BPO is not a poverty alleviation measure: ADB Study

October 22, 2011: Business process Outsourcing industry has been supporting the economy of most of the developing countries during the global financial crisis. According a report published by the Asian Development Bank institute, the government should not consider the BPO industry as a tool to eradicate poverty.

F. Tech Tschang, associate professor of strategic management at the Singapore Management University says that the BPO industry cannot serve as means to eradicate rural poverty as it does not provide employment to less educated people.

Tschang’s study covered the information technology enabled services industry in India, China, and the Philippines.  The title of the study was “A comparison of the Industrialization Paths for Asian Services Outsourcing Industries, and Implications for Poverty Alleviation”.

According to him the contribution of BPO industry to the GDP and exports can be larger and its impact on the economy due the high value addition and higher wages is even more when taken on a per-person basis. He also said that in an economy such as India which is big and growing, the impact of BPO industry on output and employment is much less important that its impact on growth.

Based on the study, it is said that Philippines has an advantage over China in terms of proficiency of English language. It is also said that Philippines is developing its competency in BPO and call centers which includes, legal processing, software development and medical transcription.

In an address to the nation, the president of Philippines has said that the BPO and IT sector has generated about 30198 jobs in the first quarter of 2011. He said that the industry is expected to create another 84,000 opportunities this year.

According to Mr. Tschang, the job opportunities generated by the BPO and IT sector is not going to benefit the major portion of the population. A problem that may come up is the bias towards the better educated which will widen the gap between those with better education background and those without. During mid 2000 in Philippines the call centers used to recruit students from colleges which were in the top 10 per cent. But as demand for demand grew and with supply reduced, call centers began to recruit from other colleges as well. This has resulted in deterioration of quality of work. As a possible solution to this problem call centers can look for students in the dynamic middle class at selected cities where the IT industry had a favorable beginning.

According to Cayetano, Socioeconomic planning chief, Philippines, the government considers the BPO industry as an indirect means to eradicate poverty. He says that BPO and IT sector is a highly employment generating industry and that employment is the only way to eradicate poverty. He stressed on the point that it is only an indirect means as direct measure include interventions such as cash transfers and maternal welfare programs.

Mr Cayetano said that they won’t just rely on the developments happening in the market as it will leave many behind and that they will resort to direct interventions to make sure that no one is left behind. 




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