The Outsourcing Week in Review: Thursday, September 29, 2022

Welcome to Inside Outsourcing: The Outsourcing Week in Review

THE WEEK IN REVIEW

Whew! This week’s Philippine outsourcing news is a crazy mix of good and bad. Who knew outsourcing could be so interesting! You’ll want to read and see what we’re talking about. 

Philippine President Ferdinand Marcos Jr. is eager to further develop the country’s IT-BPM (Information Technology and Business Process Management) industry. During his visit to New York City, Marcos Jr. shone a light on the industry, proudly higlighting that the IT-BPM sector has ranked as one of the best performing and employment-generating industries in the Philippines over the past four years. In 2021, its total revenue went up to $29.49 billion, with over 1.44 million full-time employees (FTEs). The local IT-BPM scene is expecteding to grow its revenues by as much as 10% in 2022 and create over 1.1 million jobs in the next six years.
To stimulate further growth, the industry needs to innovate. And one of those innovations is the adoption of work-from-home (WFH) model.

The IT and Business Process Association of the Philippines (IBPAP) said that the WFH resolution, as well as the promise of a seamless transfer from the Philippine Economic Zone Authority (PEZA) to the Board Of Investments (BOI), signals next-level growth in the outsourcing industry. IBPAP President Jack Madrid stated that the transfer allows IT-BPM firms to continue working remotely with no cap and consequences to their tax incentives. He added that this offer is significant because it finally reduces the overhang of uncertainty that many industry players were concerned about. At the same time, professional services firm Colliers stated that WFH and tax incentives would maintain the competitiveness of the Philippine IT-BPM industry. In a report, Colliers noted that this would help make the country a “strong investment destination” and help the local IT-BPM industry achieve its growth targets. The paper also emphasized that the government’s recognition of flexible working can help the nation stay on par with India, Brazil, Malaysia, and the United States.

In fact, one of the nation’s BPO giants, Accenture Philippines, promised to keep a hybrid work model as its employees ease into a flexible and omni-connected future of work. According to Accenture PH Country Managing Director Manolito Tayag, they worked on reimagining workspaces and enhancing the employee experience to push what the firm calls “omni-connectedness.” Accenture invested in new technologies — including collaboration tools, the metaverse, and artificial intelligence (AI) — and their employees’ technical and soft skills.

Meanwhile, US-owned outsourcing firm Office Partners 360 (OP360) launched its second and biggest outsourcing venture in Davao City, with the goal of opening 1,500 jobs by next year. OP360 Director of Legal and Compliance Tess Tan said that Davao City is an ideal location as it has a geographical proximity to other provinces and municipalities. The firm added that they are optimistic about their engagement in the region of Mindanao.

Aside from IT-BPMs, Marcos, Jr. is also luring American investors to venture into other trades in the country. Speaking before the New York Stock Exchange (NYSE), the president underscored that the amendments were made to liberalize the economy and open it up to investors. Marcos explained that the amended legislation offers lower corporate income tax rates, rationalizes fiscal incentives, and allows 100% foreign ownership in several sectors. The Philippine government also revised the minimum paid-up capital requirements for foreign retailers and foreign startups bringing in advanced new technology.

Speaking of tech, Philippine Chamber of Commerce and Industry (PCCI) President George Barcelon believes that the ICT infrastructure and talent in the country could attract more foreign investors. During a televised interview, Barcelon said that US firms are “upbeat” with the Philippines’ digital advancement — especially with its Business Process Outsourcing (BPO) sector and data centers. Department of Trade and Industry (DTI) Secretary Alfredo Pascual added that some American firms with existing operations in the country are keen on expanding their operations in the Philippines, given the “more favorable investment climate.” Pascual revealed that the early takers include tobacco company Philip Morris International Inc. (PMI) and consumer goods corporation Procter & Gamble Co. (P&G).

The trade department is also confident that the exports of goods and services in the Philippines will reach $110 billion in 2023 despite the agency’s budget getting cut. Citing the agency’s data for 2022, the total merchandise exports in the first seven months of the year rose 5.4% year-on-year to $44.7 billion. The DTI said they are drafting a new set of export targets under the multi-sectoral Philippine Export Development Plan 2023-2028 to sustain export growth following the COVID-19 pandemic.

In other news, the Technical Education and Skills Development Authority (TESDA) will improve its Technical Vocational Education and Training (TVET) programs in 2023 to respond to the needs, demands, and expectations of the local and global industries and their learners. This innovation would include digitization of certificates, institutionalizing the micro-credentialing and recognition of prior learning, and integrating the agency’s Registry of Certified Workers with the Department of Labor and Employment’s (DOLE) PhilJobNet. The program will also pursue the development of innovation centers, the expansion of the TESDA Online Program (TOP), and the Enterprise-Based Training (EBT) Program.

Blockchain ecosystem Binance held a two-day seminar with the Cybercrime Investigation and Coordination Center (CICC) to discuss cybercrime and cryptocurrency. Binance Asia Pacific Head of Intelligence and Investigations Jarek Jacubcek taught local enforcement agencies how to prevent cybercrime using blockchain forensics. CICC Deputy Executive Director Mary Rose Magsaysay said that the seminar was held to reassure the public that the Philippine law enforcement system is catching up to high-tech criminals.

Leechiu Property Consultants (LPC) CEO David Leechiu warned that banning all Philippine Offshore Gaming Operations (POGOs) could trigger a real estate crisis and bring about P200 billion (US$3.39 billion) of annual economic losses in the country. During a briefing, Leechiu said that a total ban of POGOs could translate to a vacancy of 1.05 million square meters (sq.m.) of office space, triggering high vacancy and low rental rates. He added that this potential crisis could affect medium-sized and smaller property players. So far, the POGO sector has vacated 630,000 sq.m. of office space across the country, which has led to contractions in the real estate sector over the last three years.

The Philippine peso dropped to a new all-time low against the US dollar as it closed at P58.49 last September 22. In an interview with The Manila Times, RCBC chief economist Michael Ricafort said that the peso weakened after the benchmark 10-year US Treasury yield posted a new 11-year high of 3.62% the day before. Bangko Sentral ng Pilipinas (BSP) Deputy Governor Francisco Dakila downplayed the peso’s decline and said that it is a “natural consequence of current account dynamics of a growing economy.” This is the ninth record-high closing rate of the US dollar/peso exchange rate since January 2022.

Amid economic and financial woes, BSP reassured the public of its commitment to providing financial stability and a safe and efficient payment system to back the country’s socioeconomic agenda. The central bank’s Governor Felipe Medalla said that their goal is to create a conducive environment where both [the national government and the private sector] can plan better. BSP said that the headline inflation in the country would only be between two and four per cent, and possibly near three per cent by the second half of 2023. The First Metro Investment Corporation-University of Asia and the Pacific (FMIC-UA&P) Capital Market Research is meanwhile expecting the economy to post a 6.5% growth in Q4 2022 despite a 6.7% inflation. The local think tank said that an expected strong consumer spending would boost the country’s economic growth from October to December. In terms of exchange rates, the FMIC-UA&P Capital Market Research said that its movement would largely depend on US inflation and the actions of the Federal Reserve.

Local companies’ salary budgets for employees are expected to increase by 5.5% in 2022 and 5.7% in 2023. Global advisory and solutions company WTW attributed the slight pay increase to the tight labor market and rising inflation concerns in Asia-Pacific (APAC). WTW Work and Rewards Leader Patrick Marquina added that the “compounding economic conditions and new ways of working” are cayseing organizations to reassess their salary budgets. The Philippines was fourth overall among 14 APAC countries for salary increases in 2022 and 2023.

Internet connectivity is about to get better as the Philippine Domestic Submarine Cable Network (PDSCN) now stretches up to Dapa in the island of Siargao. Pioneered by digital solutions platform Globe, telecommunications and ICT solutions provider Eastern Communications, and telecom and digital solutions provider InfiniVAN, the expansive submarine cable will deliver speedier and more reliable connectivity on the island. Rene Martin Go, Senior Director for Transport Engineering and Optimization at Globe, said that the fiber connectivity would help communities in Siargao to recover faster from the destruction brought by Typhoon Odette late last year. The PDSCN is a US$150 million project that covers a total cable distance of roughly 2,500 kilometers, or about the same distance between Manila and Singapore.

Hmm… me thinks with fast internet the beaches of Siargao will now make for a fabulous remote office!

Thursday, September 29, 2022

NEWS THIS WEEK

28 September 2022

• PH salary to increase by 5.7% in 2023 – read article…
• DTI expects a P110bn rise in exports for 2023 despite budget cuts – read article…
• Accenture PH to retain hybrid work setup – read article…
• PH’s Quezon City to be a “competitive property market” in the next few years – read article…

27 September 2022

• ICT infrastructure, talent will lure US investors to PH — PCCI chief  – read article…
• PH projected to register 6.5% Q4 growth despite inflation – read article…
• Binance shares cybercrime insights with CICC – read article…
• POGO ban could create a real estate crisis, P200Bn annual loss in PH – read article…

26 September 2022

• Marcos keen on bolstering IT-BPM sector in PH – read article…
• Economists expect lackluster economic performance this year – read article…
• BSP promises to deliver financial stability – read article…
• WFH flexibility favorable for IT-BPM global performance – read article…

23 September 2022

• Peso plummets to new all-time low at P58 vs. USD  – read article…
• PH’s expansive submarine cable reaches Siargao – read article…
• TESDA to bolster tech-voc programs in 2023 – read article… 
• Policy reforms, investments, skills could further PH’s digital infrastructure – read article… 

 22 September 2022

• OP360 to open 1,500 jobs in Davao City next year – read article…
• Marcos invites US investors to PH – read article…
• WFH implementation to stimulate IT-BPM sectors’ growth – read article…
• DICT to allocate 9,000 free wifi sites by 2023 – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: September 27, 2022
2. The Outsourcing Week in Review: October 4, 2022