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In the near absence of a vital manufacturing sector and an agricultural sector that’s terribly underperforming, our economy is dependent on just two legs: OFW remittances and BPO earnings. Both seem fragile these days and that should worry this government if its leadership is half awake.

The Information Technology and Business Process Association of the Philippines (IBPAP), the IT-BPM sector’s industry association, is warning of job losses and a contraction of a sector that brought in $40 billion last year.

On the other hand, OFWs brought in a record $39.62 billion in remittances in 2025. But the Philippines cannot rely on the continued growth of OFW deployments and remittances from the Middle East as a sustainable, long-term economic pillar due to structural shifts in regional labor policies, rising geopolitical instability and a changing demographic landscape.

Indeed, according to Manny Geslani, a manpower industry expert, new hires for Middle East countries dropped in 2025. The three largest labor markets in the Middle East that suffered a decline in hiring OFWs: Saudi Arabia -34 percent, UAE -11 percent, Qatar -16 percent.

Policies such as “Saudization” in Saudi Arabia and similar localization programs in Qatar are restricting foreign labor in favor of locals, leading to a slump in new hirings for Filipinos. Many jobs in the financial sector, hospitality, industrial and high-end services have been taken over by the better educated young Gen-Z population. The same is true in Qatar with efforts to bring the Qatari population to the workforce.

Middle Eastern nations are also raising qualifications, requiring more certified and professional workers rather than low-skilled labor. This has slowed down Filipino deployment.

While rehires (returning workers) have kept total deployment numbers up, the decline in new hires signals a long-term reduction in the capacity of Middle Eastern countries to absorb new OFWs.

As for the BPO industry, the threat from AI is there and we are more susceptible to it because our workforce lacks the training to adapt to the new world of AI.

But more serious than the AI threat is the threat of bad regulation, especially by the BIR and LGUs. IBPAP warns of job losses, contraction in the IT-BPM sector because of regulatory friction that increases operating costs by 15 to 20 percent compared with competitor countries. Other countries like Vietnam are now ready to grab a share of our market.

The industry has identified several critical “bottlenecks” that could hinder the sector’s goal of reaching $60 billion in revenue by 2028.

These include:

The Employability Crisis: only one out of every 10 applicants is currently hirable due to a lack of critical thinking, advanced technical skills and English comprehension. As one industry official puts it, no talent, no business.

AI Disruption and Skill Mismatch: While AI is creating new high-value roles like “AI Pilots” or “AI Orchestrators,” it is also threatening entry-level and voice-based roles. Industry experts warn that our education system is not producing AI-ready graduates fast enough to keep pace with this shift.

Government-funded AI training programs for 2026, IBPAP noted, may cover approximately 68,000 learners, a small portion of their industry’s 1.9 million-strong workforce. This is an industry that helped build a new Filipino middle class. It would be a pity to lose it.

Regulatory and Tax Uncertainty: IBPAP has raised alarms over inconsistent local government unit requirements and “irresponsible” tax impositions. A major point of contention is a BIR circular that could subject certain cross-border services to a 25 percent final withholding tax.

Cybersecurity and Legal Gaps: Sophisticated cybercrimes are a growing risk. The industry is currently pushing for amendments to the Cybercrime Prevention Act to allow BPO firms to file legal cases directly on behalf of their foreign clients, which is currently a legal hurdle.

Work-from-Home Friction: There is ongoing tension between government mandates for a full return to the office and employee preferences for hybrid models. Nearly 80 percent of workers prefer hybrid setups, and firms fear that strict “on-site only” rules will lead to higher attrition.

Citrini Research, a firm of equity analysts, imagined a world in 2028 in which AI had rendered a lot of white-collar work obsolete…

In Citrini’s near future, The Economist reports, output keeps growing, “driven by AI agents that don’t sleep, take sick days or require health insurance” while consumer spending collapses: workers have no jobs and no incomes to spend.”

The good news is that AI is not causing massive unemployment of white-collar workers. Not yet.

The Economist, in an article last week, reported that “most workers still use AI mainly for writing assistance and information searches. Put adoption together with limited usage and plausible productivity gains, and the aggregate boost works out at roughly 0.25–0.5 percentage points over the past year.”

Our leaders in the national and local government units should nurture this BPO goose laying all those golden dollars. We have enough problems with Trump and his MAGA gang trying to bring back or reshore the jobs now being done in our BPO companies.

Finance Secretary Deck Go should organize an intra-agency group that includes the BIR and the LGUs hosting BPO companies to get our game right.

Imagine if we lose a big chunk of our market… The property sector will suddenly lose so many valuable tenants. Something worse than the POGO exit will happen. Millions of unemployed former BPO workers will have nowhere to go.

This is an industry already here and earning big bucks for the country and our workers. We should make it easy for them to fight for us in their head offices to stay here.

Our bureaucrats and LGUs are normally hostile to businesses, seeing them merely as sources of potential bribes. That drives out investors we badly need. Is that too difficult for the BIR, mayors and governors to understand?

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco