Business process outsourcing (BPO) firms have held off from expanding in the Philippines given rising risk concerns, a property consulting firm said.
The Marawi crisis, the threat of an expanded martial law, recent earthquakes and the likelihood of higher taxes are some of the factors have stunted BPO sector growth over the last three quarters, Leechiu Property Consultants, Inc. President and CEO David Leechiu said.
“Many of our clients have decided not to grow in 2017. That’s primarily because many of their clients perceive that the country risk profile of the Philippine is climbing,” Leechiu said.
BPOs were said to have accounted for 41 percent of office take-up as of the third quarter of 2017, a 24-percentage point drop from the 65 percent recorded a year ago.
“[BPO clients are] trying to divert their presence to other countries so that they can rebalance their portfolio because they were too heavily invested in the Philippines,” Leechiu said.
These companies, he said, should temper their concerns about operating in the Philippines.
“These country risk issues are not new. There have always been relevant, meaningful country risk issues in the Philippines since maybe the 1960s and companies have learned to adapt to that,” he added.
Still, office take-up remains strong despite the “softening” of BPO demand as the online gaming industry has begun to play catch-up.
The online gaming industry’s demand hit 125,000 square meters in the third quarter, 19 percent of the total office take up of over 654,000 square meters.
Leechiu, however, does not expect online gaming firms to overtake the BPO industry.
“At the end of the day, history has shown that companies will find a way to overcome the issues they have here, and they will be back [as]bigger companies,” he said.