Poor English threatens Philippines outsourcing

PUBLISHED : Wednesday, 22 March, 2006, 12:00am
UPDATED : Wednesday, 22 March, 2006, 12:00am

The Philippines, with its large English-speaking population, is a natural hub for contact centres and other business outsourcing services. However, problems in English proficiency have become a nagging concern, for both the government and the private sector.

Of every 100 job applicants, fewer than three pass an English skills test. Is English a diminishing advantage for Filipinos?

The results of a recent study conducted by the John F. Kennedy Centre Foundation-Philippines, an affiliate of a US-based think-tank, show a dwindling supply of qualified workers. Based on industry data, only 2.89 per cent of an estimated annual 400,000 new graduates seeking jobs are qualified for business process outsourcing (BPO) and call centre jobs.

While the industry is not short of new graduates looking for first jobs, most interviewees fail to make it through the recruitment process because of a lack of appreciation of the intricacies of the work and the fact they cannot articulate their thoughts very well in English.

The study shows that the dearth of qualified personnel could have dire consequences for the booming BPO industry. Call centre companies could lose critical jobs to strong competitors like India, which boasts a vast pool of skilled and talented workers.

Shashank Bhide and Meenakshi Rajeev of the Institute for Social and Economic Change in Bangalore recognise the Philippines as India's biggest competitor in the global outsourcing sector.

While India boasts technical know-how and a large pool of skilled labour, the Philippines' cultural affinity with the US and accent skills in English make the country a lucrative choice for BPO operations.

Mr Bhide and Ms Rajeev admit the Philippines has a comparative advantage in catering for US call-centre based BPOs. But they say call centre firms should start moving aggressively to focus on investing in quality training for existing staff and potential employees.

The Kennedy Foundation says that BPO staff could undergo intensive English language training to improve their fluency.

It believes training would not prove too difficult because call centre staff are highly trainable, literate people who have excellent domain knowledge and a superior work ethic.

The foundation's study noted that comprehensive training could yield the desired results in just 80 hours over a one-month training period. The study concluded that such training would improve new graduates' chances of employment at BPO companies by as much as 53 per cent.

The study also recommended that over the long term, BPO companies should collaborate with universities and colleges to develop a comprehensive curriculum for teaching BPO entrepreneurship and management.

Businesspeople are quick to highlight the commercial imperative to have a workforce proficient in English.

'We should bring English back into the system,' says Henry Schumacher, a vice-president of the European Chamber of Commerce in the Philippines.

He says he recalls a time when the Philippines was marketed as an English-proficient country, but that the English language skills of its workers are no longer used as a selling point.

Contact and call centres first emerged in Manila in 2000, serving companies such as Citibank, America Online and Barnes & Noble and employing almost 100,000 workers by the end of last year.

The sector's gauge of success first surpassed expectations two years ago, when call centres contributed US$400 million to the country's US$95 billion gross domestic product.

Sergio Ortiz-Luis, president of the Confederation of Philippine Exporters, says that the government has yet to capture the real US dollar earnings of the industry. Current figures only counted seats and investment per seat.

According to their own estimates, BPOs and call centres actually produced sales of up to US$2 billion last year.

Business Processing Association of the Philippines president Dan Reyes expects BPOs, especially call centres, to generate US$14.4 billion by 2010.

'If the government helps us, we can surpass this projection,' says Mr Reyes, who is also country manager for ClientLogic.

Last year, BPOs and call centres, touted as a sunrise industry, generated US$1.1 billion in revenues, while investments in information technology and information technology-enabled services reached US$230 million - a large portion of which came from call centres.

Trade Secretary Peter Favila says the latest growth estimates show that revenues from the sector will reach US$3.78 billion this year, a 52 per cent increase over last year.

The sector is expected to grow 36 per cent next year, to US$5.14 billion, 37 per cent in 2008, rising to US$9.51 billion by 2009 and to US$14.41 billion by 2010.

The leading BPO services for the next four years are expected to be back-office operations, medical and legal transcription and software development, all with annual overall growth rates of between 50 and 80 per cent.

According to Rainerio Borja, president of the Contact Centre Association of the Philippines, call centres are poised to become a US$3 billion industry by 2009, with 250,000 seats installed and employing 450,000 people.

'This means more jobs and more revenues for Filipinos. The good thing about the business is that we can hire anyone - new graduates, retirees and people working from home,' says Mr Borja, who is also the president of PeopleSupport, one of the country's biggest call centre firms.

Mr Favila also stresses the importance of job creation. 'BPOs are not only dollar sources but more significantly, it is a job-generating business to ease our unemployment problems.'

At the end of last year, 8.4 million Filipinos were jobless.

The trade and labour departments expect 103,000 more BPO jobs to be created this year, a 44 per cent increase on the number of new positions last year. By 2010, the entire BPO industry is expected to employ about 1.1 million.

The National Economic Development Authority expects the services sector to help drive growth this year. After growth of 6.3 per cent last year, the sector is expected to grow 6.75 per cent this year, boosted by the expansion of BPOs.

The government has given the industry tax breaks and other incentives to foster its growth.