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Fall of oil and rise of AI is bad news for the Philippines.

Fall of oil and rise of AI is bad news for the Philippines.

Oil prices have been fallen more than 50% since their high in 2014.

barrels of oil

Saudi Arabia, one of the world’s most influential oil producers, has seen the writing on the wall and is desperately trying to move its investments away from oil and towards more viable long term prospects. The country has also cut back on subsidies and raised taxes – shocking for its populace which has become accustomed to being spoiled by its government.

Alongside the drop in oil is the rapid improvement in speech recognition and artificial intelligence. Computers can now understand human speech and provide limited responses. This in turn allows customer service to be fully automated. In the near future we will be talking to robots when we call to complain about our airline tickets or some device which isn’t working. Even human lawyers may be obsolete soon.

What do these two disparate developments have in common?

They spell big trouble for the Philippine economy.

In the case of oil’s drop, the gulf countries have been heavy recruiters of Filipinos. Saudi Arabia in particular hires more Filipino OFWs (Overseas Foreign Workers) than any other foreign country. If the gulf states suddenly feel the pinch their demand for foreign workers may drop. Less Filipinos going abroad will mean more Filipinos unemployed at home.

Granted the gulf states hire foreign workers precisely because they are cheaper than local workers. Moreover some foreign workers may have special skills (engineering, accounting, etc.) which may be difficult to find in the host country.

Still as economic malaise hits the gulf states, industrious residents may demand work, displacing foreign workers from roles which they used to hold in the past.customer-service

In the case of artificial intelligence, a fully computerized customer service is an existential threat to the BPO (business process outsourcing) industry. Why hire hundreds of call center agents in the Philippines if you can hire one software company, with servers scattered all around the world, to handle all of your customer processing needs.

AI powered customer service makes call center jobs obsolete.

The Philippines is the call center capital of the world.

The industry employs almost a million Filipino and in 2012 contributed more than 5% to the country’s annual GDP.

Even assuming that some call center companies remain in the country (someone will still need to handle irate customers who a computer can’t understand), any substantial drop in call center demand would have an adverse effect on the Philippine economy.

Easy to post, not easy to do.
Easy to post, not easy to do.

TL/DR: OFWs and call center agents are pillars of the Philippine economy. There are events afoot which could seriously undermine these pillars in the near future.

(Barrels of oil image from Zero Hedge.)