Jobs and Investing in the Philippines

RP Call Center Growth to Drop in 2008 by: Gregory Domingo, Undersecretary for Industry and Investments; Department of Trade and Industry: Issue Date: October 11, 2004

THE headline of this column may come as a big surprise to many people but it seems that the call center industry is headed towards a much smaller growth rate starting next year. The saddest part of it all is that it is not for lack of demand for Philippine call center services. Just recently, the Philippines got another boost from an international survey showing our call centers as among the best rated worldwide. James Hookway wrote last week in The Asian Wall Street Journal that "the Philippines has several advantages over India" for call center services providers.

The problem lies in the Philippines" inability to provide the appropriate human resources in rapidly increasing numbers to continue to fuel the massive growth rate. We just can't satisfy demand.

The math is quite simple. Since 2001, the Philippine call center industry has been more than doubling every year.

Each seat roughly translates to 1.5 agents which means that for 2004 alone 30,000 agents will be hired by this industry. This is confirmed by estimates that show the industry hiring about 3,000 agents per month today.

The hiring rate, according to several call centers, is between 3% to 5% of applicants. Since the Philippines produces 380,000 college graduates per year, 5% or 19,000 per year would qualify as call center agents. We know that not all college graduates would desire to work as call center agents for one reason or another so the"hireable" college graduates are probably significantly less than 19,000. In order to fill the balance of the 30,000 requirement for 2004, the call center industry hires not only new college graduates but past college graduates (even if already employed) and, in increasing numbers, college students and even plain high school graduates.

These are signs of the industry scraping the barrel. The industry hires non-college graduates not by design but because they do not have a choice. They have targets in terms of growth for Philippine operations and they have to staff up. They are already feeling the human resource constraint and the big danger for the Philippines is that these companies might decide to cut back on the growth of Philippine operations in cognizance of the human resource constraint.

SEEKING SOLUTIONS OFFSHORE

In fact, some home-grown Philippine call centers are already investing in other countries in order to meet demand for their services. For example, eTelecare International recently purchased Phase 2 Solutions, a call center in Scottsdale, Arizona in the US. Hookway wrote, "the expansion of eTelecare into Arizona is just one of a batch of recent acquisitions in the outsourcing industry."There are more to come.

That's because it is probably going to be very difficult for call centers in the Philippines as a whole to hire more than 40,000 new agents in 2005 as the pool of past college graduates who are "hireable" dwindles. To maintain a hundred 100% growth rate in 2005, the industry must hire at least 60,000 new agents. Further compounding this problem is the fact that we not only have a small number of college graduates but that only a small proportion of our small number of college graduates have the high level of English proficiency required for the call center industry.

Several initiatives to address the human resource issue have been launched by the private sector, academe and government but none of these initiatives, so far, are of the scale and intensity needed to fully capitalize on this golden opportunity that has dropped on our lap. Even though we have had three fantastic years in this industry, the Philippines has barely scratched the surface of the enormous opportunity given us. It would be mind-boggling if we squander this miracle.

Just to give you an idea of the scale of the contribution of this industry, consider the commercial real estate market over the last three years. Over 300,000 square meters of office space have been leased (about 300 floors of 1,000 square meters per floor) by the industry with a rental value of over P100 million a month. As a result, a construction boom is beginning. In the Northgate Cyberzone, for instance, Converges has just completed one three-story building, and is contemplating another. APAC occupies one entire four-story building. HSBC is currently constructing a five-story building. There are more to come.

What's the answer to this dilemma? In the same way that President Gloria Macapagal-Arroyo has identified our fiscal situation to be a matter of utmost urgency, so must our inadequate educational infrastructure be addressed. How? First, public and private schools must be directed to make English-language competency an urgent priority. Too many institutions have resisted the President's earlier call to make English the primary language of instruction. Now, there should be no choice. Second, investment in the educational sector should be eased to allow foreign institutions to set up fully-owned operations in the Philippines. Third, investment in the educational sector should be incentives to encourage investors to build institutions here and pay teachers decent salaries.

We've had a succession of government officials promising massive job creation over the past decade. So far, only IT-enabled services sectors like call centers are living up to that promise. The issue is not our capacity to create jobs, it is our capacity to fill them. It is our capacity to educate our people, and prepare them for these high-salaried jobs. We have only ourselves to hold responsible for leveraging this opportunity-or letting it pass.