A strategic plan for the IT-BPM industry: India
(Part 2)
Although India and the Philippines are the top two countries (leaders) among the 11 countries evaluated on location, both are rated weak in business environment in comparison with the other criteria such as financial attractiveness, people skills, and availability factors. India was perceived to be a top global service destination and scored the highest among the 11 countries. The country’s affordable investment cost and large talent pool attract global companies to set up or outsource their business to India, resulting in a higher ranking for financial attractiveness, people skills and availability. India, however, ranks the lowest in business environment among the 11 countries. Likewise, despite its second-place position in the global outsourcing market, the Philippines ranks only 7th in the Global Services Location Index because of its relatively poor business environment.
The weaknesses in business environment of countries are especially monitored by two international organizations, the World Bank and the Institute for Management Development (IMD). When the Frost & Sullivan study was conducted in 2015 (“Accelerate PH (Future Ready) Roadmap 2022,” done in association with the IT & Business Process Association of the Philippines or IBPAP), in the Ease of Doing Business Index of World Bank, the Philippines ranked 8th and India last among the 11 countries considered for IT-BPM (Information Technology-Business Process Management) location sites. The most business-friendly countries among the 11 were Malaysia, Poland, and Mexico in that order. Under the World Competitiveness Index of IMD, the Philippines ranked also 8th and India second to the last. In 2019 — the last time the World Bank came out with the Index since it decided to discontinue the series on Sept. 16, 2021 and replace it in the future with what will be called the Business Enabling Environment (BEE) — the Philippines ranked second to the last among the 11 countries. The 2019 ranking was as follows: Malaysia (12), Thailand (21), China (32), Poland (40), Chile (59), Mexico (60), India (62), Vietnam (70), Indonesia (73), Philippines (95), and Brazil (124).
The Administration that will be elected in May 2022 will have a great challenge to undo the damage done during the Duterte Administration to our ease of doing business. To be fair, however, much has been done after 2019, despite the pandemic, to improve the business environment, the outstanding accomplishments among which are the much-improved infrastructures resulting from the Build, Build, Build program, greater competition in the telecom sector, and the passing of the Public Service Act that has liberalized the entry of Foreign Direct Investments.
As regards the World Competitive Index of IMD, the latest rankings were in 2021. The IMD Competitiveness Ranking analyzes and ranks countries according to how they manage their competencies to achieve long-term value creation. It is based on the assumption that economic progress cannot be reduced only to GDP and productivity because enterprises also have to cope with political, social, and cultural dimensions. Governments have the obligation to provide an environment characterized by efficient infrastructure, institutions, and policies that encourage sustainable value creation by the enterprises. The Yearbook provides extensive coverage of 64 countries (which does not include Vietnam), based on the availability of comparable international statistics and collaboration with local Partner Institutes. For 2021, the ranking of the 10 countries (Vietnam excluded) in our list of leading destinations for IT-BPM outsourcing enterprises is as follows: China (16), Malaysia (25), Thailand (28), Indonesia (37), India (43), Chile (44), Poland (47), the Philippines (52), Mexico (55) and Brazil (57). It is advisable that those who will govern the Philippines in the next Administration examine closely the criteria used by IMD in computing the rankings which go much beyond physical infrastructures, institutions and policies and include innovation, digitalization, welfare benefits and social cohesion.
In fact, IBPAP President Jack Madrid recently came out with what are their expectations of the types of help and assistance they would like to obtain from the next Administration. He said that the next Administration should continue to improve the digital infrastructure of the country to allow further expansion in other areas across the country. There are other regions (Tier 2 and Tier 3) where there are surplus pools of highly educated professionals because of the high-quality education, especially in the English language, available in their universities. Examples of these are Baguio, Puerto Princesa, Tuguegarao, Dumaguete City, Iloilo City, Cagayan de Oro, Naga and others that can supplement the depleting human resources supply of Metro Manila. In fact, in some of the municipalities, university graduates speak better English than those in Metro Manila. Unfortunately, these cities leave a lot to be desired in terms of digital infrastructure. The Government should actively attract foreign telecom and other related enterprises to take advantage of the Public Service Act that now permits as much as 100% foreign ownership in telecom and other public services related to the digital infrastructure. As Mr. Madrid was quoted by BusinessWorld (March 3) as saying, “Much progress has been made during the coronavirus disease COVID-19 pandemic, but more work needs to be done to allow our telecommunications partners, private sector, and the government giving us more incentives to make internet connectivity more cost-efficient and available across the countryside.”
Mr. Madrid also said that the next Administration can help implement a permanent work-from-home (WFH) law after such a work arrangement has been in place for some two years during the pandemic. The IBPAP can help the government to enact a more permanent long-term WFH, in fact work-from-anywhere, law. This would be essential to maintain our country’s competitiveness. We should be prepared for the WFH or hybrid work arrangement to be adopted by countries all over the world. To keep our competitiveness, we must be ahead of the game in crafting a plan to allow BPO firms to transition more smoothly to these new work arrangements. Mr. Madrid said that their association is crafting a plan to provide their member companies a smoother and longer runway because, after all, a great number of workers in varied sectors have already been working from home during the last two years. The IT-BPM industry just needs a little bit more time to secure a healthy and well-organized transition back into what will be a hybrid work environment. The next Government must be quick and ready to help provide the necessary legislation and policy, especially as regards labor and social security issues.
There is also a need to change existing school curricula to come out with skills required for digitized work. As Mr. Madrid said, “More of our work is increasingly complex and increasingly digital and we need to match the expectations of our customers to the needs of the industry for more digitized work. The more complex tasks that are needed must be matched with what our universities provide with their respective curricula.”
As I had discussed in my series of articles on “A Strategic Plan for Philippine Education,” we must get rid of the obsession with college diplomas of parents and the youth in our country. True, there are high levels of skills in the digital industry, such as those of data scientists, that can only be produced in traditional bachelor’s and masteral programs in the universities. But there is a need for a variety of non-college programs, more along the TESDA or tech/voc track, to train skilled workers for other jobs in the digital sector. In the field of Big Data alone, the numerous data encoders and data analysts that will be employed have no need for a college diploma. In fact, the hundreds of thousands that have been employed in the call centers could have been better trained in short programs focused on verbal English proficiency. Filipino talents in the animation industry have no need of a college degree but could have been more cost effectively trained through short upskilling, reskilling or retooling programs in the visual arts. As AI and robotics increasingly replace human beings in the customer care services or call center business, the IT-BPM industry, working together with the government and the academe, must be ready with upskilling, reskilling and retooling programs that will upgrade our call center agents to higher knowledge-based skills such as application development and maintenance (ADM), Finance and accounting (F&A), Healthcare services, and animation and game development. Again, our educators and human resource experts must be able to distinguish those skills in these knowledge-intensive digital occupations that require a college or even post-graduate degree and those that can be effectively trained in short vocational or technical courses. In my opinion, this distinction is one of the most important educational reforms that the next Administration must be able to introduce to the Philippine educational system.
(To be continued.)
Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.
