The Outsourcing Week in Review: Thursday, February 10, 2022

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THE WEEK IN REVIEW

The Philippines generated an impressive P328.6 billion (US$6.4 billion) worth of Information Technology and Business Process Outsourcing (IT-BPO) investments over the past two decades. According to the Philippine Economic Zone Authority (PEZA), the sector generated a total of US$11.5 billion in export revenues and created over 900,000 direct jobs for the Filipinos. PEZA Deputy Director General Tereso Panga said that outsourcing has become “one of the country’s dominant industries” since the year 2000.

Unfortunately, the Philippines continues to lag behind its neighboring nations in terms of foreign investment potential, dropping to the 83rd spot out of 126 countries in the Milken Institute Global Opportunity Index. Rizal Commercial Banking Corp.(RCBC) Chief Economist Michael Ricafort said that the further reopening of the economy, improving foreign policy, legislative and fiscal reforms, anti-corruption measures, and strengthening ESG standards will help the country move to a higher ranking. Foundation for Economic Freedom President Calixto Chikiamco, on the other hand, said that the government already made progress in approving economic reforms that would boost foreign investments with the recent amendments in the Retail Trade Liberalization Act and the Public Service Act (PSA).

Aside from the economy and employment, the BPO sector has a considerable impact on the real estate market. In their latest briefing, property investment firm Leechiu Property Consultants (LPC) reported that the outsourcing industry will continue to drive growth into the Philippine office market. In fact, about 224,000 square meters (sqm) of office spaces will likely be completed during the first half of the year. LPC CEO David Leechiu claimed that 2022 will be an “even better year” for the property sector. Meanwhile, Colliers Philippines stated that a growing number of firms are looking for sustainable and healthy work environments in the country. Colliers Associate Director and Head of Research Joey Bondoc said that employers believe that ‘green offices’ will contribute to the productivity, health, and overall happiness of their workers. The report also revealed that green office spaces are becoming more reasonably priced due to the presence of eco-friendly technology vendors and environmental policies by the government. Now, that’s literally “greener pastures.”

However, industry analysts believe that the presidential elections in May will likely put investments on hold as investors and developers wait and see if the new administration will be business-friendly, says management firm Colliers. Similarly, Cushman and Wakefield (C&W) Director and Head of Research, Consulting & Advisory Services Claro Cordero Jr. said that the biggest threat in the property market would be a “hotly contested [election] result,” as it could delay investments, undermine continuity, and erode the confidence of investors and consumers. In a contrarian point of view, KMC Savills Co-Founder and Managing Director Michael McCullough added that the property sector “needs all the help it can get” as they still foresee a higher vacancy level this year compared to 2021.

The new year seems to encourage businesses to explore new opportunities — including offshore staffing. In its January report, Outsource Accelerator’s platform recorded a total of 1,380 inbound inquiries for the month (up 18.3%) from 49 countries representing 27 different sectors. Outsourcing quotation requests also increased by 16%, representing an estimated 2,114 full-time staff with an outsourcing value of US$63.4 million. The company’s website traffic rose by 18% and page views were up by 21.40%, indicating a growing interest in outsourcing.

To ensure continued growth, the local BPO industry expressed its support for the ratification of the Regional Comprehensive Economic Partnership (RCEP). Information Technology and Business Process Association of the Philippines (IBPAP) President Jack Madrid said that the trade deal’s stable regulation will attract more investors in the country and provide a necessary boost to the post-pandemic economy. He added that the Philippines’ participation will make it a “more attractive investment destination” in the world. Currently, the RCEP is in the Senate for ratification.

In other news, Italian Chamber of Commerce in the Philippines (ICCPI) President Sergio Boero urges the Philippine government to be more open to partnerships to boost the economy. In an interview with The Manila Times, Boero stated it is a “very excellent time” for countries to seek partnerships that would buoy recovery from the impact of COVID-19. He said the government’s failure to ratify the RCEP is a missed opportunity for the trading industry.

Speaking of partnerships, Japan and the Philippines signed an agreement that would boost trade and investment. PEZA said that the accord will accelerate investment flows, strengthen tourism partnerships, and expand people-to-people exchanges between the two countries. Japan accounts for about 27% of total investments in the Philippines’ economic zones. At the same time, Department of Trade and Industry-Bureau of International Trade Relations (DTI-BITR) Director Angelo Salvador Benedictos is pushing for an extension of the European Union (EU)’s Generalised Scheme of Preferences Plus (GSP+) program. Benedictos said that the renewal of GSP+ will benefit a lot of industries and areas in the country. A free trade agreement (FTA) is also being proposed to extend the nation’s alliance with the union.

US-based technology company Couchbase is looking to invest in the online gaming and outsourcing sector in the Philippines. In an interview with BusinessWorld, Couchbase Regional Vice-President for the Asia Pacific and Japan Stuart Fisher said that the nation is a “lucrative market” due to its impressive growth in digital industries. According to data analytics and consulting company GlobalData, outsourcing is the largest private-sector employer in the country, accounting for 10% to 15% of the global market.

Further, PEZA recently signed a memorandum of understanding (MOU) with the Civil Aviation Authority of the Philippines (CAAP) to build aerotropolis ecozones and aerotropolis-linked ecozones in the country. PEZA Director General Charito Plaza said that this partnership will help maintain the country’s “competitiveness and brand as the investment destination or haven in Asia.” Under the agreement, PEZA and CAAP will train world-class airline professionals to work in these soon-to-be established urban developments built around airports.

In economic updates, the Financial Stability Coordination Council (FSCC) said that it may take until the fourth quarter of 2023 to recover from the pandemic-induced economic loss in the Philippines. Despite the 5.6% uptick in GDP last year, the FSCC said that there are remaining costs incurred during the pandemic and the recovery will depend on future economic growth rates. FSCC added that the pandemic was mostly felt by “nonfinancial corporations and vulnerable households” which widened the “socioeconomic inequities” in the country and, in turn, will leave lasting effects on the local economy.

On a more hopeful note, data center provider SpaceDC will allocate over $700 million in its planned 72-megawatt (MW) hyperscale data center in the Philippines. The Singapore-based firm recently announced that it is working with global real estate services firm JLL to build a data center called MNL1, which will serve the Greater Manila region. SpaceDC Chief Executive Officer Darren Hawkins shared his excitement about their expansion, saying that the Philippines is a “dramatically underserved market” despite ranking second in terms of data center growth in Southeast Asia. The data center, which will run on renewable energy, is slated to open this year.

May the odds be in the economy’s favor!

Thursday, February 10, 2022

NEWS THIS WEEK

09 February 2022

• DTI official eyes GSP+ extension, FTA with EU – read article…
• Optum bags PEZA award, CCAP recognition – read article…
• Addt’l investments expected as arrival protocols eased — DTI – read article…
• PH, Japan to boost trade ties – read article…

08 February 2022

• Elections to affect PH real estate market – read article…
• PEZA, CAAP signs MOU for aerotropolis ecozones – read article…
• PH dropped one place to 83rd in Global Opportunity Index – read article…
• LGUs to decide restrictions for unvaxxed population – read article…

07 February 2022

• IT-BPM sector to boost office market in 2022 – read article…
• IT-BPO investments reached P329B in 20 years — PEZA – read article…
• SpaceDC to invest $700-M for PH data center – read article..
• Inclusivity in PH economy important to ensure growth — ICCPI – read article..

04 February 2022

• PH firms looking for ‘green offices’ – read article…
• PCCI, DICT to collaborate for stronger internet – read article…
• Potential slowdown in China could affect PH trade – read article…
• PH to wait until Q4 2023 to recover COVID lost incomes — FSCC – read article…​

03 February 2022

• BPO sector supports PH’s RCEP participation – read article…
• Couchbase to look into PH’s online gaming, BPO sectors – read article…
• eCommerce growth could increase demand in logistics, property sectors – read article…
• Elections to help boost PH economy in H1 – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: February 8, 2022
2. The Outsourcing Week in Review: February 15, 2022