Possible US outsourcing ban could hit Philippine BPO industry hard

A plan by US President Donald Trump to punish US firms outsourcing jobs abroad or even ban the practice could massively disrupt the Business Process Outsourcing (BPO) industry in the Philippines, a study by London-based think tank Capital Economics said.

The Philippines stands to be the biggest loser in Asia if Trump pushes through with his threat, the study entitled “Winner and Losers from the Trade War” read.

“So far we have just considered the impact of a bilateral trade war between the US and China,” Capital Economics said.

But it could be much more far-reaching if Trump decided to escalate tensions further, it added.

The Philippines has a thriving business process and IT outsourcing sector, which last year brought in revenues equivalent to around ten per cent of GDP, or more than $31 billion. In the sector, many US firms are major players, including Accenture, Convergys, Teletech, IBM Solution, Hewlett Packard, VXI Global or Concentrix.

Microsoft, for instance, also has its own BPO operations in the Philippines, while companies such as Facebook and Twitter rely on an army of Filipino workers that mainly work as so-called “content moderators.” Furthermore, big financial companies are outsourcing a large chunk of back office jobs to the Philippines, including JPMorgan, Wells Fargo, Bank of America or Citigroup.

While economies with a strong service sector like the Philippines may be more insulated from the trade war, Capital Economics cautioned that a spillover of greater protectionism to this sector may result into greater stagnation.

“The long-run consequences would be even bigger if the world also maintained barriers to trade in services and information, to foreign direct investment and to migration. In this case, there may be a much bigger global downturn or indeed a long period of stagnation,” it said.