Published 25 April 2017 Category: Business, Insights

Business process outsourcing boom in the Philippines calls for flexibility in office premises

The growth of business process outsourcing in the Philippines not only drives economic growth but also demand for flexibility in office premises.
Many skilled labour work such as writing, accounting, virtual assistance, design and web development are outsourced to the Philippines. Setting up freelancing services or outsourcing companies is becoming the next big trend in the country.
According to the IT and Business Process Association of the Philippines, employment will see a compound growth rate at eight per cent from now on until 2022. Higher value services and provincial locations are the source to drive the growth. Analysts said Cebu, Bacolod, Iloilo, Pampanga and Davao are the most viable alternative locations for growth because of the talent pool, competitive edge and support from local government and the authorities.
While China’s sluggish economy in 2016 has already inspired many economists and market watchers to pay cautious attention over the country’s performance in 2017, data from the Philippines painted a completely opposite picture.
Economists and market watchers said the Philippines will be boasting one of the fastest economic growth in the world in 2017.
Their views could be intriguing. Despite the fact that the Philippine Stock Exchange recorded the second-worst performance in the world - a 10 per cent fall in 2016, only behind Ghana in West Africa. The country’s currency peso also fell by five per cent in September 2016, hitting a seven-year low.
However, the country is expecting a 7.1 per cent GDP growth in 2017, one of the fastest in the world. The World Bank, though being rather cautiously optimistic, still gave a vote of confidence in the country by giving a promising 6.9 per cent GDP growth in 2017.
The Hongkong and Shanghai Banking Corp. (HSBC) also said recently that it has upgraded its GDP growth forecast for the Philippines from 6.5 per cent to 6.5 per cent, after upgrading its full-year 2016 growth estimate from 6.5 per cent to 6.8 per cent. HSBC’s economist Joseph Incalcaterra said that the economic outlook for the Philippines is robust, underpinned by resilient domestic demand.
There are reasons behind economists’ optimism. Compared with many other countries around the world, the Philippines has a great deal of potential that is yet untapped.
First, the Philippines is a young country that is still underdeveloped. The country has more than 103 million population, with a median age of just 24.4 years old. It is also the world’s third largest English-speaking country, but it has only 44.8 per cent of urban population, which demonstrates great potential in the region.
The Philippines government has been striving to create an environment favourable for business. Recently, the government established free trade zones through the Philippines Economic Zone Authority in order to attract foreign investment.
The cost of running a business in the Philippines is relatively low. Salaries are lower than fifth of that of the United States. The electricity, local communication, and housing cost are only half of the rates in the US. That is why foreign companies are now outsourcing, programming and business processes to the Philippines.
This make it very favourable for the young population in the Philippines - and a population of 95.6 per cent literacy rate. The low costs in setting up a business and incoming foreign investments allow a lot of younger people to set up their own businesses, riding on the booming startup trend.