China, cheap oil, other external threats abound. No one gives a damn

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China is in deep economic trouble. Last year, the real estate sector, which represents at least 25 percent of its GDP, was spooked by the unthinkable. Housing prices fell by 4.5 percent, which never happened in 20 years. There was an inventory of 60 million apartments that failed to find buyers and there were jitters all around. The depressed sector is not about to reverse its downward course this year.

The roaring stock market had to suspend trading recently to prevent a full meltdown—and pray for a correction that never came. The Bank of China has tried most options in its book to stimulate the struggling economy and the sluggish manufacturing sector, which is currently operating at a 70 percent capacity. To no avail.

Collapsing stock markets intersected with a pile of debt. Debt-to-GDP ratio is now 250 percent, a frightful number by any means. One newsmagazine said the economic bloodletting in China is just starting, adding that “the worse has yet to come.”

Finally this. Its 2015 growth rate was the slowest in 25 years.


There are textbook answers to the standard question on how such slowdown would impact on major trading partners, a list of countries that includes the Philippines. Global thinkers have offered coherent, cogent views on the possible impact, backed with data and historical context. Yet, what is most important to us is a major question left unanswered. How will the crisis impact on China’s aggressive buildup — both in military terms and infrastructure terms—within Philippine territory ?

For weeks, lay people like myself have been waiting for a critical, in-depth analysis on how the slowdown would impact on China’s acts of aggression within Philippine territory from our policy experts and public intellectuals. Will the slowdown scale down China’s display of military might and infrastructure buildup within Philippine territory. The expenditures for such military adventurism and territorial aggression are not peanuts. So economically-struggling countries often forgo these acts of aggression during downturns.

Or, will its leaders intensify the acts of aggression in a classic wag-the-dog scenario? Countries with military might often resort to more brazen, over-the-top acts of aggression during economic downturns just to divert the citizens’ attention away from their economic woes. Think of Russia and Vladimir Putin and the annexation of Crimea after the fall of oil and natural gas prices.

On this issue, not a pipsqueak has been heard from our public intellectuals. Even our political leaders supposedly well-versed on foreign aggressions and the economic toll on countries waging such acts of aggression have been silent on the issue.

With journalism and policy-writing now mostly geared toward explaining things, the Philippine void on this critical policy question is unsettling. Sadder, we have the same void on most external issues that are now vexing the country just as important as China’s aggression. Take for instance what we cited earlier, the era of cheap oil.

At any given time, we have 2.3 million Filipinos with work contracts abroad, mostly in Saudi Arabia and the UAE. With the price of oil dropping below $30 per barrel (a 12-year low), and with a $20 per barrel oil looming, Saudi Arabia, easily the biggest employer of Filipino OFWs, will have to drop some big-ticket projects and has to resort to cost-cutting measures. In fact, it has started doing those things on a calibrated basis.

Now, the question is this. How would of cost-cutting and living within a constrained oil revenue affect the employment of Filipino workers? This is a very critical issue that should be the focus of a serious study by labor economists. A panel should be convened for this issue alone, given the strategic importance of overseas workers in the overall scheme of things. But so far, no serious effort has been dedicated to this critical policy issue.

Cheap oil, this is the textbook analysis, benefits oil-dependent countries in more ways than cheaper production costs for fossil-fed factories and power plants. Transport-centric businesses also massively benefit. But while some sectors bask in cheap oil, that is just one side of the story. The lifeblood of the economy is manpower exports with distressed oil producers as their hosts and employers. A slowdown in construction jobs in the Middle East will surely imperil OFWs.

It is very sad that no serious effort has to study this serious, life-threatening external threat. Now, we go to another lifeblood of the economy – the BPO sector.

The World Bank has given the PH leaders a stern warning – shape up your BPO sector or bust. The WB essentially advised the government and private sector leaders to ensure the migration of BPO services from voice-centric services to hard-core stuff. (The hard core stuff such as writing medical and scientific tomes is done by PH doctors but from an India base.) The WB warning was timely as voice services are on the wane and pay less. Newer and smarter technologies are the trend and we have yet to fully train for migration into those fields.

Did somebody listen? Are our leaders even aware of the static nature of our BPO? Most Filipinos still think that the cyber world is about posting those silly photos, and often revolting photos, on social media. Or tweeting those inane kalye-serye inanities.

We have yet to even realize this possibility. The Jakarta bombings may just be a dress rehearsal to more mayhem in the Asean region.

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2 Comments

  1. BPO

    Some of the areas becoming more critical to the BPO sector, and providing opportunities for corporates to streamline/improve workflow/processes.

    Multi platform contact centers
    Digital overtaking voice as primary medium
    Research and analytics + ‘Big Data’
    Artificial intelligence/automated-interactive voice response (IVR)
    Collaborative/virtual teams
    Mobile + cloud
    Multimedia services
    Omni-channel solutions
    Complexity/problem solving capabilities
    Workflow analysis
    Process automation
    Multi-channel marketing
    Social media integration
    Infrastructure cost, reliability & speed
    Man/machine interfaces/interworking
    Internet of everything
    Smartsourcing

    And the over-riding objectives are always business focussed, be they improvements in customer service, employee productivity, or speed of problem solving.

    The industry needs to be thinking and planning a minimum 5 years ahead. Everybody else is – BPO suppliers, end customers, other countries.

    Having a professional DICT would be a good start, and an expert strategy group who can look at services, skills, standards, security, disaster recovery, marketing etc.

    The Philippines should consider rural-sourcing as a means of distributing jobs, maintaining a cost advantage and targetting specialist sectors in manufacturing and agriculture.
    Smartsourcing + ruralsourcing + centers of excellence.
    And home-grown apps with less dependency upon the US corporates.
    Being at the end/bottom of the food chain is the most precarious position to be.

  2. The Philippines simply provides low cost labor to US BPO companies, which operate in multiple countries and can change strategy/re-route traffic at the flick of a switch, particularly since they only rent accomodation, and have next to no capital investment in the Philippines.

    More importantly the contract and relationship is held by/managed by the US company. They can switch countries and still retain the contract. Their loyalty is to the paying customer, and their own business, not the philippines per se.
    It is not filipinos who are having meetings with the Board of Mastercard, Pfizer etc. and aware of their future plans.

    It is also not the philippines which are developing anything, simply using software, hardware, systems developed elsewhere, and usually with top management being US. All very short sighted.

    How is the philippines gearing up for data analytics/AI etc.

    India consciously moved away from the high volume low margin voice business to focus upon higher value data services and develop specialised skills/knowledge.
    And not only India – vietnam are also moving into the value added data services.
    Relying on voice, particularly since it is a mature segment is not very strategic.

    Some people just don’t duck when a punch is coming, and then run to mommy with a bloody nose.