What Biden’s Presidency Could Mean For Outsourcing
During the start of the COVID-19 pandemic, the US suffered a blow to its economy with 22 million in jobs lost in April 2020. This number has been cut down significantly through the year with only 9.5 million jobs left to recover in February 2021, but the country is still recovering as businesses continue to cut spending and trim down operations. The recession has strengthened the case for President Joe Biden and Kamala Harris’ “Buy America and Make it In America” plan. They plan on implementing this plan in what they describe as two “bold steps”:
1. The Biden “Offshoring Tax Penalty” or a 28% corporate tax rate on top of a 10% offshoring penalty surtax for any profits from a production done overseas but sold in the US. The penalty surtax also applies to call centers or other outsourced services of an American company overseas.
2. Signing a series of executive actions on his first week to “ensure the federal government is delivering on its obligation to use taxpayer dollars to Buy American products and support American supply chains.”
Five days into office, Biden first signed an executive order that directed agencies to strengthen the requirements for purchasing products and services from US workers and businesses. According to NBC News, the order will cut red tape and introduce a position in the Office of Management and Budget to carry out the order.
The Philippines meanwhile is also still recovering from its own recession amidst a continuing pandemic. With the majority of the BPO companies here being based in the US, will this industry also experience a setback? Will the Biden administration outsourcing policy affect the country’s ranking as the second-largest BPO destination?
The Future of Outsourcing Under a Biden Administration
The Biden presidency’s plan to keep products and services within America has yet to affect the Philippine outsourcing industry’s growth. Before Biden was elected into office, the BPO industry remained resilient amid rising COVID cases and a nationwide lockdown. In a July 2020 webinar, the Business Process Association of the Philippines (IBPAP) and the Healthcare Information Management Association of the Philippines (HIMAP) said they were confident the country would continue to be a global leader in BPO operations.
Outsourcing opportunities are found across the country, with six cities on the 2018 Tholon’s Top 100 Global Outsourcing Destinations list: Manila, Davao, Cebu, Sta. Rosa, Bacolod, and Iloilo. Foreign investors and business owners have more options when it comes to location, a qualified working population, and operational costs. They can compare office rental spaces, candidate pools, and location accessibility to see which city will benefit them in the long term.
The Continuous Resilience of the BPO Industry in the Philippines
The reasons behind the Philippines being an ideal outsourcing destination have remained unchanged in the COVID-19 pandemic. The industry employed 1.3 million employees in 2019, adding 71,000 to its growing workforce. The US still invests in the BPO industry because of the Philippines’ close affinity to the West. The local population has no problems speaking English for professional and conversational reasons. Many school subjects are taught in English and the population boasts of a 96.3 percent literacy rate. Popular American media is very much a part of their lives, with an affinity for the country’s movies, music, TV shows, and literature.
BPOs have a larger pool of candidates for their customer service or backend needs. They will also spend less time, money, and resources acquainting staff about their culture compared to other countries that don’t speak English or have much of an affinity with Western culture.
During the start of the COVID-19 pandemic, BPOs were among the essential industries to continue operations under a skeletal workforce. Businesses did not have to cease amid a nationwide lockdown. Social distancing measures and sanitation protocols have been followed across different companies to ensure their workers’ health and safety. Staff who lived in areas outside of the office were provided accommodations. Other companies disseminated shuttle services to ensure their safe travel back home. Work-from-home is also accommodated among staff outside the skeletal workforce. Filipinos transitioned easily into the work-from-home setup thanks to their access to the internet and on-hand technology. Shift lengths were also reduced to help ease them into the new normal.
Despite the pandemic setbacks both in the Philippines and the US, there’s room for growth in other industries, namely gaming, animation, and healthcare. All three industries are found under the IT and Business Process Association of the Philippines (IBPAP) Roadmap for 2022. Note that IBPAP’s assessment was done before the pandemic. The potential growth of health, gaming, and animation has increased given the circumstances of the pandemic. The forecast is looking toward revenue growth in these industries in the next year. US health, gaming, and entertainment companies can lower operation costs with outsourced customer service, financial, and marketing staff based in the Philippines.
Why You Should Outsource or Offshore in the Philippine Today
Outsourcing in the Philippines is still a viable option for US companies that need to save on operational costs. The effects of Biden’s policies will also depend on the measures taken by companies that have offshore sites. Chief Executive Officer of Outsource Accelerator, Derek Gallimore, emphasized that politicians typically say they will keep jobs within the country, but how they follow through is another matter. Gallimore also said that the effect is only within the short to medium-term. BPOs in the long-game need not worry about the additional costs affecting their profits and smoother operations.
With Biden only three months into his administration, now is the best time to start outsourcing in the Philippines. Getting in early and establishing your presence lets you operate within the saved costs.
Have questions about starting a BPO in the Philippines? Contact us for a free consultation on outsourcing in 2021. We can work with you and give you the best connections for implementing an outsourcing strategy. Explore the best investment your company can make with EnterPH’s assistance. We’ll address any concerns and help you overcome any possible challenges with solutions that guarantee success.
Rocky Chan is a lawyer and business consultant who excels in corporate formation, immigration procedures, and client relations. In the last 7 years, he honed his craft in the field of foreign investment consultancy.
