Connected growth

India and the Philippines share several striking similarities, such as our vibrant democratic polities, youthful populations, diversities of language and culture, and the widespread use of the English language are just a few that come to mind. Another interesting and relatively recent commonality on this list: we are the world’s leaders in IT/digital outsourcing.

India emerged as a player in this field earlier, having already established its capacities in the 1990s. Last year, the Indian IT-BPM sector had a turnover of USD 227 billion, the giant’s share of which are exports ($178 billion). The Philippines BPO success began a few years later, gaining momentum by the first decade of this millennium. Currently, the sector here is estimated to be worth over USD 30 billion. As in India, this sector is one of the star performers of the Philippines economy both in terms of export revenue as well as employment. As in the case of India, the United States remains the single biggest market for Philippines BPO companies.

Some commentators have tended to simplistically portray India and the Philippines as competitors in this sector. While an element of competition exists, a deeper analysis reveals a dramatically different narrative: ours is above all a story of ‘connected growth’.

It is relatively less known in the Philippines that Indian companies were among the first foreign BPOs to set up operations here, with pioneering companies such as HGS having entered the market as early as 2003. Today, there are over twenty Indian IT services companies with a substantial presence here, including nearly all major players. These Indian IT services companies currently employ over 150,000 Filipinos, ranking India amongst the top foreign employers in the Philippines economy.

Interestingly, the India BPO connection runs even deeper; several US-based companies with extensive operations in the Philippines, such as Cognizant, EXL or Sutherland to name a few, are also owned and operated by Indian expatriates.

Another key aspect of Indian or Indian-origin BPO firms here is that over and above their presence in Metro Manila, they were amongst the early movers to set up operations in other regions in the Philippines. In fact, Wipro with over 10,000 employees, is possibly the single largest foreign employer in the Visayas.

A recent phenomenon has been the role these Indian companies have been playing in terms of supporting the digital transformation efforts of Filipino companies in various sectors. For example, TCS, the world’s largest IT services company, has partnered with many local companies in financial services and communications sectors.

Challenges, but also opportunities ahead

During the pandemic, the digital economy asserted itself as an engine of growth as well as a critical enabler for various other sectors of the economy. The role of IT companies in facilitating and maintaining connectivity among and between businesses and other institutions was a significant factor that helped economies cope with the devastation of prolonged lockdowns.

Not surprisingly, IT services companies, including those in the Philippines, have witnessed double digit growth over the past couple of years. But the good times need not last. Ongoing technological changes are generating challenges, in particular the growing role of automation and AI which is driving a re-orientation of the entire IT sector.

The key to success in this emerging scenario will be to upskill/re-skill existing human resources even as a new cohort of digital workers are trained in the new skills necessary to thrive in a data driven digital economy.

Public policy will matter here. Digital numeracy and mathematical skills need to be nurtured, right from school level onwards.Predictability in terms of policies is particularly essential; uncertainties such as those around WFH arrangements in the Philippines that came up this year, and about which doubts are still lingering, are best avoided. Innovation ecosystems should be developed, and start-ups encouraged. Earlier this year, India witnessed its 100th Unicorn, a clear marker of the rising success of India’s young technologists and entrepreneurs.

The good news is that Indian IT companies have already begun to work in this direction with their Filipino employees. Some of them, such as TCS’ GoIT program, seek to go deeper by identifying schoolchildren with the next big tech idea. HCL Tech is upscaling its local presence to provide more sophisticated outputs for its global customers.

Working together, I am confident that the energies of a young, tech-savvy generation of Indians and Filipinos can successfully craft a new saga of connected digital growth between our two rising Asian economies. This is as optimistic and promising an aspiration as any to ring in the New Year.

Maligayang bagong taon!

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Shambhu S. Kumaran is the Ambassador of India to the Philippines, Micronesia and Palau.