Philippines Urged to Diversify Economy as AI Threatens BPO Sector

The Philippines' next major test may come from the very industry that has powered its economic ascent: call centers and business process outsourcing (BPO). As artificial intelligence (AI) threatens to disrupt jobs in this critical sector, global management consulting firm Kearney advises that the country's newly attained upper-middle-income status should spur the government and businesses to cultivate additional engines of growth, ranging from manufacturing to tourism, and to invest in the necessary infrastructure. Among the key risks highlighted by Marco de la Rosa, Kearney Philippines country head, and Varun Arora, Southeast Asia managing partner, is AI's potential impact on call centers and the BPO industry, a significant economic driver for the nation. Kearney estimates that as many as 100,000 jobs in the Philippines could become obsolete due to AI by 2023, with the effects already being observed in financial institutions and telecommunications. While AI is poised to disrupt numerous industries globally, the Philippines has more at stake than many other nations. The BPO sector has become one of its largest sources of employment and foreign exchange, projected to generate $38 billion in revenue and employ 1.82 million workers in 2024. This industry has also been instrumental in absorbing college-educated workers and anchoring office demand in major urban centers. De la Rosa underscored that the risks associated with AI make infrastructure investment even more urgent, particularly if the Philippines aims to build industries beyond BPOs. "So, if we need to diversify away from contact centers and BPOs, and we need to look into other industries, be it manufacturing or tourism, all of those things require good, stable, strong and scalable infrastructure," he stated in a Philstar.com interview. Infrastructure is crucial in its own right, but it becomes even more critical for a country striving to broaden the sources of its economic growth. Arora added that governments and companies must also prepare for more "black swan events" – unpredictable shocks with severe consequences, especially those linked to technology. "What if these black swan events happen? Then what will we do? So let's say there is, and I'm not saying just Philippines, but let's say there is a massive cybersecurity incident which happens that can rattle an economy," Arora told Philstar.com. Arora suggested that these uncertainties are unlikely to dissipate soon, and foreign investors will increasingly assess whether markets possess sufficient resilience and alternative options to absorb disruptions. "The uncertainties created by AI and technology and the risk of job losses, as well as the risk of technology disruptions, cyberattack or technology breakdown or AI going wrong, those uncertainties are very high for companies right now," he remarked. In an increasingly volatile global environment, the Philippines needs to demonstrate to investors that it possesses multiple strategic options across industries to remain competitive, Arora emphasized. "Bringing up other sectors of industry, BPOs are getting disrupted. So resilience and options is very important for the government and a lot of these enterprises to think of because we are in a world where we can't just look at the upside," he advised. Both Arora and De la Rosa believe that the Philippines' upgrade in income status should be viewed less as a final achievement and more as the commencement of a more demanding race for investment and competitiveness. "We're progressing, and we're advancing, and we're developing. But now it's about making sure we stay competitive and we get in front of other opportunities," de la Rosa concluded.