Small populations and energy costs are two impediments to outsourcing to the U.S.

Pago Pago, AMERICAN SAMOA — “Most impediments to the expansion of BPO/ KPO exports from American Samoa and Fiji” to the United States “are on the supply side,” according to the ‘U.S-Pacific Islands Trade and Investment: Impediments and Opportunities’ report by the U.S. International Trade Commission (USITC).

Released earlier this week, the report covers the period of 2017 to 2021 for 22 Pacific Islands economies and includes a sector profile that focuses on outsourcing to the United States through business process outsourcing (BPO) and knowledge process outsourcing (KPO).

The report identifies American Samoa and Fiji, as the two Pacific Islands economics with potential to increase exports of outsourcing services to the U.S. (See Samoa News editions Nov. 1 and 2, for details on part one and two of this story on outsourcing.)

The outsourcing profile-sector of the report also describes the specific factors that could impede the expansion of BPO/ KPO services in Fiji and American Samoa.

It says that Pacific Island economies face unique challenges in digital development. Such impediments vary among economies and include the vast geographical dispersion — and the associated issues with internet connectivity and sparse internet penetration — small populations, relatively low literacy rates, energy costs, and digital skills gaps.

ENERGY COSTS

“American Samoa... has energy cost impediments to increased BPO/KPO exports to the United States,” the report said. “According to industry representatives, despite utility cost decreases, energy prices remain high in American Samoa and fluctuate with the price of fuel.”

In Fiji - the report points out that although its rates of access to energy are comparatively higher than most Pacific Islands, Fiji still experiences issues with electricity reliability and efficiency. Many BPO operations in Fiji must retain a generator and a backup generator to ensure continuous power.

WORKFORCE CHARACTERISTICS

Another factor identified by the USITC report as an impediment for expansion is “workforce characteristics”. It says that some characteristics of the workforces in Fiji and American Samoa may be limiting factors in expanding BPO/ KPO exports to the U.S.

In particular, it says, the small populations in these economies mean that they may struggle to supply large multinational corporations with outsourcing services — especially when compared to competitors like India and the Philippines.

“Therefore, Fiji and American Samoa may be best suited to work with small and medium-sized enterprises — especially those that already have operations in the region,” the report says. “For example, industry representatives in Fiji said some firms have operations in both Fiji and the Philippines.”

Other issues within each economy may impede expanded exports, the report said. For example, industry representatives in American Samoa indicated that because American Samoans do not have all the requisite education and experience, they must learn on the job and that firms spend three to four months training staff.

Furthermore, employees must begin at entry level and eventually can ascend to more complicated jobs to build capacity.

The report cited several reasons for Fiji — among them — Fijian universities do not offer courses focused on outsourcing services, such as building skills in customer service training or data entry, and this knowledge gap may dissuade firms from outsourcing services to Pacific Island companies.

REMOTENESS & AWARENESS

Another impediment faced by Fiji and American Samoa for expansion of their BPO/ KPO sector is “remoteness and awareness”. For example, industry representatives noted a lack of awareness of American Samoa as a potential outsourcing destination for U.S. firms.

“This lack of awareness has a tangible impact on the BPO/ KPO sector in the territory,” the report said. “For example, industry representatives indicated that American Samoan residents and firms cannot register for some U.S. government programs or bid on government projects because American Samoa is not offered as an option in various drop-down menus on government websites.”

The report suggested including American Samoa on such lists could be especially impactful because many firms in American Samoa have “beneficial designations” such as veteran-, woman-, and minority-owned that would potentially allow the firms to participate in such programs/projects.

“Similarly, representatives in American Samoa advocated for funding assistance and small business grants to assist in marketing or their attendance at trade shows,” it says.

In Fiji, the report says that the island country faces the remoteness challenges characteristic of small island developing states. It says that the Fijian outsourcing market primarily consists of companies that already have a commercial presence in the region, which may be difficult for U.S. firms to break into.

A few other impediments, cited in the report, may hamper increased BPO/ KPO exports from Fiji, including insufficient infrastructure and policy gaps. For example, Fiji does not have a data protection law and industry representatives indicated that the United States could play a role in helping to advise on or draft such a law.

INIATIVES

U.S. investment opportunities in the outsourcing sector in American Samoa and Fiji center around education/ training, digital infrastructure, and policies designed to incentivize investment, according to the report.

In Fiji, the report said — among other things — that the Fiji government has stated that U.S. stakeholders could help promote the Fijian BPO/ KPO sector by training the local workforce in the areas of customer service, technical support, data entry, and accounting. These initiatives could be supplied through partnerships with U.S. companies and educational institutions.

For American Samoa, the report points out that the BPO/ KPO industry in the territory can be supported with initiatives to increase investment from the United States. Industry representatives indicated that technical assistance and financial resources are needed to offset the cost of the internet.

The report notes that the American Samoa Government “took out loans to build its internet infrastructure, and the cost of the debt servicing has been passed on to consumers.”

“Industry representatives also recommended subsidies for constructing office space and tax credits to make it easier to establish a business in American Samoa,” according to the report.

Samoa News notes that the “internet infrastructure” referred to in the report is Hawaiki submarine cable, which is included in the “Internet Infrastructure” profile section of the report and cited a couple of times in the report.

“Industry representatives in American Samoa further explain that its high prices for broadband services are partially due to interest payments on a large loan to connect American Samoa to the Hawaiki subsea cable” completed in 2018, the report said.

As previously reported by Samoa News, the American Samoa Telecommunications Authority owns the American Samoa Branching Unit of Hawaiki Cable linking Australia, New Zealand, American Samoa, Hawaii and the west coast of the United States.

Footnotes in the report state that USITC staff interviewed American Samoa industry representatives on Mar. 30 this year.