There’s another side to the World Bank’s observation that the country’s success in attracting investors in the business process outsourcing (BPO) masks a failure on the part of the government to develop sectors that would have been effective in reducing poverty in the country.

In its East Asia Update, the World Bank said BPO, one of the biggest components of the services sector in the Philippine economy, focuses only on employing educated and skilled individuals.

“In contrast to China and Indonesia,” the bank noted, “the service sector in the Philippines is large, but that reflects a failure to boost economic activity more generally, rather than a mark of success in diversifying the structure of growth.”

I suspect that the BPO sector has been so successful that it created the impression on the part of the World Bank that government policies and programs are focused only on this sector.

I don’t think this is the reality. Actually, the rise of the BPO sector, like the phenomenon of the overseas Filipino workers (OFW), is not due to the government initiative, but rather to market forces. Businesses in major economies were compelled by the global financial crisis that started two years ago to outsource some components of their operations to reduce costs, and emerging markets like India and the Philippines provided the solution, with their large pools of skilled, English-proficient and low-cost workers.

Real estate developers, for their part, have provided the office space to house call centers and other BPO services.

The government’s role in developing the BPO sector is mainly on providing fiscal incentives, which are also offered to investors in other industries.

Now, I have to clear up the misimpression that might have arisen from the World Bank’s report, that somehow the BPO sector is to blame for the lack of efforts in developing other sectors of the economy, particularly those that will have more impact on the low-income families.

The bank said the BPO sector focuses only on employing educated and skilled individuals, and that employees of BPO companies belong to families who cannot be considered poor or even near poor.

It’s true that the BPO sector provides employment to people from the so-called ABC class. But that also means that the estimated 500,000 jobs provided by the BPO companies to this group of employees will make available the same number of jobs in other fields, for applicants who may not be qualified to work in call centers and other outsourcing services.

In effect, the half-a-million middle-class workers in the BPO sector will no longer crowd out the poor applicants in other industries. If we did not have the BPO sector the world will be smaller for the poor, and the job market for them will be half-a-million less.

There will be a negative impact if we start looking at the BPO sector as an end-all, a panacea to all our problems.

Economists have been cautioning against depending on the OFW phenomenon to the extent that local industries are neglected; we should also not be lulled into depending excessively on the BPO sector at the expense of other industries.

Both the OFW and the BPO sectors provide resources that keep the Philippine economy afloat even during the 2-year-old global crisis, and generate jobs that prevent our unemployment rate from getting worse than it is now.

Of course, neither one will completely solve our unemployment problem, but allowing workers to go abroad and others to work in BPO companies are among the solutions to our poverty problem.

We have to use a cocktail of approaches to really reduce poverty that has been with us for as long as anyone can remember. At least 30 percent of our estimated 92 million people, or 27.6 million, are poor.

The World Bank said that at least 1.4 million Filipinos would join the ranks of the poor next year because of the slowdown in the economy. The bank’s forecast is 1.4-percent growth in terms of Gross Domestic Product (GDP) for 2009 and 3.1 percent next year, but actual GDP growth rates of 0.6 percent in the first quarter and 0.8 percent in the second and third quarters point to a full-year growth of less than 1 percent.

A survey conducted by the Social Weather Stations (SWS) October 24 to 27 showed that the proportion of families that experienced involuntary hunger increased nationwide by 1.3 points—the equivalent of an additional 300,000 families—after the onslaught of Ondoy and Pepeng.

Hunger, according to the survey, rose to 18.9 percent nationwide from the 17.5 percent posted in the survey conducted on September 18 to 21. Ondoy swept across Luzon on September 26. Pepeng struck a week later.

The new hunger figure represented an estimated 3.5 million families or 300,000 more than the estimated 3.2 million hungry families as of September.

The government’s Labor Force Survey showed that employment growth slowed down to 2.6 percent in July 2009 compared to 3.8 percent in July 2008. A total of 916,000 jobs were generated in July this year, versus 1.275 million in the same month last year. Thus, the unemployment rate inched up to 7.6 percent as of July 2009, from 7.4 percent a year ago.

Increasing employment is one of the first steps that we must take toward reducing poverty. Seventy percent of our people live and work in agricultural areas—where poverty incidence is also the highest—so it’s a must that we improve our agriculture sector.

The World Bank blames the underinvestment in sectors like industry or agriculture through the lack of public investment for infrastructure like agriculture and transportation as the reason many Filipinos made services, including BPOs, their employment safety net.

I agree. Actually I have been calling for a comprehensive program to revive the agriculture sector.

I call it agricultural renaissance, which involves the repair of damaged irrigation facilities and construction of additional irrigation and post-harvest facilities, farm-to-market roads, production and marketing assistance to farmers, and introduction of new technology on crop production.

I have always believed that if we can help all our farmers get out of poverty, then we have almost solved our poverty problem. And in previous columns I had talked about other approaches to the poverty and other problems confronting our nation.

I will continue to do so to keep all of us aware of these problems and the need to solve them, lest we are lulled into complacency or indifference. For if that happens, then woe to us all!

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