Human capital and knowledge economies

Did you know that the Global North, which has one-fourth of the world’s population, controls four-fifths of all the income earned anywhere on the planet? Meanwhile, the Global South, home to the remaining three-fourths, has access to just one-fifth of the world’s income. This North-South divide is not a geographic demarcation but an economic and political one. That’s why Australia, Israel, Hong Kong, Macau, New Zealand, Japan, Singapore, South Korea, Taiwan and Russia are in the Global North, together with the United States, Canada, and most European countries. Conversely, most of Asia, Central America, South America, Mexico, Africa and the Middle East are in the Global South.

I brought this up because the Global South, which includes the Philippines, has traditionally relied on an abundance of inexpensive labor to prop up their economies. But all that is about to change, thanks to disruptive technology. We now have knowledge economies, where fortunes are made through mining data instead of mineral resources.

Recently, the IT & Business Process Association of the Philippines (Ibpap) unveiled its Roadmap 2022, a comprehensive, six-year blueprint for growth in the knowledge-driven, tech-intensive and highly competitive information technology and business process management (IT BPM) industry. Roadmap 2022 has six distinct growth targets, but for the moment I will focus on two: a $40-billion revenue target by 2022, and moving up the value chain by shifting to mid- to high-value services in areas like outsourced engineering services and performance management, data analytics, application development and systems integration, remote healthcare management, and augmented and virtual reality.

Obviously, the IT BPM industry can only reach its revenue target if it has enough competent human capital to meet the global demand. The Philippines currently enjoys market leadership in this industry because it has a well-educated workforce that can communicate in fluent English. (The Philippines is the fifth-largest English-speaking country in the world.)

Disruptive technology, however, will change the employment picture radically. Robotics and automation will do away with low-level tasks and processes that used to be the bread and butter of the Philippine IT BPM industry. Thus, it is strategically sound for Ibpap and its partner associations in the software industry, health information management, animation and game development, and global in-house services to aim for the bigger ticket, but numerically fewer high-level job categories.

This has far-reaching implications and poses serious challenges to the entire education system, which is currently undergoing a broad and deep-seated reform process. We have the K-to-12 program at the basic education level, which is not about simply adding extra years of school. The program has a completely reworked curriculum and teacher-training component designed to prepare our youth for life and work in the 21st century. At the same time, higher education’s continuing reform agenda builds on the competencies that the Grade 12 graduates shall have acquired. To this end, both private higher education institutions and state universities and colleges have been routinely revisiting their offered courses in response to the demand of parents and education stakeholders, because well-designed courses that can lead to meaningful employment are also education quality indicators.

Now let’s go back to the North-South divide. China is in the Global South, but the Russian Federation is not. Like the United States and most of Europe, they, too, consider the Philippines as a prime outsourcing destination. But China and Russia are also our major competitors for the US and EU markets. We may speak better English than they do, but they have high-level IT talent. And China is very aggressive when it comes to bringing costs down.

Butch Hernandez (butchhernandez@gmail.com) is the executive director of the Eggie Apostol Foundation.