The Outsourcing Week in Review: Wednesday, August 12, 2020

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THE WEEK IN REVIEW

The Philippine economy is now in a technical recession and unsurprisingly it’s the worst economic contraction on record. It’s likely that possibly worse is yet to come as the country endures one of world’s longest and most strict COVID lockdowns.

The National Statistics Agency said the country’s Gross Domestic Product (GDP) shrank a record 16.5% for the second quarter, the worst reading in the data series going back to 1981. According to Capital Economics analyst Alex Holmes, “A failure to contain the virus, continued restrictions to movement and inadequate policy support mean the Philippines is also likely to experience one of the region’s slowest recoveries.”

As Metro Manila and nearby provinces’ return to the stricter Modified Enhanced Community Quarantine (MECQ) the fallout will “drag down” the country’s recovery into the third quarter. Finance Secretary Carlos Dominguez III said that while the economy remains in good shape, the reimposition of a two-week MECQ in key areas of Luzon is one-step backward for the country. He said that the economic recovery is expected to proceed in the third-quarter at a “steady, yet moderate phase.” The choice whether to extend or list the MECQ will be out of the Palace’s hands though, according to presidential spokesperson Harry Roque. He said that this decision would be up to the Inter-agency Task Force (IATF) for the Management of Emerging Infectious Diseases as it is a “delicate decision” to be made. Trade Secretary Ramon Lopez has stated his hope that the MECQ will only be for two weeks so as not to further impact the already devastated small business sector.

Despite this, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno has made assurances that the Philippines’ is not at risk of an investment rating downgrade as its macroeconomic fundamentals remain “sound”. In a statement, Diokno said, “From January to June, the rating agencies Fitch, Moody’s and S&P have downgraded 82 sovereigns, revised to negative outlooks 104 sovereigns. The Philippines is not one them.” Diokno is also confident that the country has resources for a “protracted fight” against the pandemic and its effects in the economy, adding that the nation’s “unique fiscal and macroeconomic strengths” going into this year provide it with a “solid footing” to meet the pandemic’s economic challenge. The central bank chief added that the country’s pace of inflation will also likely remain in check for the foreseeable future.

According to Leechiu Property Consultants (LPC) office leasing activities are maintaining a good pace despite the pandemic. LPC said that the demand from the Business Process Outsourcing (BPO) sector has compensated for the slump in the Philippine Offshore Gaming Operators (POGO) sector, adding that the continuing growth of the country’s office market is “a rarity in this pandemic-stricken planet”. Colliers International Philippines supported this sentiment saying that the industrial or logistics and office segments are expected to lead the recovery of the country’s property sector.

According to Colliers Philippines’ senior research manager Joey Roi Bondoc, the implementation of flexible working arrangements (FWA) compelled companies to rationalize their office space requirements by looking at areas outside business districts. Bondoc said that since businesses are permitted to resume operations at only half of their capacity, many are looking to “occupy smaller spaces in non-core locations outside the major business districts.” He further recommended Clark, Iloilo, Bacolod, Davao and Cebu, where businesses access to abundant office space options.

One industry doing well from the pandemic is online gaming as everyone across the globe are stuck at home.  This has had a positive impact on the Philippines video gaming industry as it struggles to cope with the spike in demand. The Game Developers Association of the Philippines (GDAP) president, Alvin Juban has said that they are “desperately looking for more people” to hire as the industry clamours to hire 2,000 more industry professionals. Call center giant Alorica Inc. is also hiring and has found an opportunity in offering jobs to repatriated overseas Filipino workers (OFWs), particularly those who lost their jobs due to the COVID-19 pandemic. According to Bong Borja, Alorica president for Asia-Pacific Operations, OFWs are an ideal addition to the BPO workforce with their experience abroad of providing customer service and solutions, as well as having the basic command of the English language.

Overseas, United States President Donald Trump fired the chairman and a board member of the Tennessee Valley Authority, partly as a consequence of an IT outsourcing program that brought in three foreign-owned contractors to replace the work done by about 100 federal employees. The contractors were CGI Federal, a subsidiary of a Canadian firm; Accenture Federal Services, whose parent company is headquartered in Ireland; and French firm Capgemini. Trump also threatened to remove other board members if they keep hiring foreign labor. On August 3, Trump signed an executive order that orders agencies to review whether any of their contracts rely on temporary foreign labor and if that practice results in the diminution of opportunities for U.S. workers.

Source Digest…
Is it really possible, politically or otherwise, to stem the tide of globalized employment solutions? Especially when physical products are more often than not produced overseas, why can’t staffing solutions also be sourced internationally?

There is an irony in that a US company might be compelled to hire only US-based employees, yet the firm manufactures using German machines, fits the office with Italian furniture, drives Japanese cars, uses Korean electronics, and gets their uniforms from China.

Wednesday, August 12, 2020

NEWS THIS WEEK

11 August 2020

• MECQ extension up to IATF – read article…
• PH has resources to endure virus, says Finance chief – read article…
• Remote work threatens corporate security – CyberArk – read article…

10 August 2020

• MECQ to drag Q3 recovery – read article…
• BPOs urged to promote good health, safety of employees – read article…
• Alorica looking to hire repatriated OFWs – read article…

7 August 2020

• Illegal drugs seized from Chinese POGO workers in Subic – read article…
• DTI chief hoping MECQ will only be for two weeks – read article…
• Philippines plunges into recession, cuts 2020 GDP outlook – read article…
• Philippine fundamentals sound despite recession – BSP chief – read article…

6 August 2020

• Trump fires TVA chairman over IT outsourcing – read article…
• Industrial, office segments to lead real estate recovery – read article…
• POGO exodus dropped Manila’s office demand by 74% – read article…
• PH inflation is in check – BSP – read article…

5 August 2020

• FWA allows businesses to rationalize offices and expand outside business districts – read article…
• Return to MECQ may ravage economy – read article…
• PH video game industry “desperately” looking to hire 2000 more professionals – read article…
• BPOs’ Q2 demand lifts office leasing activity – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: October 30, 2019
2. The Outsourcing Week in Review: January 16, 2018