Can the Philippines move up the AI value chain? | Jack Madrid (IBPAP) | Business 360

[00:00:00]What is the Philippines place in the AI economy [music] and how can it capture more of the value beyond just being part of the workforce? To help us answer that, we have Jack Madrid, president and CEO of the IT and Business [music] Process Association of the Philippines.

[00:00:14]Good morning, Mr. Jack Madrid.

[00:00:17]>> Uh, good morning Marggo. It's good to be back on BNC.

[00:00:20]>> IPAP recently cut its revenue and job forecasts for 2028 and you also flagged possible shrinking future business. What has changed?

[00:00:31]>> Well, you know, we uh have a road map that we do every six years which contains the uh projections as well as the strategies for the industry to move forward and and meet its growth targets. But our projections normally cover different scenarios.

[00:00:54]the aggressive scenario, the baseline scenario and we also have a downside scenario. We launched this in 2022 and at that time the industry was I would say on a on a very positive upward uh trajectory on the back of growth in both uh jobs and and export revenues. Fast forward three and a half years later, um some things have changed both at the macroeconomic level and of course the ongoing uh transformation of the types of work brought about by uh you know artificial intelligence and other forms of automation and transformative technology. This has caused us to review the projections and as you said uh last week we uh we communicated to our partners in media the new projections both the upside the baseline as well as as as the downside.

[00:02:03]And so some of those numbers have changed specifically the the ambitious or aggressive uh set of projections.

[00:02:12]>> You sound quite disappointed and frustrated Mr. Madrid. Um let's put it into context first. Uh what is the contribution of the IT and um business process outsourcing industry or business process management industry to GDP? Uh there have been reports that it may uh be as much as 6%. uh what are the what are the figures that you have in your road map?

[00:02:33]>> We we've uh consistently grown in export revenue year on year. We grew [clears throat] 5% uh in 2025 over 2024. We are poised to grow another 5% uh this year. [music] But to answer your question, Marggo, we are we have been consistently above 8% of uh Philippines GDP.

[00:02:58]>> Wow. That's a that's a huge contribution to GDP and that translates to around uh I I saw a report that said it's around $40 billion US or and projected to increase to 42.

[00:03:10]>> Yes, 42.3 billion is our baseline projection for 2026.

[00:03:18]>> Yeah, that's a big contribution to GDP.

[00:03:20]And how can the Philippine government uh maximize this and continue to support uh you you seem to be uh hesitant uh and said that back in 2022 uh there was greater support. Uh how about this 2026 and uh towards all the way up to 2028 perhaps even up to 2030. What do you think can the uh Philippine government do to support business process outsourcing and it further even um maximize this contribution to GDP?

[00:03:50]>> You know given given that the industry is such a large uh pillar of the economy. I think it is incumbent on all stakeholders uh including our partners in government uh to to to help us protect uh our market share. You know uh as as you probably know Margot we are very solid number two in ITBM. We are frequently uh called the contact center capital of the world or the customer experience capital of the world. And uh I I I think it's very important for us uh to act with urgency to address some of the challenges in the years ahead. The first the first challenge uh which is not a new one but I think I think it is always good to to recognize that this is a very human capital inensive industry. We are now 1.9 million digital workers. And I think for us to to uh to protect our market share, to protect our revenue, we need to find ways to make that 1.9 million grow in number of jobs. But more importantly than growing jobs, I think our challenge is to make those workers AI enabled. And in order to do that uh all all of us uh stakeholders need to work together uh in the upskilling and reskilling of the existing workforce as well as the incoming generation of uh uh graduates and and job seekers who are entering uh the job market. Now what what skills are needed? What is the upskilling and reskilling that's needed?

[00:05:47]Well, I'll answer that in two in in two buckets. Um, I think I think we all know that 10 years ago what we were talking about then was digital literacy. Uh I think uh while that is still important, I think the term that all of us need to take seriously now is AI fluency, which means that we need to be very comfortable in being able to use uh AI as a tool to augment the work that we do. Speaking of upskilling uh the Luzon economic corridor uh they there are plans that have been uh announced of coming up with uh an AI hub and aside from the AI hub there have also been announcements of partnering with um for example Tesla to teach AI and to um propel the this kind of upskilling that you have mentioned. Uh do you think the Luzon economic corridor would be uh a good uh venue or Pacilica would be a good uh venue and platform? Uh would it help the industry greatly or do you think that this is something that uh the government needs to rethink?

[00:07:02]Well, you know, I think I think uh developments like that, initiatives like that are always uh exciting in that it will allow us to uh to make plans given the you know the talent pools that we all know are present in in the heart of uh Luzon and adjacent uh you know adjacent regions. Um uh ITBM is a very human capital intensive industry and I think we need to to to really dig deep into the uh depth of of talent uh and take advantage of the very good learning institutions across uh cities and provinces outside Metro Manila where we are seeing a lot of growth. Um so so I'm very bullish uh on on countryside development as as a whole. Um obviously uh the Luzon economic corridor is very exciting um given given the large pool of young young population uh in those in that region but I would say the same in in in the Visayas and Mindanao uh as well where we are seeing a lot of growth. You mentioned countryside development. Are local governments supporting the industry or do you feel that there are some local government units that have been lacking in their support for the industry?

[00:08:27]>> Well, you know, that's a that's a very relevant uh question. Um on on a positive front, I think uh the much improved digital infrastructure uh faster connectivity as well as uh superior physical infrastructure uh in the past five 6 years has allowed countryside development to grow and that was also accelerated during the years of the pandemic. you know, when when we had to mobilize over 1 million workers to uh what was then uh you know, a remote work environment, hybrid work environment that that many of us had never experienced.

[00:09:09]>> Are there specific LGUs that are um more supportive of the uh industry or are there specific LGUs that uh have been giving you a hard time?

[00:09:20]Well, well, you know, um what investors look for is uh consistent implementation and interpretation uh of of established rules and regulations, especially incentives that have been promised to them when they made their decision to invest uh in the Philippines or in a specific uh uh city in the Philippines. So the inconsistency that occasionally happens is uh is is an uncertainty that uh investors do not like.

[00:09:56]>> You've said sorry uh you've said that AI won't replace people. Uh shifting to another topic you've said that AI won't replace to won't replace people. People who use AI will replace those who don't.

[00:10:09]With the lower forecasts that you had mentioned earlier, does that still hold?

[00:10:13]>> Uh for the most part, yes. And in fact, but I'd like to rephrase that a little bit. I think I think the people who will be successful uh in in the marketplace will be those who are fluent in being able to apply uh AI tools to augment the work that they do.

[00:10:36]So regardless of whether you are a nurse, an architect, a banker, an accountant, um I I my recommendation would be uh you know strengthen your domain knowledge of your chosen field, but also learn how to apply AI to make you do your job better, faster, and more productively. Um because AI will help us become more productive and efficient to a certain extent, but many of the work that the ITBM industry worker does will still require judgment, will still require critical thinking and problem solving skills uh as well as you know communication skills.

[00:11:21]>> Okay. And for our last question, the state of the nation address is going to be delivered by the president this coming Monday. uh our neighboring countries like Vietnam, uh Singapore even are leading in the uh AI um uh competition. Uh what for you uh can the Philippine government do or what can the through a whole of government or whole of nation approach? What can we do to make our uh IT uh BP uh industry uh more competitive? Uh and for you, what is the state of that industry today?

[00:11:57]I think I think I'm very confident that uh you know uh President Marcos is very well aware of the challenges and opportunities of AI uh and its potential impact on our overall country competitiveness.

[00:12:12]uh I was with him in a recent uh uh investment mission to to Canada and I think there heard firsthand uh the importance of uh domain knowledge and AI fluency uh as a way to augment the type of work that you know we we met with nine Canadian uh enterprises and and he he was quite he was quite pleased with uh their plans as well as uh uh the the awareness that uh AI fluency and AI training will be important to augment uh you know the working the the workers uh of these companies.

[00:12:52]>> Thank you very much Mr. Jack Madrid and best of luck in developing this very great industry.

[00:12:59]>> Thank you very much Marggo. Always a pleasure to be in DNC.