The Outsourcing Week in Review: Thursday, March 10, 2022

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Welcome to Inside Outsourcing: The Outsourcing Week in Review

THE WEEK IN REVIEW

The Philippines, contributing 18 percent of information technology-business process management (IT-BPM) employees globally, ranked second in the world’s leading IT delivery locations in 2021. Consulting and research firm Everest Group reported that the country, which ranked second in the world’s top IT-BPM locations, generated a total of $26.7 billion of outsourcing revenues last year and accounts for 17-18% of the eight million full-time employees (FTEs) worldwide. North America, Asia Pacific, and the European Union remain the top IT-BPM clients of the country, contributing $15 billion to the total revenues.

To catalyze economic activity, the Department of Trade and Industry (DTI) Secretary Ramon Lopez is discouraging people from working in their homes now that cities in the Capital Region and another 38 areas in the country are under Alert Level 1. During a cabinet meeting, Lopez explained that resuming on-site work could stimulate spending and help businesses — especially Micro, Small, and Medium Enterprises (MSMEs) — which have suffered losses due to the pandemic. Filipino employees took to Facebook to express their reactions to Lopez’s statement. Most of them stated that they are worried about commuting costs, long traffic hours, and proper office ventilation. One user commented that since traffic is still a common problem in the country, the jobs that can be done remotely should stay that way. The majority of local workers are now advocating for a hybrid setup instead of a full-time office work model.

The Business Process Outsourcing (BPO) sector is also requesting an extension of their work-from-home (WFH) arrangements, following the government’s April 1 deadline. In an interview with the InquirerIT & Business Process Association of the Philippines (IBPAP) Jack Madrid said that it is not easy for their workforce to transition back to the office after two years of remote work. Government guidelines placed earlier in the pandemic allowed the sector to keep its tax breaks while having up to 90% of its employees work from home. However, the Fiscal Incentives Review Board (FIRB) said that this regulation will only last till March. The IBPAP president added that the outsourcing industry could work remotely without sacrificing productivity and customer satisfaction ratings. In 2021, BPO revenues increased by around 12% to $28.8 billion, while the sector’s workforce grew further by eight per cent.

Meanwhile, IBPAP reported that about four in 10 IT-BPM employees are looking to change jobs in the next four to six months. At a forum hosted by the European Chamber of Commerce of the Philippines (ECCP), Madrid attributed the industry’s high attrition rate — even pre-pandemic — to the younger generation’s different behaviors and expectations. The IBPAP president added that the biggest challenge in the sector is talent shortage caused by the difficulty in finding enough qualified people who will fill the roles required by companies. The pressure on salaries and the fast-rising salaries is causing another kind of disruption that needs to be addressed by the government. In line with this, the association is urging the next administration to give additional support to the sector. Madrid explained that the next government leader should strengthen the country’s digital infrastructure and internet connectivity to allow BPO expansion in the countryside. Moreover, Madrid noted that the next admin should help implement a permanent WFH law to “maintain our country’s competitiveness” in the global outsourcing market.

Jobstreet is also chiming in on this issue. The online employment company stated that a hybrid work model will be ‘instrumental’ in allowing employees to adjust to post-pandemic office expectations. JobStreet Philippines Country Manager Philip Gioca said that this work arrangement gives everyone the flexibility “to be at home when needed and to be in the office when there is a need.” Gioca also emphasized the importance of upskilling as future jobs are expected to be more digital than ever.

Onto some post-pandemic projections. Jobs that were lost during the COVID-19 crisis have the potential to open again thanks to herd immunity and the implementation of economic reforms in the country. In an economic bulletin, Department of Finance (DOF) Chief Economist Gil Beltran said that the mass administration of vaccines “will help the country live with the virus” and go back to normal. The economist added that the passage of the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and the amendments made in retail trade, foreign investments, and public laws “will help bring in more employers and generate more employment.” However, University of Asia and the Pacific senior economist Cid Terosa said that the benefits of economic reforms in the Philippines will not be immediately felt. In an email interview with BusinessWorld, Terosa stated that other conditions need to be in place before the economic reforms gain traction. Additionally, the Ukraine-Russia war is also making investors more cautious with their new ventures.

President Rodrigo Duterte has now signed into law Republic Act 11647 which seeks to amend the Foreign Investments Act to ease foreign equity restrictions in some sectors and further open up the Philippine economy. Under the new version of the law, foreign exporters can now have 100% ownership in areas outside the foreign investment negative list and shell out capital to hold as much as 100% equity in domestic enterprises. Direct hires are also eased from 50 to at least 15 Filipino employees, allowing the small and medium-sized enterprises (SMEs) to invest more in the local market. The Inter-Agency Investment Promotion Coordination Committee (IIPCC) will facilitate efforts to attract more foreign investments in the country.

Several Israel-based firms are interested in investing in various sectors in the Philippines. According to Israel Head of Economic and Trade Mission to the Philippines Tomer Heyvi, most companies are only waiting for President Duterte’s signature in the amendment of the Public Services Act. At the same time, Israeli Ambassador Ilan Fluss said that Israeli firms are looking to invest in the BPO sector as the Philippines is a “good place to outsource.” These investments could further improve the economic ties of both countries.

The Philippine Economic Zone Authority (PEZA) approved a total of PHP807.83 billion (US$15.5 billion) investments since 2016. PEZA Director-General Charito Plaza reported t hat 88 special economic zones (SEZ) were registered during the Duterte presidency, bringing the total to 415 SEZs and 4,665 locators across the country. About 1.78 million jobs were also created during the last six years. Plaza promised that they will continue to put their “best foot forward” despite the upcoming change in leadership this May.

Meanwhile, DTI Undersecretary Rafaelita Aldaba stated that new investments in the tech industry will be given generous fiscal incentives under the CREATE Act. Aldaba explained that tech and innovation investments — which belong to Tier 3 — have the longest income tax holiday (ITH) period, special corporate income tax (SCIT) of five per cent for export enterprises, and enhanced deductions. Export enterprises with investments in tier 3 activities within Metro Manila are qualified for six years of ITH and seven years for investments outside Metro Manila, and another 10 years of enhanced deductions and SCIT.

Philippine-based e-commerce startup SariSuki raised US$10.7 million from regional and global investors. The virtual sari-sari store secured its funding from VCs Openspace and investment firms OpenspaceFoxmont Capital PartnersSusquehanna International Group (SIG)Global Founders Capital (GFC)Saison Capital, and JG Digital Equity Ventures. In a statement, SariSuki founder Brian Cu said that the fresh funds will help in the company’s operations expansion, particularly its coverage and product portfolio. SariSuki is an e-Commerce company that offers Filipinos value grocery products at extremely affordable prices.

Startups are booming in the business community!

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Thursday, March 10, 2022

NEWS THIS WEEK

 

09 March 2022

  • Alert Level 1 can offset effects of Ukraine-Russia conflict to PH economy – read article…
  • PH unable to secure P65B loan due to Ukraine-Russia war – read article…
  • Israel’s biz community eyes PH BPO investments – read article…
  • Foreign investors re-enter PH as restrictions loosen – read article…

08 March 2022

07 March 2022

  • Foreign Investments Act amendment signed into law – read article…
  • Positive impact of economic reforms will be ‘delayed’ – read article…
  • 4 in 10 BPO employees to change jobs over the next months – read article..
  • Tech investments to receive generous tax incentives in PH – read article..

04 March 2022

  • Employees express concern over DTI chief’s remote work statement – read article…
  • PH still the 2nd leading IT-BPM provider in the world – read article…
  • Outsource-Philippines continues growing despite pandemic – read article…
  • Hybrid work ‘instrumental’ for employee adjustment post-remote work – read article…

03 March 2022

  • IBPAP asks for more support from next admin – read article…
  • PSEi down 1.36% as Russia-Ukraine crisis continues – read article…
  • DTI chief do not encourage WFH in Alert Level 1 areas, IBPAP disagrees – read article…
  • Jobs to resume after herd immunity, economic reforms — DOF – read article...

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Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.