THE business process outsourcing (BPO) industry (BPO) is considered insulated from the impact of the trade war, unlike the manufacturing sector, Mitsubishi UFJ Financial Group (MUFG) said.
They added that the Philippines continues to be attractive for BPO investors due to low costs and English-language skills.
“I think the Philippines is very unique and could reap the benefits of having an English-speaking population… (US companies) are very happy with the outsourcing and (can be expected to) continue to outsource their activities to the Philippines,” Leong Sook Mei, ASEAN Head of Global Markets Research for MUFG told reporters in a briefing Friday in Makati.
Ms. Leong added that the industry is unlikely to be a direct competitor in BPO because of its underdeveloped service economy.
“It’s something that I think is very hard to take away because China is not into the same kind of deal or the service sector that the Philippines (is). The closest competitor is probably India. But even then I think there has been a lot of issues over the BPO operations in India,” Ms. Leong said.
Marie Diana Lynn C. Singson, head of Global Corporate Banking at MUFG Manila, said that the low cost is what makes the Philippines attractive, despite global trade tensions.
“I think BPOs are relatively shielded from the trade wars… Companies set up BPOs precisely because they want to minimize costs… even with a trade war, I don’t think we will see it affecting the BPO business,” Ms. Singson said.
Any impact of trade tensions could show up in another pillar of the economy, remittances.
“I think, may be a little bit (of impact) on remittances. Manufacturers are impacted by the fact that they can’t export as much… But I think for BPO not really,” Ms. Singson said.
President Rodrigo R. Duterte has said that India and the Philippines and India should boost ties to complement each other’s strengths in the global IT and BPO industries.
During a visit to Manila in October, Indian President Ram Nath Kovind said India is looking to expand business opportunities with the Philippines in the digital industries, start-ups, health, and agriculture.
The BPO industry generated between $24.5 billion and $24.8 billion in revenue in 2018, according to estimates from the Information Technology and Business Process Association of the Philippines (IBPAP). Despite the pickup, it was short of the association’s targets.
“I think there was a prevailing discussion around the overall uncertainty, really and what we have said in the past, it’s less about what eventually the fiscal regime will be. It’s more about how are we managing the predictability of fiscal forecasts,” IBPAP President and CEO Rey E. Untal told members in May, referring to the possible impact of tax reform and incentives rationalization.
Such uncertainties could take their toll on the industry and prevent it from hitting its $40 billion revenue target by 2022. — Luz Wendy T. Noble