The Philippines is a country that has plenty to offer to those that come from near and far. Aside from its warm climate, beautiful tourist destinations, and friendly people, it also attracts plenty of foreign investments, particularly those that have to do with an industry that has emerged in recent years: business process outsourcing. Over the past two decades, the Philippines saw the rise of its information technology and business process outsourcing (IT-BPO) industry primarily due to partnerships forged between the public and private sectors. As the Philippines continues to grow its third-party service offerings and client base, the future of its outsourcing industry will keep getting brighter with more clients seeking high-quality offshore support at agreeable rates.
Tracing its beginnings to the early 1990s, the IT-BPO industry encompasses a range of services, including data entry, contact centers, back-office support, transcription, software development, and even game development and animation. According to an Outsourcing Journal report, the Philippine IT-BPO industry ranks first in voice-related support, accounting for a global market share of 13%. In 2020, the industry generated USD 26.7 billion in revenue, a value that is projected to reach USD 29 billion in 2022 despite the economic downturn driven by the COVID-19 pandemic.
The country’s IT-BPO sector also employs approximately 1.3 million individuals in more than 1,000 companies. Many of these workers provide customer support in a variety of industries, such as travel, insurance, telehealth, and tech. Related to this is the Knowledge Process Outsourcing (KPO) sub-sector, which focuses on professional, knowledge-based services, including accounting, finance, virtual assistant (VA) support, and creative work.
The outsourcing industry has since expanded from large multinational organizations to include small- and medium-sized businesses (SMBs) seeking transparent pricing, flexible terms, and a vast portfolio of services. And with more businesses embracing hybrid or remote work, there are now more reasons to consider the Philippines as an outsourcing hub. Here are just some of the benefits foreign firms can derive when they choose to invest in the country’s IT BPO sector.
High English Proficiency and Western Influence
The Philippines shares a long history with the West. Thanks to decades of American rule in the country, there’s barely any language barrier between Filipinos and the English-speaking world. In fact, the EF English Proficiency Index ranks the Philippines at 18 out of 112 economies, with an EF EPI score of 592, enabling it to pass the “high proficiency” standard. The country also ranks second in Asia. Although Filipinos speak and learn a number of native languages as their mother tongue, the majority of schools in the country prefer English as their medium of instruction.
And with American influences ranging from basketball to fast food, it’s no surprise that Filipinos are among the most westernized groups in Asia.
Adequate Workforce Training
With its largely export-oriented employment culture, the Philippines offers plenty of support to future members of the global workforce. Organizations like the Technical Education and Skills Development Authority (TESDA) and the Information Technology and Business Process Association of the Philippines (IBPAP) even fund training programs designed to train students for BPO jobs. There are also institutions in the country that offer BPO-specific subjects. Every year, around 500,000 Filipino students graduate equipped with in-demand skills such as software programming and app design.
Business districts in the Philippines house a large number of buildings and office spaces dedicated to the IT-BPO sector. According to the Philippine Economic Zone Authority (PEZA), there are around 415 economic zones across the country, with approximately 297 accounting for IT parks and centers as of November 2021. IT-BPO firms under PEZA have also invested PHP 328.6 billion in Philippine ecozones over the last two decades, according to the agency. With more industrial parks shifting out of major urban areas and into the suburbs or provinces, opportunities remain aplenty for businesses large and small to invest in economic estates for their offshore processes.
Reasonable Service Rates
Because of the Philippines’ low cost of living, foreign employers save labor costs through outsourced staffing solutions. In addition to the wages of Filipino workers being generally lower compared to their Western counterparts, doing business is also affordable due to lower rental rates, taxes, and exchange rates, among others. Companies can boost profits and save operational costs by realigning funds to other investments like staff upskilling and customer service improvement.
Business-Friendly Government Policies
In 1995, foreign investors saw an opportunity to expand their footprint in the Philippines through the Special Economic Zone Act or RA 7916. The law resulted in various capital- and operation-related benefits, including relaxed area development requirements, corporate tax exemptions, duty-free importations, and even permanent residency for investors. Besides instigating more prevalent foreign ownership, the Special Economic Zone Act also led to the establishment of PEZA and opened the doors for the Philippines’ BPO boom.
In addition to providing incentive packages to attract qualified entities in industrial estates and Special Economic Zones, the Philippine government’s privatization efforts also include integration with the country’s neighbors through the ASEAN Free Trade Agreement (AFTA). Through these policies, foreign investors can enjoy lower tariff rates and broaden their consumer market in competitive economies.
All the Benefits and No Fuss
Starting a business doesn’t have to be costly, especially for enterprises that are just starting out with limited resources. Combined with strong government support and the excellent work ethic of Filipino workers, choosing to operate in the Philippines will always be a good business decision.