The Outsourcing Week in Review: Wednesday, June 24, 2020

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THE WEEK IN REVIEW

The Philippines was dragged into a high profile international fraud allegation over the weekend involving a missing US$2.1bn, a German fintech, and a series of shell companies across the Philippines.

The erupting scandal has left the German payments firm Wirecard short of US$2.1 billion, which it claimed was being held by two Philippine banks, BDO Unibank and Bank of the Philippine Islands (BPI). The company’s long-standing CEO Markus Braun has been ousted and it is now scrambling for cash. BDO and BPI deny that Wirecard has been a client, and Bangko Sentral ng Pilipinas (Philippine Central Bank, or “BSP”) Governor Benjamin Diokno has since claimed that Wirecard’s missing money did not enter the Philippine financial system, calling the allegation “an attempt to cover the perpetrator’s track.

London’s Financial Times wrote an exposé on an emerging situation back in March 2019, saying that whistleblowers as far back as early-2018 raised the alarm of inappropriate practices, identifying numerous feeder and shell companies around the Philippines which were funnelling up to half of the fintech’s gross revenues. Looks like we’re in for a long game of hide-and-seek. Read more.

The Philippine Economic Zone Authority (PEZA) has called on President Rodrigo Duterte to approve the proclamation papers of 71 economic zones worth P76.13 billion in committed investments pending before his office.  The agency’s approved investment pledges declined to P29.5 billion in the first five months of 2020 due to the COVID-19 pandemic, which was a 31 per cent decrease from P43.2 billion in the same period last year.

In spite of all the COVID calamity, things are looking up for the Philippine economy as the Japan Credit Rating Agency (JCR) upgraded the country’s credit rating to an “A-“ citing the country’s resilience in the middle of the current global crisis. The rating was a notch higher than the Philippines’ previous BBB+ rating.

BSP’s Monetary Board announced its adjusted projections for the country’s current account deficit and Balance of Payments (BOP) this year, taking the global economic slowdown into account. The country’s BOP is now projected to be 0.2% of the gross domestic product (GDP) for 2020 equivalent to $600 million, which is much lower than the earlier 0.7% forecast in November 2019. The BSP cites the strength of the Business Process Outsourcing (BPO) industry to make up for the dollar remittance decline, as BPO receipts are expected to grow to two per cent this year. Meanwhile, the Department of Labor and Employment (DoLE) continues to stake the country’s economic recovery on the strengths of the BPO industry – as it projected that the country’s employment levels would rebound fully in just in one-to-two years.

The BPO industry continues to add critical support to the economy with the latest property report by Leechiu Property Consultants (LPC) showing a continued increase in office space demand for January to May this year, despite the pandemic. According to data released by Leechiu, the BPO sector accounted for the biggest share of demand with 37 per cent, followed by Philippine Offshore Gaming Operators (POGOs) at 13 per cent. Personally, we feel the positive news for commercial property will be short-lived and with a monumental correction about to happen.

Anecdotally, the outsourcing industry is laying off and furloughing large numbers of staff as offshore accounts pull out their Philippine operations.  Many staff are left on a “floating status” with their employers deferring onus to the client who “has already run out of funds” to support its agents. This has caught the attention of Senator Imee Marcos who is urging DOLE to investigate alleged abuses in call centers amid the pandemic. Marcos said her office has received complaints from call center employees saying they have not received their salaries for the last two to three months. “BPO’s must take care of their employees in anticipation of a bounce-back in business post-COVID, as companies in other sectors will turn to outsourcing services to cut costs,” said Marcos.

In other POGO news, the gaming operators will now be required to settle their five per cent franchise fee before being cleared to resume operations. According to Department of Finance (DOF) assistant secretary Antonio G. Lambino II, POGOs have been refusing to pay their taxes because they don’t have a physical store in the Philippines, and therefore, they believe they are not liable to pay tax. Since BPOs pay taxes, maybe this is their own way of segregating themselves from the BPO industry?

In recent weeks, five POGOs and at least 10 of their local service providers have closed down due to the difficult business environment brought about by the pandemic. A source said that prohibitive lease expenses, high overhead costs and inability to resume partial operations due to strict conditions imposed by the Bureau of Internal Revenue (BIR) were contributing factors for the closures.

Wednesday, June 24, 2020

NEWS THIS WEEK

23 June 2020

• IT-BPO industry listed highest number of job opportunities during pandemic – read article…
• POGOs close down due to COVID-19 pandemic – read article…
• Telus launches first wave of its 5G network, picks Samsung as third vendor – read article…

22 June 2020

• Philippines implicated in missing US$2.1bn Wirecard fraud – read article…
• Probe shows no Wirecard funds in PH banks, says BSP – read article…
• DOLE urged to look into alleged call center violations – read article…

19 June 2020

• Border entry now allowed for Cebu City workers – read article…
• Western Visayas leaders push for COVID-19 economic recovery plan – read article…
• POGOs now required to settle franchise fee before resuming operations – read article…
• PEZA-approved investments drop 31% in Jan-May – read article…

18 June 2020

• PH labor market to rebound in one to two years – DOLE – read article…
• BPO to save dollar remittance dip – read article…
• PEZA urges Palace to approve 71 new ecozones worth P76 billion – read article…
• Regular BPO employees left without pay as offshore accounts pull out PH operations – read article…

17 June 2020

• PH gets upgraded credit rating grade from Japan – read article…
• BSP announces new projections for 2020 – read article…
• FDI posts lower net inflows in February 2020 – read article…
• BPOs, POGOs raise office demand up to 34% despite lockdown – read article…

16 June 2020

• GCQ extended for Metro Manila until June 30 – read article…
• Four company onshoring predictions post-COVID 19 – read article…
• Accenture Federal Services hires new MD – read article…
• PH projected to post BOP surplus despite pandemic – read article…

Read more Inside Outsourcing Newsletters here:

1. The Outsourcing Week in Review: June 17, 2020
2. The Outsourcing Week in Review: July 1, 2020