Filipinos Move Up the Value Chain

From the Asia Times:

Filipino diaspora moves up value chain
By David L Llorito

MANILA - A growing global search for English-speaking talent is greatly benefiting Philippine workers who pursue overseas opportunities and badly hurting the local companies and domestic economy they are in growing numbers leaving behind.

A recent study conducted by Grant Thornton International and Philippine accounting firm Punongbayan & Araullo found that 43% of Philippine companies rated the scarcity of skilled labor as the major impediment to their business-expansion plans. Last year

only 15% of Philippine companies surveyed complained about a chronic lack of skilled labor.

"Employers across industries are experiencing ... the draining of our local talent pool," said Greg Navarro, managing partner and chief executive officer of Punongbayan & Araullo. "Even in the accounting practice, we are struggling to compete with foreign firms that see the Philippines as a good resource for highly trained, English-speaking [staff]."

Official statistics from the Philippine Overseas Employment Administration corroborate those complaints. Since 2000, the Philippines on average has seen 79,000 professional and technical workers, most of them college or university graduates, take positions overseas each year.

Over the past six years, 10,000 nurses have left the country annually for Saudi Arabia, the United Arab Emirates, the United Kingdom, Ireland, the United States and other destinations. Close to 13,000 medical caregivers, many also with nursing backgrounds, have likewise left each year for jobs in destinations as far flung as Taiwan and Israel.

Meanwhile, Japan and South Korea are emerging as the most popular destinations for performing artists, with each country now receiving on average 55,000 Filipinos per year. More worrying to national competitiveness, the Philippines is sending a growing number of highly trained information-technology (IT) workers to such countries as Saudi Arabia, the UAE, Malaysia, Singapore and the US - undermining the crucial local electronics industry.

Official figures may understate the actual outward movement of IT workers to such countries as Singapore and Malaysia, where they are often directly recruited by employers there. Many Filipino IT workers take advantage of the waived visa requirements for fellow Association of Southeast Asian Nations countries by applying directly to regional companies while traveling on tourist visas.

Manuel Villa, a Filipino industrial engineer who works for Fairchild Semiconductors in Singapore, said there are many professional Filipinos in that country. He said that apart from IT workers, a growing number of Filipino professionals are seeking high-paying jobs with Singaporean and multinational companies, including positions in upper management, engineering, logistics and aviation. "The [official] Filipino population here has already reached 120,000 and is rising," he said.

Previously, the professional exodus only affected a few sectors of the Philippine economy, predominantly shipping, aviation, engineering, construction and nursing. In the past three years, however, the loss of professionals has hit nearly every sector.

That includes Filipino journalists moving to Singapore, Saudi Arabia and the UAE; engineers and oil-rig workers to Nigeria, Russia, and the Persian Gulf states; speech and physical therapists to the US; and mining engineers and geologists to Australia and China.

According to the Personnel Management Association of the Philippines (PMAP), high-value-added industries are being hit by higher staff turnover rates, including pharmaceuticals, banking, consumer goods, hotels, electronics, semiconductors, telecommunications, and IT. Anywhere between 33% and 59% of employees who recently left their jobs in these industries pursued new opportunities abroad, according to a recent PMAP survey.

The lower-paying public sector is also being adversely affected. For instance, the state-run Weather Bureau and Mines and Geosciences Bureau are increasingly losing forecasters and geologists to better pay offers from abroad. The Department of Science and Technology recently revealed that out of almost 3,000 national scientists with PhD degrees in various scientific disciplines, nearly 500 have left the Philippines in recent years.

Outward march
Even the Armed Forces of the Philippines have not been spared foreign poaching. Army sources who spoke with Asia Times Online said Australia recently started to recruit Filipino soldiers trained in asymmetrical warfare and counterinsurgency operations, sometimes luring them with the offer of citizenship.

The Australians "know that Filipino soldiers are well trained in the different occupational specialties which make them competent and efficient and they can communicate and verbalize [in English] very well", a senior army officer said in an interview. "The Armed Forces of the Philippines is using American military doctrines and it is compatible with Australian military doctrines. For several decades, our soldiers have been fighting the NPA [New People's Army], secessionists, and terrorist groups. The Australians do recognize this Filipino talent," he said.

As more Filipino professionals move offshore, local companies are scrambling to recruit from a thinning talent pool. "In just 12 months, we lost about a dozen human-resource officers to other companies," said Raymond Santiago, corporate-affairs manager of Unilab, producer and exporter of prescription and consumer-health products.

Noel de Leon, country manager of Mercer Consulting, a global human-resources company with clients in 42 countries, attributes the fierce global competition for Filipino talent to demographic change in the US and the Asia-Pacific region. "There's a war for talent out there because China is growing so fast," said de Leon. "The trend of rising demand for skilled workers is really Asia-Pacific-wide."

In a recent regional survey, Mercer found that anywhere between 50% and 77% of companies in Japan, South Korea, mainland China, Hong Kong, Taiwan, Singapore, Malaysia, Thailand, Indonesia, Vietnam, Australia and New Zealand had expressed intentions to hire more English-speaking staff, even as many of them are experiencing high local worker attrition rates. "And where are they going to get new talents? Naturally, many of them will recruit from the Philippines," said de Leon.

And global economic trends show that demand will grow before it diminishes. In a recent paper titled "Global Competition for Skilled Workers and Consequences", Manolo Abella, a Bangkok-based labor-migration expert who formerly worked for the International Labor Organization, said the intensifying battle for Filipino and other English-speaking professional talent results from "the growth of global supply chains" brought about by trade and investment liberalization.

"The emergence of these global production structures has been everywhere accompanied by greater movements or transfers of technical and managerial personnel," said Abella. "Another important development has been the growth of informal as well as flexible forms of employment, opening markets for foreign workers willing to enter occupations or sectors abandoned by [local workers]."

According to Dieter Ernst, an economist and senior research fellow at the East-West Center based in Hawaii, the trend toward downsizing of local staff among US firms since the late 1990s has also been a major factor in the hiring trend. Ernst explained that because many US companies operate on very lean staff, many of these firms are now scrambling for lower-paid, but equally skilled, foreign workers.

"For many high-tech companies, competing for scarce global talent has become a major concern," said Ernst. "As a result, global sourcing for knowledge workers now is an important global manufacturing and supply-chain strategy. The goal is to diversify and optimize a company's human-capital portfolio through aggressive recruitment in global labor markets."

But what's adding real fire to the global professional-talent war is increasingly aggressive recruitment from the US, Canada and Australia, especially in regional areas suffering from low population and labor-force growth. For instance, Canada and Australia have been offering permanent residence and citizenship as incentives for skilled migrants, including from the Philippines.

Through its so-called H1-B visa program, US firms have been increasingly aggressive in trying to lure IT workers from the Philippines to Silicon Valley. Middle Eastern countries such as Saudi Arabia and the UAE have been giving temporary admission to skilled engineers, welders, pipe fitters, accountants, journalists and advertising people from the Philippines and other Asian countries. And Australia is now using its universities as so-called "academic gates" for attracting skilled migrants from the Philippines and all over the world.

Slowly but surely, the mounting professional exodus is driving up wages in the Philippines. Patrick Marquina, associate consultant for Watson Wyatt, another human-resources-related firm, says 148 Philippine companies involved in manufacturing, business process outsourcing, banking and other industries have in the past year all raised their pay scales by an average of 9.2%, or nearly three times the benchmark inflation rate.

Rising pay scales, Marquina explained, are moving fastest in the outsourcing and IT-related businesses. Still, several economic analysts and corporate executives believe average professional wages have risen too little, too late, and fret that the mounting exodus of talent from the Philippines is adversely hitting overall national competitiveness.

Labor expert Abella said: "Experience has shown that human capital, rather than natural-resource endowments, is the key to economic development. The current competition for the highly skilled has raised alarms that ... developing countries will have difficulty in creating a critical mass of professionals and technical workers needed to raise productivity."