Pago Pago, AMERICAN SAMOA — A federal government report identifies American Samoa and Fiji, as the two Pacific Islands economies with potential to increase exports by outsourcing services to the United States through business process outsourcing (BPO) and knowledge process outsourcing (KPO).
“Fiji is an established outsourcing services producer with the potential to increase U.S. exports,” according to the ‘U.S-Pacific Islands Trade and Investment: Impediments and Opportunities’ report. “American Samoa currently has a very small BPO/ KPO market with growth potential.”
Released on Monday, the report by the U.S. International Trade Commission (USITC) covers the period of 2017 to 2021 for 22 Pacific Island economies and includes a sector profile that focuses on outsourcing BPO/ KPO to the U.S. from Fiji and American Samoa.
The report explains that outsourcing occurs, for example, when companies separate business functions and reduce costs by moving labor-intensive services to countries where labor costs are lower.
It explains that BPO occurs when a company transfers information-intensive office functions (e.g., customer service or data entry) to a third party, and KPO occurs when a company transfers more knowledge-intensive functions (e.g., legal services or research).
The report, under sub-heading “Internet-Enabled Services Outsourcing”, profiles a description of the services outsourcing sector in the Pacific Islands before examining the potential for increasing exports of BPO/ KPO services from Fiji and American Samoa to the U.S.
Also included in the profile are impediments to growth in the BPO/ KPO sector in Fiji and American Samoa. And the profile concludes analysis of initiatives that could foster the expansion of outsourcing from these two economies.
(Samoa News is providing only a brief summary and necessary information for Fiji in this story, and focuses more details on the federal report pertaining to American Samoa, for our readers.)
Compared with major outsourcing locations like India and the Philippines, the report points out that the BPO/ KPO sector in the Pacific Islands is smaller and less developed. Advantages, including labor costs and various workforce characteristics, among others, mean that the BPO/ KPO sector has potential for future growth in Fiji and American Samoa.
In 2022, global BPO services accounted for more than $325 billion in revenue, and sales are expected to increase compared to the previous years. Within the Australia and Oceania region, Papua New Guinea and Fiji had approximately $48 million and $9 million in BPO services revenue, respectively. Globally, KPO services are expected to grow quickly and represent high-value and skilled services, including auditing and accounting services that could be executed in Fiji.
According to the report, Fiji could emerge as a regional hub for BPO/ KPO services in part because of its relative size, growth, and connectedness. Fiji currently employs about 8,000 workers in the outsourcing sector, of which 67 percent are women.
For American Samoa, the report says that although the BPO/ KPO industry in the territory is less developed than in Fiji, some companies perform BPO/ KPO services for firms on the U.S. mainland.
According to the report, the first contact center in American Samoa was opened in 2018 after the American Samoa Department of Commerce (ASDOC) invested in the Hawaiki submarine cable, the first high-speed internet cable connecting the territory.
In partnership with the American Samoa Telecommunications Authority, the ASDOC launched the BPO Incubator with the goal of forming and expanding the BPO industry in the territory, it says.
And industry representatives indicate that they now have a 1,500 square foot call center with a 125 megabits per second connection. Additionally, ASDOC is also working to develop a technology campus and build commercial turnkey facilities.
Footnotes in the report state that USITC staff visited American Samoa and Fiji in March this year talking to industry representatives for this report.
PANDEMIC EFFECTS
The report noted that Fijian government designated BPO as an essential service that allowed the sector to continue to operate as other outsourcing locations such as the Philippines were shut down during the COVID-19 pandemic.
For American Samoa, the report said that BPO industry representatives noted that, although the sector is growing in American Samoa, the pandemic negatively affected them and that government regulations on hours worked during the COVID-19 pandemic “were very disruptive”.
They indicated that the restrictions prevented them from operating during U.S. East Coast business hours and they lost clients, according to the report, which notes that government restrictions related to the COVID-19 pandemic ended on Dec. 01, 2022.
POTENTIAL FOR INCREASE
Several labor and non-labor factors provide opportunities for Fiji and American Samoa to increase BPO/ KPO exports to the United States, the report points out.
It says that the labor forces in Fiji and American Samoa exhibit characteristics, including cost savings compared to the U.S as well as a high level of English proficiency, that make them well suited to expand exports of BPO/ KPO services to the United States.
Fiji offers labor cost savings and other benefits that contribute to their export potential of BPO/ KPO services to the U.S.
Regarding American Samoa, industry representatives indicated that the territory has potential for growth as an outsourcing exporter because of its low wages, low training costs, and potentially higher retention rates.
Further advantages related to the workforce costs in American Samoa include a low minimum wage (about $5.50–$6.00 an hour) and a good work ethic.
Industry representatives noted the potential advantages for American Samoa to increase BPO/ KPO exports to the United States, including a labor force with a U.S. accent and a population that is schooled in the U.S. educational system.
American Samoans are U.S. nationals and, although no federal law restricts the flow of data originating in the United States, and the report says that U.S. firms may prefer to onshore jobs to American Samoa as a way of keeping jobs and data in the United States.
Additionally, industry representatives said that “people in American Samoa prefer indoor office jobs — as opposed to manual labor — and, if residents were aware of these opportunities, some of the talent that has left the territory could be retained.”
OTHER FACTORS
Non-labor factors also may contribute to the potential for Fiji and American Samoa to increase BPO/ KPO exports to the United States, the report points out.
Firms consider various factors beyond labor abundance and quality, including ICT infrastructure (software, hardware, firmware, networks, and websites), cultural affinity - including business practices and language) — and political risk, when making a decision to outsource services.
Industry representatives presented the time difference between the United States and American Samoa as an advantage because it allows U.S. companies the potential to provide continuous coverage to their customers outside of U.S. business hours.
Additionally, American Samoa has ample telecom infrastructure to support growth in the BPO/ KPO sector.
“Because their small populations limit their ability to supply larger companies,” the report said, “Fiji and American Samoa may be best suited to accommodate the BPO/ KPO needs of small and emerging U.S. firms with less than $100 million in annual revenue.”
Industry representatives also tells USITC staff, that the number of jobs associated with BPO/ KPO may be negligible to the United States, but they have the potential to significantly impact Fiji and American Samoa.
For example, an industry representative in Fiji said that 90 jobs could triple their business while industry representatives in American Samoa said that 250 jobs would be a major development.
FEDERAL COURT
Also cited in the report, is the impact of the “lack of federal courts on the potential for outsourcing in American Samoa,” which is the only U.S territory without a federal district court.
Industry representatives in American Samoa have indicated that its status as a U.S. territory could serve as an advantage for outsourcing, particularly in areas with federal privacy protections, such as healthcare.
Enforcement of federal laws in American Samoa, however, can be a patchwork because of its unincorporated status and the lack of any federal court, the report says.
The report notes that local courts have only very limited jurisdiction over federal issues and that disputes involving federal law must be heard in a federal district court in either Hawaii or Washington, D.C.
“Problems of enforcement complicate the degree to which American Samoa’s status as a U.S. territory serves as an advantage for American Samoa in outsourcing,” the report says.
Samoa News will report later this week on impediments and other issues, on service outsourcing.
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