s medium-term growth. That the DepEd and CHED work together with IBPAP to improve senior high school immersion and higher education internships. That DepEd and CHED prepare the next generation of engineers by improving enrollment rates and STEM learning.
We cannot be complacent. The Philippines is in stiff competition with South Africa, Poland, Malaysia and Columbia. Without qualified workers, our “golden goose” will surely slip away.
The second stumbling block is government’s penchant to harass investors and subject them to bureaucratic red tape. This is especially true of the Fiscal Incentives Review Board (FIRB), the BIR and local government units.
Hence, the second set of asks: That the implementing rules of the CREATE Law make permanently flexible the availment of tax incentives for work-from-home and hybrid work set-ups. That the ambiguities in VAT-related issues be made clear. That LGUs be made to comply with the intent of the incentives law and not impose their own interpretation of the law. That the Department of Finance and the Bureau of Customs be made to comply with the provisions of duties and taxes on asset donation and disposal per the CREATE Law.
Government bureaucrats must view investors not as milking cows for pennies and cents but as partners for long-term wealth generation. The culture of red tape and harassment must be replaced with a culture of enablement.
The third ask is for the Department of Justice. We need clear guidelines on cybercrimes, preferably through the enactment of the Cybercrime Act.
Again, we have a clear shot to generate meaningful wealth via the IT-BPM. The last thing we want is for this gravy train to pass us by, just as industrialization did. May this column motivate our political leaders into urgent action.
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Email: andrew_rs6@yahoo.com. Follow him on Twitter @aj_masigan