Good news from the BPO sector

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AT a time when much of our attention is focused on swirling political controversies, a bit of good news is more than welcome. Such is the case with the banner story from yesterday’s business section, which detailed the 13.8 percent expansion of the information technology-business process outsourcing (IT-BPO) sector in 2013.

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The fact that the report from the Bangko Sentral ng Pilipinas (BSP) covers the year before last – which at first glance makes it seem a little outdated – is itself an indicator of the success of the IT-BPO sector. Employing more than 850,000 people and generating revenues in excess of $15 billion, the industry has grown so large that collecting and analyzing the data to produce the Survey of IT-BPO Services is a process that takes many months.

Across the board, the performance indicators from the industry show outstanding growth. Every subsector of the industry – contact centers, transcription, animation, software development and other BPOs – posted positive revenue growth, with contact centers (call centers) leading the way, accounting for more than half of the industry’s $14.2 billion export-of-services revenue in 2013, and contributing 6 percent of the 13.8 percent overall growth.

Two measures that particularly stand out were actually slightly negative, but indicate positive trends. The export-of-services receipts of $14.2 billion in 2013 were 13.4 percent higher than the $12.5 billion collected in 2012, but their proportion to the total receipts declined slightly from 93 percent in 2012 to 92.6 percent in 2013. Likewise, equity capital investments rose to $8.4 billion, growing at 14.2 percent from year earlier, with $7.8 billion of that coming from foreign sources. However, the foreign-to-total equity proportion in all the subsectors declined slightly.

Taken together, these two mildly declining factors are good news because they indicate that both the domestic market and the domestic ownership of the IT-BPO sector are expanding. Admittedly the rate of domestic expansion is minimal, but it is nonetheless positive. And that, of course, is a sign that this industry so critical to the Philippine economy is becoming less reliant on foreign money, and is strengthening itself – if only gradually – against the uncertainties of the business and overall economic environment outside the Philippines.

The Administration of President BS Aquino 3rd has been, as was his predecessor’s, generally supportive of the country’s IT-BPO sector – because it would be politically and economically suicidal not to be – and the latest data is evidence of the good environment for the industry that has been created over the past decade or so in this country. We hope that the good performance of the IT-BPO sector would encourage even greater efforts to improve the business environment by further reducing restrictions on investment both foreign and domestic, procedural red tape, and local corruption encountered by investors wishing to set up IT-BPO businesses.

And now would be a most opportune time for that focus, because the environment in India, the Philippines’ strongest competition in IT-BPO, has taken a turn for the worse under the right-wing government of Prime Minister Narendra Modi. Modi’s nationalist hostility toward foreign interests in India has recently extended even to well-established and respected foreign charitable organizations such as the Catholic Church’s Caritas and the Ford Foundation – an unrelated move on the face of things, but one that is nevertheless an unwelcome warning to any investor considering a long-term business commitment of several million dollars. The leaders of this country should avoid making the same mistakes, and not allow their focus to wander off to unproductive pursuits.

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