Sunday, June 05, 2005

RP struggles to match India in outsourcing boom

By Cecil Morella Agence France-Presse

AN EDUCATION system that churns out poor-quality college graduates who can barely speak English is handicapping the Philippines as the former US colony tries to match India and ride a global outsourcing boom to lift millions out of poverty.

Despite a huge potential pool for the call center and business process outsourcing industries from a rapidly growing population of 84 million, experts warned there were no quick fixes in the poorly-funded educational system.

Chief executive of C-Cubed Services Jose Xavier Gonzales says the Philippines had an ethnic prescription which should give it an advantage in outsourcing where India is the runaway leader of the field.

"We think American, feel Spanish, and act Asian," said Gonzales, whose business is one of the industry's mid-sized players in the Philippines.
Gonzales was speaking at an outsourcing forum sponsored by the Development Bank of the Philippines and held here last week where business leaders were told that while labor was cheap the quality was poor.

"Our country faces a very dire situation in terms of getting the basic education sector to provide a much more solid foundation of basic education competencies essential for global competitiveness," Education Secretary Florencio Abad told the forum.

National achievement tests given to graduating high school students in the 2004-2005 school year showed that only 6.59 percent could read, speak and comprehend English well enough to enter college.

Some 44.25 percent had no English skills at all.

In a bid to catch-up with international standards, Abad said the government would make pre-school attendance compulsory and ask Congress to lengthen high school education by at least one year.

"As the world shifts deeper and deeper into the information age, education will be essential for a job," said Manila-based business consultant Peter Wallace.

"You can put a poorly educated person on a production line, but you can't put them behind a computer."

"The Philippines has few production lines.

Agriculture needs only basic education, but leaves people destitute."

Wallace added the Philippines is attracting companies in need of computer-literate employees, but the qualified talent pool is already overstretched.

This was highlighted at C-Cubed where Gonzales said 48,000 applications for call service jobs were received last year but only 1,089 people made the grade.

"We have long neglected, under-invested, mismanaged and over-politicized our vast network of public schools and it will take a long time for us to turn this situation around," Abad said.

Talent pool extremely shallow
Gonzales said this year's demand should be around 27,000 call center seats, way above the qualified pool of about 12,000 people from a national total of 380,000 graduates produced annually by the country's tertiary institutions.

Once in the door, outsource workers undergo three months intensive training on culture, geography and "accent neutralization" to round-off their spoken English and make themselves understood to customers from across the globe.

Call centers, back office services, digitalization of medical records, animation, and software development now employ 114,000 people in the Philippines, generating annual revenue of 2.022 billion dollars.

Outsourcing for call centers alone produces revenue of one billion dollars a year.

By comparison, the semiconductor and electronics industry generates 27 billion dollars in annual revenue, accounting for around 70 percent of exports and employs around 376,000 people.

They earn salaries of 10,000-12,000 pesos (about 184-220 dollars) a month which is about half the wages earned in outsourcing.

The government hopes to triple employment in call center outsourcing to about 300,000 over the next three years, with revenues expected to also triple, to three billion dollars.

But a frustrated Gonzales said this was unlikely although the number of call center positions has risen dramatically to 69,000 from just 4,500 in 2001 while back office operations including accounting and airline ticket reservations for foreign companies accounted for another 25,000 jobs.

"Unless the government, industry and the academe take a more proactive role in enlarging the qualified pool, call center growth will max out at 30,000 annually," he said.

Amid the dearth of qualified people the outsourcing industry is making do by hiring professionals from outside the industry, luring "career-shifters" with higher pay.

Gonzales said this pool is also considered extremely shallow and had forced companies to cut back on hiring which has slowed growth in the sector.

And Abad added the deficiencies of Filipino college graduates are planted even before grade school.

"We were shocked to find out" about a health department survey that found 30 percent of school-age children are under-nourished, he added. This delays brain development and seriously inhibits their intelligence.

Wallace, citing government data, said out of 100 primary school pupils, 33 dropped out of grade school, and only 45 finished secondary school. Of these, only 26 entered college, and just seven graduated.

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