Market Integration and BPO in the Philippines

• Market integration is the increasing interdependence and interconnection of economies through commodity flows and their impacts.
• International Financial Institutions (IFIs) provide support via loans, grants, and advice to boost a country's economic and social development.
• Corporations, both multinational (MNCs) and transnational (TNCs), produce goods and services for expanded markets; TNCs give foreign subsidiaries more autonomy.

BPO in the Philippines

• The Philippines hosts numerous call centers and business process outsourcing (BPO) companies, primarily serving international consumers.
• The Philippines has 851 BPO companies, over half of which are call centers (429).
• The Philippines is seen as the call center capital, holding 18% of the global market share.
• The country saw US$24.4 billion and a 7.5% revenue increase in the first quarter of 2018.

Horizontal vs Vertical Integration

• Horizontal integration involves a firm gaining control of similar firms at the same level, such as Disney acquiring Pixar for $7.4 billion.
• Vertical integration involves a company owning all stages of the supply chain, like an iron mining firm operating a steel manufacturing firm.
• An example of local market integration is Landbank's acquisition of the Philippine Postal Savings Bank.
• Another instance of vertical integration is McDonald's owning the land where its supplies are located to avoid lease costs.

The Role of IFIs in the Global Economy

• IFIs aim to support a country's economic and social development through various means.
• Global and regional IFIs include the International Monetary Fund (IMF), World Bank Group, African Development Bank (ADB), Inter-American Development Bank, and European Bank for Reconstruction and Development.
• IFIs offer financial and technical services for overall economic and social development, not for profit.
• IFIs provide loans, technical assistance, and policy-based lending to promote macroeconomic stability and necessary infrastructure.

Issues around IFIs

• Major issues with IFIs include legitimacy, effectiveness, support conditionality, financial capacity, and sustainability.
• Some critics argue that IFIs' legitimacy is questionable.
• This is because policy-making power is in the hands of powerful, rich nations.
• Leadership roles in IFIs, particularly in the IMF and World Bank, have historically been held by Europeans and Americans.
• The effectiveness of IFIs' development assistance programs and policy advice has also been questioned.
• Some IFI investments, such as large-scale land use conversion, have displaced indigenous peoples.
• Social safeguards are needed to ensure human rights, community well-being, and the environment.
• The Paris Declaration on Aid Effectiveness focuses on harmonization, alignment, and managing aid for results, including monitoring systems and indicators.
• The major products of IFIs are loans which come with conditions requiring borrowing countries meet, which is a form of safeguard to ensure that loans are spent efficiently for its intended use.
• Nevertheless, some conditions on privatization, trade liberalization, elimination of subsidy, and limits to public investments are mostly contested.
• IFIs' financial capacity and sustainability are concerns, as their income base has reduced while the demand for their services increases.
• Middle-income countries sometimes limit their borrowing from IFIs because of higher transactional costs and conditionality.
• Developed countries pledged further financial support to IFIs during the 2002 Monterrey Conference on Financing for Development.

History of the Global Economy

• The modern capitalist world economy grew between the 16th and 18th centuries.
• The period leading up to 1914 marked the first phase of globalization.
• During this period, trade, capital, and immigration flows grew tremendously, but the global institutional architecture to manage these was limited.
• International conventions and treaties served as drivers for these global movements.
• Examples of these instruments are the International Telegraph Union in 1865, Universal Postal Union in 1874, International Association of Railway Congresses (1884), and International Sanitary Convention in 1892.
• From World War II to the 1990s, the modern international economic structure was established, with the expansion of MNCs facilitated by supportive policies and better communication.
• The late 1990s marked the third wave of market integration.
• The advent of the modern Internet, the WTO establishment, and China's entry into the trading system marked this period.
• The World Economic Forum called the current era the "Fourth Industrial Revolution."

Distinguishing MNCs vs TNCs

• MNCs still provide central decisions.
• TNCs provide individual foreign market investment to have their own operations and systems
• With the growth of global corporations from emerging economies, the capital flows have now started to change from the dominant North-North/North-South to South-South and South-North capital flows, most of the South-North coming from China and India (Rajan, 2010).

IFIs and Global Corporations' Effect

• IFIs and global corporations play a big role in global wealth creation and distribution, including global economic development.
• However, their increasing influence can lead to global inequality and climate issues.
• IFIs should safeguard against unintended negative outcomes of their investments and balance economic growth.
• Corporations need focus on their impact on society and the environment beyond profit.
• They need to focus on social development and environmental integrity.

Explore market integration, IFIs, MNCs, and TNCs, focusing on the Philippines' BPO industry including call centers and market share. Also includes horizontal versus vertical integration. See revenue growth in 2018.