IDB points to untapped high-end BPO market for Jamaica

The Inter-American Develop­ment Bank is holding up Jamaica as a raving success story for the global outsourcing industry, more popularly known as business process outsourcing or BPO, but the head of the multilateral financing institution is pointing to some underperformance by the country in the upper echelons of that market.

Investment to make Jamaican BPO companies more competitive in high value knowledge processing is being recommended by IDB President Mauricio Claver-Carone even as he presents the country as a BPO poster child and exhorts other Caribbean countries to take a leaf from Jamaica’s BPO sector growth book.

“Jamaica is leading in the global services sector. We need to replicate that in other countries. Companies are demanding more sophisticated knowledge process outsourcing services, KPO, paralegal, medical insurance claims processing, cybersecurity. Jamaica has really set itself up in that regard. But we need more training, and we are working to provide that training. Eighty per cent of Jamaican BPO companies are focused on the traditional outsourcing services. Just 20 per cent of those are prepared to compete in that KPO sector. So huge opportunities are there,” Claver-Carone told Caribbean journalists on a briefing call this week.

Some estimates put the value of the global BPO market at around US$250 billion, with projections for it to see growth to more than US$400 billion in the next five years. Jamaica’s share of that market is less than US$1 billion, with recent estimates placing the local industry income at just under US$800 million. Both revenue and job creation for about 44,000 workers represent significant growth in recent years.

Allied to the growth Jamaica is seeing in the BPO industry, the IDB head is pointing to the broader financial technology services area of business as one that the bank will be pushing in its bid to catalyse economic activities and gross domestic product (GDP), growth in the Caribbean and Latin America, its target market for the loan financing, equity input, public-private partnerships, technical cooperation, and entrepreneurial incubation services it provides. The IDB also gives grant funding.

According to figures provided by the IDB, the bank has a portfolio of Caribbean projects valued at US$2.38 billion, US$563 million of which are in Jamaica. This includes US$$456 million in government loans and grants; US$99 million in equity stakes and debt through IDB invest, its private sector funding arm; and US$8 million through IDB Lab, which funds innovative, usually tech-driven entrepreneurial start-ups. The lion’s share of the funding – US$594 – is in Trinidad & Tobago, with US$456 million in IDB loans and grants, US$122 million in private sector financing, and US$16 million IDB Lab funding.

The bank has conceded that the average government loan approved for the Caribbean last year fell to $383 million, compared to US$454 million in 2020, the first year of the COVID-19 pandemic, when $921 million was approved for the region. The IDB is projecting to up spending in the region this year, with a target of S$1.1 billion in government loans.

While the IDB has not provided a full break-out of the regional financing envelope for this year, already, US$400,000 has been approved for a fiscal reform management project and a community-based seniors healthcare programme in Jamaica since 2022. A US$200,000 energy efficiency technical support project and a US$750,000 public-private partnership project for a project-preparation facility are among the initiatives signed off for funding this year.

Projects in agriculture, tourism, eco-tourism, small and medium-size enterprises, integrating women into the labour force and ensuring manufacturing and service outsourcing from India to Caribbean countries, have been identified as projects to receive IDB funding emphasis this year.

CARIBBEAN LEADING

Noting that the Caribbean and Latin American region is a leader in financial and educational technologies, the Washington, DC, United States-based multilateral financing institution is also promoting the Caribbean as a location for a work-from-home tourism of sorts. Highlighting what is called the welcome stamp programme in Barbados, Claver-Carone said that the island is already said to have attracted more than 2,000 foreign digital nomads to live there and remote into their work at various metropolitical centres around the world.

“Right now, there are millions of people in the USA who are working from home. I have no doubt that they would rather be working from the Caribbean,” Claver-Carone said.

Noting the particular challenges faced by small island nations in the Caribbean, the IDB president said that the winners and losers of the pandemic are those who are connected and those who are not, respectively, adding that the bank was conducting analyses on how to close what he said was the digital gap between the Caribbean and large economies of the Organisation for Economic Cooperation and Development.

“Closing the digital gap between the Caribbean and OECD would increase GDP by between six and 12 per cent in the medium term. It would create in the Caribbean over 200,000 direct and many more indirect jobs. We see across the board the benefits of investing in digitisation. We estimate that the return on investment could be anywhere from two to 50 times the cost of investment. A 10-point improvement in digital infrastructure is associated with three per cent faster economic growth in the Caribbean,” said Claver-Carone.

huntley.medley@gleanerjm.com