Business

ISIS threat cools outsourcing boom in Philippines, industry says

The Philippine Star

September 27, 2017 | 1:50pm

ISIS threat cools outsourcing boom in Philippines, industry says

Workers are seen on scaffolding at a construction site in Manila on September 26, 2017. Rebounding global trade and China's strong momentum should help boost Asia's economic prospects, the Asian Development Bank said on September 26, as it upgraded its growth forecasts for this year. Noel Celis/AFP

MANILA, Philippines — Prolonged fighting by militants supporting the ISIS group has put the brakes on the Philippines' $10 billion outsourcing industry, one of its key growth drivers, industry leaders said Wednesday.

More than 900 people have been killed in the city of Marawi, where pro-IS militants have defied a months-long US-backed military campaign to flush them out, while the southern third of the country has been placed under martial law to contain the violence.

READ: Marawi siege 'most serious terror event' in Southeast Asia in past 15 years

Although the lucrative outsourcing industry is largely based in the northern and central regions, the bloody conflict has unnerved many potential investors, said officials of the Information Technology and Business Process Association of the Philippines (IBPAP).

"In the early part of the year, we had a lot of 'wait-and-see' attitude for the most part," said IBPAP President Rey Untal.

READ: Drug war, Islamists 'rising' risks for Philippine economy — Moody's

Approved investments in the information technology services sector, which includes the outsourcing industry, fell 31.3 percent from a year earlier in the three months to June, government data show.

"There is an element of (wait and see) still," Untal told reporters, though there were now signs that new players were coming in.

The outsourcing industry includes call centers and offices that carry out such functions for overseas companies like accounting, medical and legal transcription, software design, animation and even architecture.

It has become a major pillar of growth of the Philippine economy, bringing in $23 billion in revenues last year and employing 1.15 million people, according to industry officials.

READ: ADB retains Philippine growth forecasts

When the Marawi violence broke out in May, the industry was bracing for the fallout of the protectionist threats issued by US President Donald Trump, who has vowed to bring back jobs outsourced abroad, Untal said.

"Then suddenly we had to deal with that (Marawi) also. In every conversation I had, that figured in," said Untal.

Industry leaders had to assure investors that work would continue with "business as usual," despite the fighting, he said.

Industry leaders also obtained government assurances that its employees would be exempt from martial law curfews in the south, IBPAP Vice-Chairwoman Cathy Ileto said.

Untal said that while the outsourcing industry employs almost 50,000 people in the southern Philippines, no one worked in Marawi or nearby areas.

The industry is hoping for growth to pick up with target revenues of $40 billion and 1.8 million direct employees by 2022, the officials said.