Philippine Services Sector: Domestic Policy and Global Markets

The Philippines experienced a dramatic turnaround in the past decade: once the proverbial basket case, its economy distinguished itself as among the world’s fastest growing by the start of the 2010s. This chapter attributes the country’s spectacular growth to its booming international trade in services, notably, its labour export and business process outsourcing (BPO) industries. External and domestic factors combined to produce the boom. The fragmentation of global production and technological advancement created new opportunities for the services industries, but domestic policy also aggressively linked Philippine labour to global markets, institutionalising the deployment of Philippine workers abroad and incentivising the proliferation of so-called cyberzones to attract global BPO providers. The chapter argues that trade in services has enabled the country to go beyond the structural constraints that had previously hampered growth, and introduces the concept of labour export hazard in which substantial earnings from abroad remove the incentive for the Philippine state to improve the domestic economy. That said, for the country to climb up the value chain in services would require increasing investment in human capital and broadening the nexus between manufacturing and the services sectors.