Outsourcing: boon or bane? (2)
Outsourcing: boon or bane? (2)
Updated 01:20am (Mla time) Oct 22, 2004
By Michael Tan
Inquirer News Service
Editor's Note: Published on Page A15 of the October 22, 2004 issue of the Philippine Daily Inquirer
OUTSOURCING has been described as a sunshine industry in an otherwise bleak Philippine economy. Last Wednesday, I described the many lucrative opportunities offered by major outsourcing activities contracted out by Western companies to the Philippines -- call centers, software development, medical transcriptions and cartoon animation.
But I warned, too, that if we are to tap the full potential of these outsourcing activities, we need to be more aware of the history of outsourcing, and its advantages and disadvantages.
Outsourcing is, after all, only the latest phase in the development of global capitalism. In the 1970s, as multinationals faced rising factory labor costs in their home countries, many moved their production facilities overseas (sometimes called runaway shops) to use cheap Third World labor. In this 21st century, with the explosion of information technologies, the multinationals are looking into the use of these technologies to outsource customer servicing, office accounting and other routine office procedures to the Third World.
How do we stand to gain, or lose, from all outsourcing?
Global coolies
It helps to start by looking back at our experiences with the "runaway factories," mainly garments and electronics firms that now form the backbone of several of our export processing and industrial zones.
Yes, the products of these multinational firms are now among our leading export items. And yes, we did see, and continue to see, the creation of jobs, often paying fairly good salaries based on local standards. Just to give one example, electronics firms in Laguna province can offer something like P10,000 a month to a factory worker. For the many young women from rural Southern Tagalog provinces who flock to Laguna, that is a windfall, enough to support parents and younger siblings.
But there's another side to this. These factories have in a sense stifled local industries. Local textile and garments firms, for example, have been practically wiped out, unable to compete with the multinationals, unless they themselves become subcontractors.
In the area of electronics, I always have mixed feelings seeing some gadget sold in an American or Japanese store labeled "Assembled in the Philippines." Note "Assembled," rather than "Made in." Unlike Taiwan, South Korea and now, China and India, we've always been content to be global coolies, doing the menial jobs of assembling different components, many produced in other Third World countries, into a finished product.
We welcomed these firms thinking of the jobs they'd create, but forget that capital moves into areas where the skills that are needed are cheapest and most docile. We're vulnerable, as the multinationals move out of the Philippines to countries like China and Vietnam.
Hype versus realities
Never mind, we tell ourselves, we have a stable niche with call centers, because, together with India, we have the English proficiency and fairly high levels of formal educational attainment needed to deliver many of the required outputs.
But there's a danger here that we become complacent, believing the hype in the mass media and in the local grapevine about the opportunities in outsourcing. Last month, I met someone I'll call Ana, an ambitious young woman who had come to Manila from Polomolok town in the southern province of, South Cotabato, lured by the prospects of becoming a call center operator. Ana was setting aside two years of college courses in engineering and a six-month caregiver course after hearing about the wonders of the call center world, with salaries supposedly running up to $800 a month. Why work overseas when you could earn that much here?
Manila proved frustrating for Ana, with one rejection coming after another. Ana hadn't realized, as with many other call center hopefuls, that last year there were only about 20,000 "seats" (job positions) available. Even with projections of 40,000 seats this year, this is miniscule compared with the number of jobseekers. Outsourcing Digest cites a recent study by the Contact Federation of the Philippines finding that only two or three out of 100 applicants qualified for call center jobs. The reason? You need not just proficiency in English but the potential to get "accent training" so you can be understood by American clients. It's not surprising most of those accepted come from the University of the Philippines, Ateneo de Manila University and other upper-class private schools.
And the salaries? P12,500 to P17,000 a month is a more realistic starting salary, overtime included. Sure, that's about what an instructor gets at the University of the Philippines, but certainly a long way off from the $800 figure being bandied around.
Learning from India
My fear is that we will again remain content as global coolies, deploying University of the Philippines graduates to handle menial jobs. Call centers moved to the Third World not just because our labor was cheaper but also because Americans and British young people were leaving their jobs after a few weeks, totally bored by the routine.
We might want to learn from the Indians, who see outsourcing as part of a larger industrial development plan. Whether call centers or software development, many of these outsourcing firms are situated in Bangalore, India's "Silicone Valley," where they become part of a larger plan to develop India's own information technology sector.
Not surprisingly, the Indians have developed homegrown technologies for local needs, from hand-held equipment to be used by farmers to computer technologies that electronically canvassed some 400 million ballots during their last elections within a few days. Call centers, the Indians know, generate loose change compared with software development. Last year, their software exports raked in $9.6 billion.
The Indians have a National Association of Software and Service Companies (Nasscom) that is able to negotiate on the global market. When American politicians began grumbling about how outsourcing was taking away jobs at home, Nasscom warned them that without outsourcing, the US economy would be in even more dire straits.
Nasscom conducts studies of the world outsourcing market, trying to figure out what niches are available for India. Rather than feeling threatened, for example, by China, a major competitor for software development, they're talking about joint ventures. Similarly, the Philippines is seen less as a threat than an opportunity, with at least one Indian human resource company, Daksh, already investing in the Philippines' call center industry.
Why the difference in approaches? India has always adopted a nationalistic but pragmatic stand in relation to industrial development, bringing in the multinationals but negotiating with them with domestic priorities in mind. We lacked that foresight many years ago when we invited in the runaway factories. It may not be too late yet when it comes to outsourcing.
Updated 01:20am (Mla time) Oct 22, 2004
By Michael Tan
Inquirer News Service
Editor's Note: Published on Page A15 of the October 22, 2004 issue of the Philippine Daily Inquirer
OUTSOURCING has been described as a sunshine industry in an otherwise bleak Philippine economy. Last Wednesday, I described the many lucrative opportunities offered by major outsourcing activities contracted out by Western companies to the Philippines -- call centers, software development, medical transcriptions and cartoon animation.
But I warned, too, that if we are to tap the full potential of these outsourcing activities, we need to be more aware of the history of outsourcing, and its advantages and disadvantages.
Outsourcing is, after all, only the latest phase in the development of global capitalism. In the 1970s, as multinationals faced rising factory labor costs in their home countries, many moved their production facilities overseas (sometimes called runaway shops) to use cheap Third World labor. In this 21st century, with the explosion of information technologies, the multinationals are looking into the use of these technologies to outsource customer servicing, office accounting and other routine office procedures to the Third World.
How do we stand to gain, or lose, from all outsourcing?
Global coolies
It helps to start by looking back at our experiences with the "runaway factories," mainly garments and electronics firms that now form the backbone of several of our export processing and industrial zones.
Yes, the products of these multinational firms are now among our leading export items. And yes, we did see, and continue to see, the creation of jobs, often paying fairly good salaries based on local standards. Just to give one example, electronics firms in Laguna province can offer something like P10,000 a month to a factory worker. For the many young women from rural Southern Tagalog provinces who flock to Laguna, that is a windfall, enough to support parents and younger siblings.
But there's another side to this. These factories have in a sense stifled local industries. Local textile and garments firms, for example, have been practically wiped out, unable to compete with the multinationals, unless they themselves become subcontractors.
In the area of electronics, I always have mixed feelings seeing some gadget sold in an American or Japanese store labeled "Assembled in the Philippines." Note "Assembled," rather than "Made in." Unlike Taiwan, South Korea and now, China and India, we've always been content to be global coolies, doing the menial jobs of assembling different components, many produced in other Third World countries, into a finished product.
We welcomed these firms thinking of the jobs they'd create, but forget that capital moves into areas where the skills that are needed are cheapest and most docile. We're vulnerable, as the multinationals move out of the Philippines to countries like China and Vietnam.
Hype versus realities
Never mind, we tell ourselves, we have a stable niche with call centers, because, together with India, we have the English proficiency and fairly high levels of formal educational attainment needed to deliver many of the required outputs.
But there's a danger here that we become complacent, believing the hype in the mass media and in the local grapevine about the opportunities in outsourcing. Last month, I met someone I'll call Ana, an ambitious young woman who had come to Manila from Polomolok town in the southern province of, South Cotabato, lured by the prospects of becoming a call center operator. Ana was setting aside two years of college courses in engineering and a six-month caregiver course after hearing about the wonders of the call center world, with salaries supposedly running up to $800 a month. Why work overseas when you could earn that much here?
Manila proved frustrating for Ana, with one rejection coming after another. Ana hadn't realized, as with many other call center hopefuls, that last year there were only about 20,000 "seats" (job positions) available. Even with projections of 40,000 seats this year, this is miniscule compared with the number of jobseekers. Outsourcing Digest cites a recent study by the Contact Federation of the Philippines finding that only two or three out of 100 applicants qualified for call center jobs. The reason? You need not just proficiency in English but the potential to get "accent training" so you can be understood by American clients. It's not surprising most of those accepted come from the University of the Philippines, Ateneo de Manila University and other upper-class private schools.
And the salaries? P12,500 to P17,000 a month is a more realistic starting salary, overtime included. Sure, that's about what an instructor gets at the University of the Philippines, but certainly a long way off from the $800 figure being bandied around.
Learning from India
My fear is that we will again remain content as global coolies, deploying University of the Philippines graduates to handle menial jobs. Call centers moved to the Third World not just because our labor was cheaper but also because Americans and British young people were leaving their jobs after a few weeks, totally bored by the routine.
We might want to learn from the Indians, who see outsourcing as part of a larger industrial development plan. Whether call centers or software development, many of these outsourcing firms are situated in Bangalore, India's "Silicone Valley," where they become part of a larger plan to develop India's own information technology sector.
Not surprisingly, the Indians have developed homegrown technologies for local needs, from hand-held equipment to be used by farmers to computer technologies that electronically canvassed some 400 million ballots during their last elections within a few days. Call centers, the Indians know, generate loose change compared with software development. Last year, their software exports raked in $9.6 billion.
The Indians have a National Association of Software and Service Companies (Nasscom) that is able to negotiate on the global market. When American politicians began grumbling about how outsourcing was taking away jobs at home, Nasscom warned them that without outsourcing, the US economy would be in even more dire straits.
Nasscom conducts studies of the world outsourcing market, trying to figure out what niches are available for India. Rather than feeling threatened, for example, by China, a major competitor for software development, they're talking about joint ventures. Similarly, the Philippines is seen less as a threat than an opportunity, with at least one Indian human resource company, Daksh, already investing in the Philippines' call center industry.
Why the difference in approaches? India has always adopted a nationalistic but pragmatic stand in relation to industrial development, bringing in the multinationals but negotiating with them with domestic priorities in mind. We lacked that foresight many years ago when we invited in the runaway factories. It may not be too late yet when it comes to outsourcing.
posted by Dante at 2:19 PM
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