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Welcome to Inside Outsourcing: The Outsourcing Week in Review
THE WEEK IN REVIEW
Philippine IT-BPM sector accounted for 31% of the total office demand in Q1 2022, making it the biggest contributor to the local real estate market. According to real estate consultancy firm Leechiu Property Consultants (LPC), out of the 124,000 square meters (sq.m.) of leasing transactions recorded, 39,000 sq.m. were from IT-BPM (Information Technology and Business Process Management). LPC is expecting that the demand would further increase in the coming months as restrictions are eased and borders are now opened for foreign investors.
However, due to the Covid-19 Omicron variant infection surge early this year, about 26% of office lease terminations also came from the said sector. LPC reported that a total of 104,000 sq.m. of office space were vacated during the first three months of the year. The Philippine Offshore Gaming Operators (POGOs) — a sector that suffered the most contraction at the beginning of the pandemic — showed a 33% vacancy rate in the January-March period. But, fear not, LPC is confident in the property market’s recovery for the rest of the year.
Meanwhile, the impending 1 April return-to-office order gains strength on both sides of the argument. LPC CEO David Leechiu said that 95% of large companies feel that full-time office work is the fastest solution to productivity problems and data breaches that were prolific during the pandemic. On the other hand, BPOs think that work-from-home should be made available to a “wider labor pool” as the industry did not suffer losses despite lockdowns. For their part, Leechiu said that remote work could lead a “chunk of companies” to terminate their leases — which would then negatively affect the property market.
Still pushing for WFH? The Department of Finance (DOF) said that WFH is not a problem, as long as BPOs are ready to surrender their tax incentives. In a statement, DOF Secretary Carlos Dominguez III pointed out that under Section 309 of the Tax Code, the benefits given to agencies registered in any Investment Promotion Agency (IPA) are tied to their physical offices. The government official added that allowing remote work for BPO agencies would be unfair to other companies outside economic zones that are paying for their regular taxes.
The Philippine Economic Zone Authority (PEZA) — the strongest proponent for a WFH extension — is now waving a white flag on this issue. Instead, PEZA announced that they will be issuing a memorandum circular (MC) that would allow 70% onsite and 30% remote work for IT-BPM firms in their ecozones. Director-General Charito Plaza said that this is their way of giving “assistance and relief” to their members as they all re-enter life after lockdowns. The memo will be released before March 31, coinciding with the expiration of the Fiscal Incentives Review Board’s (FIRB) 90% remote and 10% on-site work model. As for permanent WFH legislation, the agency said that they are leaving this to the next administration. Plaza stated that this can be introduced under the next president’s government “to institutionalize the work scheme and corresponding ratio.”
Industry group Alliance of Call Center Workers (ACW) reported that at least four to six BPO companies are willing to forego their tax incentives to continue working remotely. ACW co-convenor Lara Melencio said that these organizations would rather suffer than “force their workers to return to the office.” The salaries of employees are expected to remain the same even though employers would lose their fiscal incentives from the government. Another ACW co-convenor, Emman David, added that a “significant number” of BPO workers are ready to quit once WFH is removed. David said that this is based on a recent poll done among the group’s 1,400 members. In their appeal to the FIRB, ACW said that the government should consider hearing the employees’ side as they “will be the ones who will undergo hardships” once everyone starts going back to their offices.
Property research firm Colliers International Philippines is advising office landlords to create an environment that enhances employee experience to make everyone excited about their office return. In their latest market outlook, Colliers said that highlighting the building’s health and safety measures, renovating spaces to retain social distancing, fitting office spaces to handle the inflow of employees, and short-term leasing vacant spaces could attract tenants to their properties. Colliers added that although they support remote work extension, they also believe that the impending return of employees to their offices could help other supporting industries thrive and recover post-pandemic. At the same time, the Akbayan Party List is urging the government to provide benefits and subsidies to employees who will be compelled to go back to their offices. According to Raymond John Naguit, the party list’s second nominee, if workers would have no other choice but to return to on-site work, then they should be afforded subsidized commutes and free COVID-19 testing. Naguit’s suggestions were based on the provisions under the Telecommuting Act, which allows reimbursements to employees on any expenses incurred while they are working in alternative workplaces.
In other news, President Rodrigo Duterte signed Executive Order (EO) No. 166 which lays down a 10-point policy agenda aimed at accelerating the economic recovery. Recommended by his Economic Development Cluster, the EO includes strengthening the healthcare sector and vaccination programs across the country. It also tackles the further reopening of the economy, expansion of public transport capacity, resumption of face-to-face learning, boosting of the local tourism industry, and introducing laws that will assist the Philippines’ digital transformation. Speaking of economic recovery, the National Economic and Development Authority (NEDA) is eagerly celebrating the implementation of Republic Act No. 11659 which amends the Public Service Act (PSA). NEDA secretary Karl Kendrick Chua said that the RA will attract more foreign investors, improve the quality of goods and services in the country, and open more jobs for Filipinos. RA 11659 allows full foreign ownership in businesses across various sectors — including telecommunications, airlines, and railways. This law completes the administration’s economic liberalization reforms that are aimed at increasing the country’s competitiveness post-pandemic.
The Department of Trade and Industry (DTI) is looking to conclude the Comprehensive Economic Partnership Agreement (CEPA) between the Philippines and United Arab Emirates (UAE) next year. In a statement, DTI Assistant Secretary Allan Gepty said that this will stabilize trade relations between both countries and could open potential trades “to the vast market of the Middle East, including the GCC (Gulf Cooperation Council).” The DTI is also planning to use CEPA as a launchpad for PH’s trade agreement with North African nations.
Simultaneously, the Board of Investments (BOI) is looking to attract more foreign biotechnology companies to the country through a roadshow in the United States (US) roadshow. Under the board’s Make It Happen in the Philippines campaign, the roadshow aims to introduce investment opportunities to the life sciences and healthcare startups in the US. Among the attendees is the Filipino-led firm InterVenn which pioneered the latest innovation in pre-cancer screening using artificial intelligence (AI) called ‘Glycoverse’. As good news, InterVenn is planning to open a software hub in the Philippines and add 100 software Filipino engineers to its workforce.
But wait, there’s more! A total of eleven data centers and hyperscalers are planning to roll out projects worth P147 billion (US$2.8 billion) in the country. DTI Secretary Ramon Lopez disclosed that of these companies, five are US-based and are working on data center projects with a capacity of 150 to 180 megawatts (MW) or an estimated project cost of over $2 billion. This is a great benefit to the Philippines as the government is positioning the country as the “next strategic hub in Asia” for hyperscalers and data centers. Enterprise spending on cloud services in the country is expected to hit $2.6 billion in 2024, doubling 2020’s $1.8 billion.
The investment gods are definitely favoring the Philippines this year!
Thursday, March 31, 2022
NEWS THIS WEEK
30 March 2022
- Aboitiz’s new office tower looking to attract BPO firms – read article…
- PH, UAE trade deal to be concluded in 2023 – read article…
- On-site return divides conglomerates, BPOs – read article…
- Hyperscalers, data centers to invest P147Bn in PH – read article…
29 March 2022
- Employee experience should be prioritized to push on-site return — Colliers PH – read article…
- BOI looking to attract more biotech innovators through US roadshow – read article…
- PEZA allows hybrid work arrangements – read article…
- IT-BPM contributes 26% to Q1 office vacancies – read article…
28 March 2022
- Call center group opposes on-site return, pushes for dialogues with DOLE – read article…
- Companies with expansion plans dropped to 20.8% — BSP – read article…
- Moody’s raises PH GDP estimate to 6.4% – read article..
- IT-BPM remains ‘fundamental catalyst’ in PH real estate – read article..
25 March 2022
- Some BPO firms would rather lose tax perks than remove WFH – ACW – read article…
- ‘Significant number’ of BPO employees ready to resign from their jobs – read article…
- Sen. Lacson pushes for WFH extension – read article…
- Akbayan seeks benefits, subsidies for returning BPO employees – read article…
24 March 2022
- PEZA pins permanent hybrid work to next admin – read article…
- WFH in IT-BPOs may continue without tax perks – DOF – read article…
- Duterte signs economic recovery EO – read article…
- NEDA commends PSA amendment – read article…
