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Ruminations
on Investment
By Michael Alan Hamlin
April 26, 2004
Thank God It's Friday! As I write this Monday-morning
piece as the previous week winds down, I find myself somewhat uncharacteristically
staring out my office window at the activity taking place across
the street. Just this morning, Northgate Cyberzone began construction
on the new HSBC call center that's been hyped up in the papers the
past couple of weeks.
To watch things get started, and I presume to leverage the obligatory
groundbreaking photo op, a bunch of foreigners gathered around the
construction equipment that appeared in the field early this morning.
They - the construction equipment, that is - have been going at
it ever sense, busy as bees, moving tons of soil out of a fast-growing
hole in the ground, and making quite a racket in the process. That
racket accounts for my distraction, I suppose.
But it also got me to thinking. Construction is becoming a big thing
again, as the economy continues to recover and it becomes increasingly
evident that the country will probably have the same president after
May 10 that it has now. Not a day goes by that I don't receive some
sort of promo piece on yet another luxury condominium being built
in Makati, Ft. Bonifacio, Alabang, Libis, or some other trendy hotspot.
Out here in Northgate Cyberzone in Alabang, the new HSBC building
isn't the only thing cooking. Across the field fronting Zapote Road
the new Convergys building has quickly reached its full three-storey
height. Another tier-one call center, APAC, has exercised its option
for the entire four-storey Building C that sits next to the one
our offices occupy, Building B. Building B itself has most of two
floors leased out to Ambergris, a local call center outfit. Across
Zapote Road in the ritzy Insular Life twin towers, Epixtar is expanding
its call center to 1,000 seats. It's adding another 1,500 in Libis,
housed in Epixtar House in Eastwood.
In Makati People Support is building a new building, and TeleTech's
suppliers have been buying media supplements announcing the opening
of its newest call center. With all this, and more, highly visible
activity, it's easy to get caught up in the euphoria associated
with call centers, which have become the career of choice among
many young people. As some told me recently, "our friends and
family admire us because we were able to get jobs in the call center
industry." Only about one in every 100 applicants gets accepted,
according to the scuttlebutt.
Call center sector investment represents a mixture of purely foreign
and local investment. Most of the tier one companies don't look
for local partners. Tier two companies frequently do, and local
call center operators generally look for either industry partners
or hire expatriates to teach them the business. In other e-Services
sectors such as software development, engineering and design, and
financial back office operations, foreign investment is the principal
driver of development.
According to economic planning secretary Romulo Neri, total foreign
investment in the Philippines is probably going to be in the vicinity
of US$1.5 billion this year. India will get about US$10 billion,
and like the Philippines, a significant portion of this investment
goes to non-traditional sectors like e-Services and network infrastructure.
Fortunately for both countries, non-traditional investment is a
much more efficient job generator than investment in traditional
sectors like light and heavy industry manufacturing and assembling.
And that's why we seem to have been taken over by call centers recently.
Yet foreign investment accounts for just 10 percent of total annual
investment in the Philippines. It is domestic firms that account
for the bulk of investment. Neri says that domestic investment has
been growing around seven to eight percent a year, but that it needs
to increase to at least 15-20 percent annual growth to match domestic
investment rates in other regional economies.
Obviously, foreign investment needs to grow faster too, and that's
not just a matter of investor perception. Rather, lack of investment
in some key sectors is attributable to protectionism, some of it
constitutionally enshrined. Neri feels that liberalizing mining,
utilities, shipping, ports, and airlines, for instance, could generate
an additional US$2 billion a year in foreign investment, effectively
doubling present levels, and generating significant job growth and
lessen our new dependence on e-Services.
However, government has its hands tied for political and constitutional
reasons. Perhaps a re-elected government will have both the moral
authority, and the political will, to make this happen. That's something
to ruminate about, at least.
(Michael Alan Hamlin is the managing
director of consultancy TeamAsia and the author of three books on
Asian economies and companies. His latest book is Marketing Asian
Places, of which he is a co-author (Wiley, 2001), and he is currently
at work on High Visibility: The Making and Marketing of Asian Professionals
into Celebrities. Write him at mahamlin@teamasia.com.).
Copyright © 2003 Michael Alan
Hamlin. All Rights Reserved.
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