Philippines starts worrying about Trump’s protectionism

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The BPO industry and the office market in the Philippines could feel the heat from Trump’s policy of disrupting globalisation

Businesses in the Philippines are getting increasingly worried about the economic isolationism of US President Donald Trump as the country’s main growth engines, business process outsourcing (BPO) and overseas remittances sent by Filipino expats – which together constitute around 11 per cent of the Filipino GDP – seem to be at stake.

The BPO sector, which has been exceptionally booming in recent years and in 2016 brought in revenues equivalent to 8% of GDP or more than $22 billion and employs 1.2 million people, is heavily dependent on servicing US companies which account for nearly 70 per cent of the industry. A number of BPO companies in the Philippines have now put expansion plans on hold, while some are reportedly already drawing up precautionary plans to relocate some operations back to the US.

Charito B. Plaza, Director-General of the Philippine Economic Zone Authority (PEZA), said that foreign firms pledging to invest in the country had declined in both volume and value. Investment pledges registered with PEZA fell 26 per cent in 2016 because many US firms are clueless as to which new protectionist policy Trump will devise next and what impact it will have on their outsourcing activities.

As a result, the Philippine office property market could be poised for a slowdown. Credit Suisse in a recent analysis pointed out that the office sector in the Philippines seems to have become stagnant amid uncertainty over US BPO companies’ expansion plans.

Another problem is uncertainty about the future fate of the around four million Filipinos living and working in the US who send send back remittances equivalent to around 3 per cent of the GDP of the Philippines.

The majority of Filipinos living in the US is there legally and they have not been threatened with expulsion, but if the US were to press ahead with a tax on remittances, which it has already threatened to do against Mexico, it could cause remittances growth to slow sharply.

There are also more than 300,000 Filipinos in the US without proper papers who could face deportation and a re-entry ban under Trump’s policy to expel illegal immigrants from the US.

Philippine President Rodrigo Duterte has made clear that he will not help Filipinos who are illegally in the US.

“I will not lift a finger. You know that it is a violation of the law,” Duterte said.

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Reading Time: 2 minutes

The BPO industry and the office market in the Philippines could feel the heat from Trump’s policy of disrupting globalisation

Businesses in the Philippines are getting increasingly worried about the economic isolationism of US President Donald Trump as the country’s main growth engines, business process outsourcing (BPO) and overseas remittances sent by Filipino expats – which together constitute around 11 per cent of the Filipino GDP – seem to be at stake.

Reading Time: 2 minutes

The BPO industry and the office market in the Philippines could feel the heat from Trump’s policy of disrupting globalisation

Businesses in the Philippines are getting increasingly worried about the economic isolationism of US President Donald Trump as the country’s main growth engines, business process outsourcing (BPO) and overseas remittances sent by Filipino expats – which together constitute around 11 per cent of the Filipino GDP – seem to be at stake.

The BPO sector, which has been exceptionally booming in recent years and in 2016 brought in revenues equivalent to 8% of GDP or more than $22 billion and employs 1.2 million people, is heavily dependent on servicing US companies which account for nearly 70 per cent of the industry. A number of BPO companies in the Philippines have now put expansion plans on hold, while some are reportedly already drawing up precautionary plans to relocate some operations back to the US.

Charito B. Plaza, Director-General of the Philippine Economic Zone Authority (PEZA), said that foreign firms pledging to invest in the country had declined in both volume and value. Investment pledges registered with PEZA fell 26 per cent in 2016 because many US firms are clueless as to which new protectionist policy Trump will devise next and what impact it will have on their outsourcing activities.

As a result, the Philippine office property market could be poised for a slowdown. Credit Suisse in a recent analysis pointed out that the office sector in the Philippines seems to have become stagnant amid uncertainty over US BPO companies’ expansion plans.

Another problem is uncertainty about the future fate of the around four million Filipinos living and working in the US who send send back remittances equivalent to around 3 per cent of the GDP of the Philippines.

The majority of Filipinos living in the US is there legally and they have not been threatened with expulsion, but if the US were to press ahead with a tax on remittances, which it has already threatened to do against Mexico, it could cause remittances growth to slow sharply.

There are also more than 300,000 Filipinos in the US without proper papers who could face deportation and a re-entry ban under Trump’s policy to expel illegal immigrants from the US.

Philippine President Rodrigo Duterte has made clear that he will not help Filipinos who are illegally in the US.

“I will not lift a finger. You know that it is a violation of the law,” Duterte said.

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