Government News Analysis

The Trump effect?

Two items on the agenda of newly installed US President Donald Trump are causing some concern in the Philippines – his executive order on immigration and his avowed policy to tax overseas US entities. It should be pointed out, however, that at this stage these concerns are largely based on speculation. No definitive policy has been set out so far that clearly shows the Philippines will figure prominently in the fallout from either of these two directional shifts. That said, it’s worth keeping an eye on them.

The former concern relates to Filipinos working in the US – along with the money they send back home to the Philippines. This amounts to around 10% of gross domestic product (GDP). The latter concern centres on the future of the Philippine-based business process outsourcing (BPO) into which American companies kicked roughly 75% of the US$22 billion earned by the sector last year – a sector which contributed 6% to GDP.

Of course, if these important revenue streams ultimately do fall into Trump’s firing line, the effects will quite seriously impact the Philippine economy. The US, the largest source of remittances, accounted for some 43% of the US$26.8 billion plus sent to the Philippines by Overseas Foreign Workers last year. With regards to the BPO sector, if American companies reduced or withdrew their business completely, this would hit not just services-sector earnings but employment and prices in the country’s office rental market – particularly in Manila.

Right now, however, it’s too early to say if any of that will happen – that said, clarity is being sought. At this stage, though, this is what we know.

Trump’s immigration brake, which he applied last Friday, only affects people coming from seven Muslim-majority countries – namely, Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen. In other words, the Philippines is not on that list. However – and here’s where the speculation comes from – at some future date Trump might seek to expand the list to include countries which the US State Department has categorised as ‘terrorist havens’. And among these is the Philippines, specifically the southern Mindanao region. Others on this list include Afghanistan, Egypt, Indonesia, Mali and Pakistan.

Currently there are more that 3.5 million fully-documented Filipinos living and working in the US. However there’s an estimated further 1 million in the country illegally, and this demographic might well end up being repatriated; though that’s not going to happen overnight, if at all. Philippine President Rodrigo Duterte had them in mind when he said “I wont lift a finger to help them”. The fact is there’s very little he could do to help them in any case if they become the subject of deportation orders.

The point he was making – deliberately missed by his opponents – is that Filipinos must be properly documented when travelling overseas and must abide by the immigration rules of the countries they’re visiting. He was using Trump’s policy to underscore the need for them to attain the proper legal status. The Philippine immigration service stops hundreds of thousands of citizens from leaving the Philippines each year. This crackdown was beefed up under the previous administration of Benigno “Noynoy” Aquino following pressure from foreign governments – countries where Filipinos had been swelling the black economy – to ensure people travelling to their jurisdictions were bona fide tourists or workers.

Throughout his election campaign, Trump stated that he would cull his country of all illegal migrants – predominantly singling out people from Mexico and countries in Central and South America. While he’s doing that, however, he’s unlikely to offer any special dispensation to Filipinos working illegally in the States.

With regards to US companies’ overseas operations, Trump’s stated target are those that produce goods overseas and sell into the US – carmakers being a prime target. He’s threatened manufacturers of such goods with a scorching 35% tax. But nowhere has he ever mentioned targeting services, the category under which BPOs fall. That doesn’t mean it won’t happen; it means that at this stage nobody knows and it’s pure speculation to assume he has them in mind.

The BPO sector in the Philippines is a huge success story and its economic contribution has been steadily gaining on that of remittances. Currently employing 1.3 million workers and still growing, the Philippines today is a world leader in this global US$140 billion business. So of course if getting on for half of that income were to disappear, it would decimate the country’s services sector. And as we mentioned earlier, this would also kick on into other areas of the economy such as real estate.

There have been claims from some quarters that the commercial office-space market is already slowing as a result of a wait-and-see policy by BPO operators who were either looking to enter the Philippines or expand their existing Philippine businesses. They’re apparently unnerved by Trump’s rhetoric on repatriating business back to the US.

Behind much of the speculation, however, is the American Chamber of Commerce. Recently it told financial-services provider, Credit Suisse, that US BPOs have put their expansion plans on hold, though it didn’t name any specific companies. Well, that’s par for the course; nothing to verify, so its not exactly ripping analysis.

In September, AmCham Philippines put out this statement. “The American Chamber of Commerce of the Philippines voices growing concern over developments that could harm the long-standing optimism of American business to invest in the Philippines”. Adding that Duterte’s War on Drugs and the death toll associated with it was damaging the country’s image, it continued, “… and some investors are now asking whether this campaign reduced the rule of law”. No evidence, of course to support any of that either.

In fact, the only thing we can accurately deduce from those ‘anecdotes’ is that AmCham is no more keen on Trump’s presidency than it is on Duterte’s. But then we knew that anyway.

27 Comments

  • The Philippines a basically a catholic country and, what I could feel during my short stint there, the Filipinos love United states and almost at every walk of life in the Philippines you can feel the very presence of America. The Philippines a overall a peace-loving nation with a good moral value, but the steps of the incumbent president has to a great extent jeopardized the situation. His so-called war on drug and subsequent proximity with China, who allegedly help make the Philippines a narco-state, has earned a worldwide denunciation and, to make the thing even worse, it’s already somehow proven that PNP itself is implicated to earn extortion and ransom money out of the whole process. So, in my opinion, the Philippines should not be put under travel ban.

    • PRESIDENT Duterte is the best President that ever happened in this country..what he is doing is fulfilling what should be his campaign commitments and not all Filipinos are being slaves of such colonial mentalities..majority tho how miserable are not depending on US, we are not influenced by American dreams because, how poor our country is, we will never leave. We are born here, we will die here…thank for having a president who has brought changes, eradicating drugs, criminality and corruption…sorry for those who can’t agree with the ways of the President, but he won the votes of majority, with almost 6M difference because of those traits, a very extra ordinary leader…with BALLS..

    • I do agree… how could they about that with our pres. They are not here. U r not here madam…. ask the ordinary people first before u say such words… change has come and i love it

    • The recent story this days are the result of hatred and absurd words trown to the us and the americans by this administration. Blaming the us for all his past experiences with the us embassy and officials . Cursing and calling deregatory words to us un and eu. Now that the trump admin. Is issuing new policies regarding migration and refugee concern they react with outmost concern. Hahahahahahaha look whos talking? Hating us and americans, but they love to go there and stay, and they use and ate everything stateside. Hypocrites and liars! Be true to urself, do what u preach and dont ride in the bandwagon!

    • Dear friends, I harbor no grudge against the Philippines or the Filipinos and in fact I have a very close connection with the country. But, having said that, there’s hardly any glory in killing a man, those drug-lords and pushers could easily have been brought to justice instead of killing them. Mr. Duterte was right and perhaps he was perhaps the first Filipino president to call a spade a spade respecting US, but then he miserably failed to do so in case of China. If US cannot be trusted, China too should have the same status and honestly China never respected Philippines’ claim of West Philippine Sea. Here lies the dichotomy in the Philippine foreign policy which was perhaps clouded to some extent by the President’s own ego and justification.

  • The president only speak to himself what he don’t know it affects million and millions filipinos. We are already slave by china. Have you ever seen any chinese nationals working as maid in the philippines have you ever seen? Only
    Pilipinos working as maid by chinese.

  • I really dont understand the concern of some filipinos re there travel to the US,, since when did we filipinos regardless who was the US Pres. that we,, did not go through the extreme vetting ,, tell me when? We have always been abiding by the US rules in applying for Visa etc so whats new why is this becoming an issue,, if you are granted a visa and you are in the states what you do there is another issue..

  • The state dept denied that the phils is included in the ban list. However Worries is up now for thousand of undocumented filipinos. Why undocumented?? And how they stay there for long??

  • Dont worry, mr. Duterte is the answer. Hahahahaha afterall, his giving us and the americans a big punch on the chin when he call it quits with them. Those undocumented pinoys in the us should come home and ask for jobs shelter education and other means of livelihood to d30 the saviour of the phils. Or to china and russia his new friends. Why not?

  • Hindi kaya malakas ang loob ng china sa WPS ay dahil meron na silang right dito ? …dahil hindi pa nakaupo si President Duterte allegedly ay binenta ito sa pamamagitan ng isang emissary na ilang beses pabalik balik sa china.

  • So matotal peace at good moral.at magtulongan tayo
    Bawat salita may mgagalit dahil lang sa salita..pls lahat tayo tao.kaya wag nyong siraan si.digong.dahil sa kabutihan ang ginagawa nya.lahat hiling natin na sana walang sakuna nga darating un lang ang pray natin.we are one of this word.

  • Mr. Subhendu Mandal we don’t care whatever policies the Trump administration would like to implement in the US bcoz he has the mandate in the first place. If those illegal migrants will be affected its their choice they must face the consequence. Its about time that we follow laws and orders to the letters and that’s the very reason why Filipinos love PDu30 because he has the balls to enforce the law no matter who will be affected. Enough of hypocrisy no country in the world has a perfect law enforcement agency basically bcoz human by nature is flawed. What’s important is that authorities are taking necessary actions to eliminate these scalawags in uniform. About proximity with China…FYI based on Phil. history we have a very long standing economic relationship with them far longer than the US. We never been conquered by China but US did. Our ancestors fought for our freedom from US but unfortunately some (few) of the Filipinos is still been affected by colonial mentality exemplified by their love to US more than their own country. In the final note.. No matter what you say we love PDu30 and so far He is doing well in response to the needs of the majority of his countrymen.

  • … i still believe Pres.Trump will not touch on the BPOs in the Philippines because US investors will not agree on it… the investors are earning much better in our country than to have said industry be transferred back to the US… and besides even the Americans will not agree to receive way below their minimum wage if hired.