Outsourcing has been around from more than two decades, but it is particularly in the past decade that the Philippines have come to the party and shown phenomenal growth in this industry. It has become one of the top outsourcing destinations in the world, owing to the combination of its highly qualified and cost-competitive workforce and strong government support for investment in outsourcing. In 2011, the outsourcing industry employed more than 630 000 Filipinos and generated in excess of $11 billion.
In terms of the Philippine IT-BPO Road Map 2011-2016, projections are that the industry will grow to employ 1,3 million workers and generate $25 billion in annual revenue by 2016. While the Philippines is today the world leader in voice-based business services (call centres), there are approximately 25 different sectors represented in its information technology and shared services sector, and increasingly these sectors represent knowledge-based, non-voice services. More than one third of the industry is engaged in delivering complex services.
Promoting the Philippines as a brand
In addition to supporting the Road Map, the Philippine government is building the country brand to promote investment through increased visibility. In May 2012 this initiative received a great boost when Manila hosted the Asian Development Bank’s biggest ever annual Board of Governors meeting, with 5 300 participants. The top executives, ministers and bankers who attended the meeting were more than one thousand over target. This event was a unique opportunity for the Philippines to showcase its public-private partnerships, its tourism industry, Filipino arts and culture, and its world-class services.
BPAP providing advocacy
Commenting on the US Senate’s rejection of an anti-outsourcing bill, Benedict Hernandez, president of the Business Processing Association of the Philippines (BPAP), said recently:
“Outsourcing business services to the Philippines helps make American companies more competitive and profitable. Profitable companies hire more workers, both here and in the United States.”
The BPAP is an umbrella organization for the IT-BPO industry in the Philippines and acts as an advocacy group for the country’s outsourcing and offshoring sector. It seeks to promote competitive advantages and growth potential in existing and new areas of outsourcing. Hernandez will be a speaker at this year’s International Outsourcing Summit in Manila, 7 – 9 October 2012, which will examine the ways in which recent developments in technology and public policy will create new opportunities for the business process outsourcing industry in the Philippines.
Political support for the outsourcing industry
Two main government incentive schemes are the incentives granted by the Board of Investments (BOI) and incentives under the Philippine Export Zones Authority (PEZA).
BOI incentives include an income tax holiday for a period of six years for pioneer enterprises and for four years for non-pioneer enterprises; the employment of foreign nationals in a supervisory, technical or advisory position for a period of five years; a deduction from taxable income of 50% of labour expenses; and unrestricted use of consigned equipment.
PEZA incentives include the option to pay a special 5% tax on gross income earned in lieu of all national and local taxes; exemption from payment of import duties and taxes on imported machinery, equipment and raw materials; a deduction equivalent to 50% of training expenses; permanent resident status for foreign investors with initial investment of US$150 000 or more; and employment of nonresidents required in the operation of IT enterprises.
Together with strategies by the Department of Education (DepEd) of the Philippines to improve education and training and produce more graduates for the labour market, these aggressive government incentives are strengthening the Philippines’ already healthy position as a value destination for investors.