The Outsourcing Week in Review: Thursday, May 19, 2022

Welcome to Inside Outsourcing: The Outsourcing Week in Review

THE WEEK IN REVIEW

The Philippines’ Gross Domestic Product (GDP) grew by 8.3% in the first quarter of 2022, following the easing of pandemic-induced restrictions and opening of the borders to foreign travelers. According to the Philippine Statistics Authority (PSA), the main contributor to this increase is the transportation and storage industry with a 26.5% jump, followed by the manufacturing industry with 10.1%. Household consumption also grew by 10.1% after alert levels were downgraded in the country’s key cities. PSA noted that this growth is higher than Q4 2021’s 7.8%, marking a great turnaround and recovery of the economy after the contractions caused by the COVID-19 pandemic.

At the same time, Foreign Direct Investments (FDI) increased by 46.3% to $893 million in February. Bangko Sentral ng Pilipinas (BSP) said that this growth is driven by the government tempering the possible resurgence of the COVID-19 virus in the country. As a result, the net FDI inflow from January to February went up by eight per cent to $1.71 billion from $1.58 billion in the same period last year. Chief Economist of Rizal Commercial Banking Corp. (RCBC) Michael Ricafort expects the FDI net inflow to improve further in the coming months as Metro Manila and nearby provinces shifted to Alert Level 1 last March.

In outsourcing news, three India-based Business Process Outsourcing (BPO) companies are looking to expand in the “King City of the South,” Davao City. ICT Davao President Samuel Matunog said that he is looking forward to this expansion as it would open more employment opportunities in the sector. Among the companies venturing south is healthcare outsourcing provider AGS Health, which is planning to hire 1,500 agents within the city’s first three years of operations. While the two other firms remained anonymous, Matunog assured the public that they had already met its representatives to tackle the crucial steps in locating in the city.

Investment firm Aeropark Development Philippines, Inc. (ADPI) recently acquired an outsourcing complex called West Aeropark located in Clark Global City, Pampanga, Philippines. The 142,000 square meters (sq.m.), five-building development is one of Clark’s landmark developments and is home to several BPO tenants that cater to numerous multinational companies. ADPI’s parent company Carval Investors partnered with Philippine-based growth equity investment firm SofCap Partners to fulfill this acquisition. CarVal Managing Director Nimrod Wei said that they are confident that West Aeroparks “holds a lot of promise, especially in the IT-BPO sector” especially now that the country is rebuilding after the pandemic.

As the vote-counting for the national elections came to a close, leading IT solutions provider and systems integrator DFNN expressed their support for the incoming administration. DFNN CEO  Calvin Lim stated that he is looking forward to bolstering their investments in the country under the Marcos presidency. The company also revealed that they are poised to invest in data centers, Space Technology Platforms, and Space Sustainability Support Systems involving artificial intelligence and capability expansion.

However, a recent study revealed that Filipino college graduates are ill-prepared to join specific subsectors in the outsourcing industry. According to a joint survey by the Board of Investments (BOI) and the Commission on Higher Education (CHED) called National Skills Mapping Survey, the preparedness level of fresh grads for animation, game development, software industry, and health information management sectors is low. The report stated that the education sector should work hand-in-hand with the industry in upskilling the students to address this dilemma. Additionally, the BOI and CHED are pushing for a review of the existing programs implemented by government agencies to ensure they are still in tune with what the industry needs.

The continuing work-from-home (WFH) conundrum will be the highlight of the Information and Communications Technology – Business Process Management (ICT-BPM) Summit this June 2022. Cebu Business Month (CBM) 2022 Vice-Chairperson Joslyn Canon said that the government’s mandatory return-to-work order last April 1 posed challenges to the sector despite the extension offered by the Philippine Economic Zone Authority (PEZA). Aside from WFH concerns, CBM 2022 ICT-BPM chairman Ryan Tan Yu added that they would also discuss the growing attrition rate in the industry.

Speaking of the ecozone authority, PEZA has approved nine new projects for March. Among these ventures, five are under the export manufacturing enterprises, one for facilities, and three for ecozone development projects. This comes as PEZA announced a 67.9% decline in their Q1 investments approval. Nonetheless, PEZA Director-General Charito Plaza stated that she is confident that the situation will improve after the new president has laid out his economic plans for the country. Plaza’s optimistic view may be right as four hyperscalers are looking to apply for PEZA-membership. The agency’s Deputy Director-General Tereso Panga said that these hyperscalers — also known as data centers — are interested in registering with PEZA to decrease its high power rates. Panga disclosed that these investors are “big players” who are already setting their sights on Bulacan, Cavite, and Laguna.

The total count of available office spaces in the National Capital Region (NCR) rose to 17.3% in the January to March period due to the completion of new buildings in the metro. According to a report by real estate firm Colliers, around 306,000 sq.m. of new office supplies came online during Q1. Office leasing transactions also improved by 30% year-on-year to 146,000 sq.m. As for the recently finished national elections, Colliers stated that the policies that will be implemented by the new administration — particularly towards hybrid and remote work models — could play a part in the market’s dynamics for the rest of the year.

The Department of Labor and Employment (DOLE) approved the minimum wage increase for Metro Manila and Western Visayas workers. In a statement released by DOLE, Metro Manila workers were granted a ₱33 (US$0.63) hike to daily wage, bringing the minimum wage rate per day to ₱570 (US$10.89) for the non-agriculture sector and ₱533 (US$26.62) for the agriculture sector. Meanwhile, in Western Visayas, DOLE approved a daily wage hike of ₱55 (US$1.05) and ₱110 (US$5.49) for non-agriculture, industrial, and commercial establishments; and ₱95 (US$1.81) for the agriculture sector. DOLE also approved an increase ₱500 (US$10) to domestic workers’ monthly salaries. DOLE said that this move is expected to benefit around one million minimum wage earners in private establishments and protect them “from undue low pay.”

The gambling industry in the Philippines grew its Gross Gaming Revenue (GGR) by 30% to P39.15 billion (US$743 million) between January to March despite the Omicron surge in the period. The Philippine Amusement and Gaming Corp. (PAGCOR) reported that casinos accounted for the bulk of the GGR by posting a 30% y-o-y increase in revenue, while PAGCOR-owned games registered a six per cent increase in earnings. This comes after the Malacañang Palace issued a memorandum suspending E-Sabong activities. Additionally, the value of e-commerce transactions in the Philippines is also seeing growth as GlobalData reported that they are expecting the industry to reach nearly P500 billion (US$9.5 billion) by 2025 with a compound annual growth rate (CAGR) of 15.8%. The data and analytics firm stated that this growth would be driven by alternative e-commerce payment tools, which accounted for 31% of the total e-commerce value last year. Digital wallets GCash, Maya, PayPal, and GrabPay have been the leading alternative payment solutions in the country since the pandemic started.

Think the Philippines is past the stage of COVID infections? Think again. The Department of Health (DOH) recently detected 14 cases of the Omicron subvariant BA.2.12.1 in Metro Manila and Palawan. According to DOH Undersecretary Maria Rosario Vergeire, the two cases were from the capital region, while 12 were detected in a cruise ship docked at Puerto Princesa. The NCR cases have now recovered after completing home isolation. All close contacts of the positive cases tested negative for the virus. To stay cautious, the Inter-agency Task Force (IATF) for the Management of Emerging Infectious Diseases is keeping NCR under Alert Level 1 until the end of the month. Aside from the capital region, 79 provinces, highly urbanized cities, independent component cities (PHIs), and 160 other component cities and municipalities are also under the same alert level. About 60% of the country’s total component cities and municipalities are now under the country’s most relaxed COVID-19 restriction, while the rest are at Alert Level 2.

Did someone sneeze?

Thursday, May 19, 2022

NEWS THIS WEEK

18 May 2022

• OFW remittances rose at its fastest pace of 3.2% in March – read article…
• ICT-BPM summit to tackle WFH issue – read article…
• PH gaming revenues up 30% in Q1 – read article…
• NCR to remain in Alert Level 1 till May 31 – read article…

17 May 2022

• College grads unequipped for BPO industry — BOI survey – read article…
• PH poised to reach upper middle-income status in 2023 – read article…
• PH detects 14 Omicron subvariant cases in NCR, Palawan – read article…
• DOLE approves wage hikes in Metro Manila, Western Visayas – read article…

16 May 2022

• ADPI acquires BPO complex in Pampanga, PH – read article…
• IT provider DFNN expressed support for incoming admin – read article…
• PH e-commerce market to hit P500Mn by 2025 – read article..
• Cybersecurity should be integrated with smart city planning — Cyfirma – read article..

13 May 2022

• PH GDP up 8.3% in Q1 following easing of restrictions – read article…
• Available NCR office spaces rose to 17.3% in Q1 – read article…
• 3 Indian BPOs to expand in Davao – read article…
• PEZA green lights 9 projects in March – read article…​

12 May 2022

• FDI inflows up 46% in February – read article…
• 4 hyperscalers to apply for PEZA-membership – read article…
• RCEP should be Marcos’ top priority — DTI, PIDS – read article…
• PH stocks downgraded to ‘underweight’ – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: May 17, 2022
2. The Outsourcing Week in Review: May 24, 2022