NEDA sees 15% annual BPO growth

Posted at 04/11/12 7:02 AM

MANILA, Philippines - With more foreign companies looking at cutting costs for their business operations through offshoring, the National Economic and Development Authority (Neda) disclosed that the business-process outsourcing (BPO) sector may see a growth of not below 15 percent every year.

Based on the 2011 to 2016 Road map of the Business Processing Association of the Philippines (BPAP), the Neda said the projection of the association for an annual growth of 15 percent every year would be more feasible in the sector than a low of only 9 percent or a high of 20 percent every year.

A 15-percent growth, the BPAP said, would generate 3.15 million direct and indirect jobs and taxes in the amount of $6 billion every year. The Neda said this is likely considering the global economic environment.

“Most likely, [it will happen] on average between 2011 [and] 2016. Most likely 15 percent. We believe it; it is credible. If the public and private [partnerships] are strengthened even more, it could reach 20 percent but if the global market wanes and then public-private partnerships are not as strong, then it could fall to 9 percent,” Neda Assistant Director General Ruperto Majuca said in an interview.

Majuca said in the agency’s presentation to President Aquino before the Lenten break, that the BPAP’s basis for its assumptions is the possible doubling of growth in the global market in 2016 from 2010. This estimates that there is a 10-percent to 15-percent growth in the world market, despite uncertainties that are surfacing in Europe and the slow recovery in the US.

He added that these economic developments are even driving foreign firms to flock to places like the Philippines to save on labor and other logistical costs that will give them better bottom lines.

Majuca said countries like the Philippines, which has been able to establish itself as a BPO haven and a place where Internet connectivity is affordable, are likely to continue benefiting from outsourcing.

“The motivation of firms to conduct offshoring is to save costs. Although [there are those who] need to cut costs so [we should not outsource]. But also because we need to cut costs, we need to transfer our operations from high cost US tier 1 and tier 2 cities to low-wage and low-cost telecom-infrastructure countries like the Philippines,” he added.

In order for the country to take advantage of this growth window, the Neda urged the speedy establishment of next-wave cities, the improvement of the talent pool, the strengthening the telecommunication and information techonology (IT) sector and the creation of an enabling environment for offshoring.

Majuca said the next-wave cities that have been identified by the BPAP and the Department of Trade and Industry (DTI) include Davao City, Sta. Rosa in Laguna, Metro Subic in Zambales and Naga City in Camarines Sur, among others.

He added that the rising costs of operating BPO firms in Metro Manila should open the avenues for some of these firms to transfer to locations that still offer low operation costs to business owners.

In terms of improving the talent pool, the Neda urged the improvement of the education sector, particularly in the subjects such as English, math and science for the country to qualify for higher level BPO services. The improvement of ICT skills not only of students but also of teachers is also imperative.

Majuca said that according to the BPAP data, the industry might face a shortage of BPO-ready employees/graduates by this year or 2013. This poses a significant challenge, he added, the reason improvements in the education sector are needed immediately.