The next big job creator

This past week, I attended an investment conference in the United States on business process outsourcing (BPO) in the Americas. Under the theme 'Nearshore NEXUS: Intelligent Analysis of Outsourcing in the Americas', the conference focused on the prospects of companies that supply and those that demand BPO services in this region.

Presentations were given by critical industry stakeholders on the challenges and opportunities facing BPO activities and how the industry can further expand to improve efficiency and add value to both clients and service providers based in Latin America and the Caribbean.

BPO is essentially the contracting of local companies by other companies, normally located overseas, to carry out specific functions related to the operations of these overseas businesses. For example, a company that sells television sets in North America may decide to hire a company in Jamaica with Jamaican workers to receive all calls from its US customers who may want to either buy a television or seek assistance on how to set up the device.

Of course, the Jamaican worker would need to be trained in the relevant areas. In effect, these Jamaican workers are representatives of these overseas companies and it is their job to represent them well. In fact, calls are usually monitored by those who manage these local companies to ensure quality control, and incentives given for targeted output and performance.

BPO operations can vary from back-office functions such as handling billing or purchasing, to front-office functions such as customer service and technical support. Contrary to popular opinion, BPO doesn't necessarily mean low-paid, low skilled jobs. These operations can vary from basic calls for soliciting business to more technical support in area of accounting, finance and product support. Depending on the particular service being provided, earnings can be comparable to, and in many cases higher than, similar job functions in traditional sectors in our economy.

In his Budget presentation this past Tuesday, Opposition Spokesman on Finance Audley Shaw referenced the BPO activity as an important part of Jamaica's future job creation and growth strategy. He lamented the fact that the country was not doing enough to capitalise on the opportunity for expanding this sector.

SOURCE OF GROWTH

The BPO industry has long been cited by successive governments as an important plank of Jamaica's economic growth strategy. The island has several advantages for this activity. These include geographic proximity to markets being served (nearshore) including time zone similarity, fluent and compatible English language, telecommunications infrastructure, and an adequate and trainable workforce.

Meantime, the costs of Jamaica's labour are 40-60 per cent less than workers who would do the same jobs in the clients' markets in North America and Europe. For these reasons, plus the desire for the client companies to divest themselves of non-core activities, Jamaica is viewed as an attractive BPO host.

Its attractiveness is further amplified by the increasing demand for this service in the region and globally. The BPO industry is currently growing globally by approximately nine per cent per annum, with an estimated value of US$1 trillion by 2014. Our primary targeted market, North America, is growing at approximately 16 per cent. As host service providers, Latin America and the Caribbean currently have almost six per cent of the global market; Jamaica, as a host destination, controls approximately six per cent of the region's BPO activity.

Jamaica's small share of this growing market suggests that there is significant room for improvement, even while there are substantial benefits that are currently being derived from BPO activity here. President of the BPO/ICT association, Mr Yoni Epstein, has indicated that based on the nearly 14,000 Jamaicans who are employed in Jamaica's BPO sector, in financial year 2011-12, more than $18 billion has been paid out in wages to workers and more than $4 billion for other local inputs such as utilities.

But as Audley Shaw correctly pointed out, other countries in the region are doing a lot better than we are in securing this high job-creating impact activity. We must determine why, and correct this. One such country is Dominica Republic. In 2005, Dom Rep and Jamaica were almost on par as it relates to the size of BPO activity. Today, Jamaica, at 14,000 workers, represents less than 50 per cent of Dom Rep's more than 39,000 employees in this sector.

How did Dom Rep move so fast in consolidating their position as a leader in this region? Both Dom Rep and Jamaica have similar government incentives of exemptions from taxes and custom fees, except that Dom Rep government has a more aggressive training programme, particularly for English training to support bilingual communication by its nationals who work in the sector. This has been a very attractive feature for the BPO offering in Dom Rep, a feature Jamaica has not been able to offer.

WHAT JAMAICA MUST DO

Dom Rep has also been more aggressive in providing space for its potential operators. Of course, it does not have the threat of lottery scammers stealing and using customers' personal data for extortion. Other countries in the region, like Mexico, one of the fastest-growing providers of this service, is even more bullish in its offerings to attract this type of investment, giving cash payments for investments for infrastructure, research, and training.

In our bid to find paths to growth and job creation, Jamaica is unlikely to be able to afford some of these generous incentives being offered by other countries. Offering upfront cash payments may not be possible. However, Jamaica can be more aggressive in pushing for expansion of this industry by recognising its potential and being more deliberate in a coordinated strategy to ensure growth.

Our investment policy has to have sufficient flexibility to respond to competing destinations, even while we seek to establish equity and transparency.

This will determine who benefits from these incentives and that these incentives are tied to specific, measurable performance criteria, such as new job creation. There is currently a feeling in the industry that foreign operators here in Jamaica are given preference over local indigenous players. This should not be the case; rather, incentive programmes should apply to all investors.

Office space and customised training are major needs currently challenging the expansion of BPO operations. These need to be addressed as a matter of priority. While there are sources of funding available for space build-out, terms and conditions for these loans must be sensitive to the need to secure contracts from clients, usually after investors have started construction.

Similarly, training should be viewed as an important investment in the sector and an important tool to improve productivity. Generally, this reduces the temptation by increasing the costs for clients to be footloose and move their operations to other destinations.

Christopher Tufton is a senator, opposition spokesman on foreign affairs and trade, and investments, and co-executive director of CaPRI. The views in this column do not necessarily represent those of the above-mentioned entities. Email feedback to columns@gleanerjm.com and cctufton@yahoo.com.