THE BUSINESS PROCESS OUTSOURCING (BPO) industry in the Philippines is likely to shrink as the shift to artificial intelligence (AI) in the workplace accelerates, according to Fitch Solutions unit BMI.
“In the case of the Philippines, BPO is a major source of foreign exchange, and this vital sector is likely to shrink as AI adoption increases as this would enable FThe efforts to expand call centers to even developed economies cost eFfectively,” BMI head of Asia Country Risk Darren Tay said in a webinar on Thursday.
“Put bluntly, AI could negate the Philippines’ current economic strategy,” he added.
The Contact Center Association of the Philippines (CCAP) expects sales of contact centers and BPO industries to rise 9% to $32.16 billion this year.
In 2023, CCAP member revenues reached $29.5 billion, accounting for the majority or 83% of the $35.5 billion revenue of the Information Technology and Business Process Management (IT-BPM) industry.
BMI said the Philippines is also among the countries less likely to benefitFof the transition to AI.
According to BMI, lower-income countries are “much slower to adopt AI on a meaningful scale and the development gap between these countries and the rest of Asia is likely to widen.”
“The Philippines, Indonesia and Thailand are in a worse position compared to the high-income group,” Mr Tay said.
A quarter of the workforce in these countries is involved in jobs with high exposure and low complementarity, such as basic sales functions, he said.
“And they have a much smaller share of workers in high complementarity jobs, limiting their ability to benefit from AI-powered productivity gains,” he added.
In 2023, the Philippines ranked 65the out of 193 countries in Oxford Insights’ Government AI Readiness Index.
The National Economic and Development Authority (NEDA) previously said the Philippine economy could generate $2.6 trillion annually if local companies adopt AI.
BMI said workers in developed economies are more exposed to AI than in developing countries.
“The International Monetary Fund (IMF) argues that lower-income countries could eventually leapfrog older technologies with the help of AI and overtake richer countries in development,” the report said.
“However, we believe that the high costs of building the required infrastructure and highly skilled workforce make achieving such a feat highly unlikely,” it added.
GREAT INCOME INEQUALITY
Generating the necessary investments to support the transition to AI may become increasingly difficultfficcult as AI “oFf existing development paths,” according to BMI.
“Moreover, the share of workers who could benefit from AI is much smaller than the share of workers who stand to lose in these economies, meaning there could well be strong public opposition to AI adoption,” it added .
BMI also noted how AI adoption could lead to greater income inequality.
“AI will increase income and wealth inequality, just like previous disruptive technologies such as the internet,” Mr Tay said.
While AI has the ability to increase productivity and incomes, it will likely widen the gap between rich and poor, according to BMI.
This potentially growing inequality could also hinder coordination and cooperation between countries.
“Social stability and international cooperation are likely to deteriorate as inequality within and between countries increases due to AI adoption.”
The inequality between countries makes regional cooperation differentFiccult, said BMI. It cited challenges to climate change efforts due to inequality among countries.
“And in Asia, rising inequality between countries may hinder greater integration among organizations such as ASEAN (Association of Southeast Asian Nations). The counterargument is that development gaps already exist and even if AI were to widen this gap, the barrier to international cooperation may not increase appreciably.”
“However, income differences between middle-income and low-income countries are often much smaller, and we believe that widening those differences (between Thailand and the Philippines, for example) will have a material impact on international cooperation.” — Luisa Maria Jacinta C. Jocson