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Gartner confirms the 2008-09 financial crisis has triggered widespread adaptation of BPO and shared services by European countries and corporations. Presentation for the Shared Services and Outsourcing Exchange in Europe.
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The Philippines: The Location of Choice for IT-BPO and Shared Services
6th Shared Services and Outsourcing Exchange
BrainWeave Session 10:00 a.m.-11:00 a.m., 17 September 2012
Prague, Czech Republic
Alejandro P. Melchor III Deputy Executive Director for ICT Industry Development
Department of Science & Technology
Information and Communications Technology Office
Outline
• Philippine economic scorecard
• Policy directions
• Philippine Advantage
• Government Support
Land Area: 300.000 km2
Population: 94.2 million
41% working group from ages 20-44
16% working group from ages 45-64
Capital City: Metro Manila
Political Structure: Democratic (Presidential System)
National Language: Filipino,
Official Language: English
Religion: 93% Christian Believers of which 83% are Catholic
2011 GDP : US$224.8 Billion
2011 Per Capita Income: $2,223 Sources: Bangko Sentral ng Pilippinas National Statistical Coordination Board and National Economic and Development Authority
PHILIPPINES AT A GLANCE
1
PHILIPPINE ECONOMIC SCORECARD
GNP/GDP Quarterly Growth
(2010-2012) Highlights
6.9
5.6
3.5
2.4
2.2
4.5 5.1
6.3
7.3
6.1
4.9
3.6
3.2 4.0
6.3
5.1
0
2
4
6
8
10
12
GNP
GDP
Sources: Bangko Sentral ng Pilippinas National Statistical Coordination Board and National Economic and Development Authority
GDP growth of 7.6% in 2010, highest in 31 years
BOP record surplus of US$10.2B in 2011
Inflation at its lowest in 21 years
Stable and low interest rate environment
Gross international reserves (GIR) peaked at $75.3 million in 2011
PHILIPPINE ECONOMIC SCORECARD
= Resistance to external shocks. Positive GDP growth rate for 52
consecutive quarters since 1999
-20%
0%
20%
40%
60%
80%
100%
2003 2004 2005 2006 2007 2008 2009
Pvt. Consumption Govt. Consumption Investments Net Exports
Consumption-driven economy + Nearly $80M Gross Int’l Reserves
+ Prudent fiscal management
+ Sound economic policy
HSBC, The World in 2050:
• “Attention will increasingly turn to the
‘new emergers’ as the world economy
undergoes a seismic shift…”
• “We highlight the following:
The striking rise of the Philippines,
which is set to become the world’s
16th largest economy, up 27 places
from today.”
• “Who will deliver the
fastest growth enroute
to 2050?” https://www.research.hsbc.com/midas
/Res/RDV?ao=20&key=hCmm8WiQC
0&n=317638.PDF
Ruchir Sharma, Morgan Stanley
• TIPs, poised to upstage BRICs
• Turkey, Indonesia, Philippines
• “Aquino is delegating power to
competent technocrats…”
Jim O’Neill, Goldman
Sachs:
• Philippines one of the
“Next 11”—the next
BRICs.
World Economic Forum:
• Philippines leapfrogged 20 places in
global competitiveness in the 2 years of
the Aquino Administration.
2012 economic performance lives up to billing
#2 in Asia, 1Q 2012
#3 in Asia, 2Q 2012
• A more responsive government and a business-friendly environment
• Continued fiscal consolidation
• Increased infrastructure spending
• Clear agenda for competitiveness
• Broad-based expansion led by services
• Prioritizes creation of jobs that empower the people
• ASEAN masterplan for ICT development
• National development plan for rapid economic growth
• Inclusive agenda for national ICT development
POLICY DIRECTIONS
http://devplan.neda.gov.ph/index.php
ilearn.gov.ph/PhilippineDigitalStrategy2011-2016.pdf
http://www.aseansec.org/22073.htm
President Benigno S. Aquino III supports the IT-BPO Industry
“The BPO sector has successfully showcased
the skills of Filipinos to the world.”
“By the time I step down in 2016, we are looking at
revenues that will have more than doubled to $25 billion
and 4.5 million jobs — 1.3 million directly as a result of
the BPO sector and 3.2 million indirect jobs.”
Source: Business Processing Association of the Philippines (BPAP)
101
163
236
300
372
442
525
643
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009 2010 2011
$1.3
$2.2
$3.3
$4.9
$6.1
$7.1
$8.9
$11.0
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
2004 2005 2006 2007 2008 2009 2010 2011
Total Employees (000s) Annual Revenue (US$B)
Philippine IT-BPO Industry: The country’s premier sunrise industry
12
Suitability rates are empirically based on a total of >80 interviews
with HR professionals working in each country
Number of college degree graduates 2010
Medical and natural sciences, allied fields
119,378
Business, accounting, and related fields
117,339
Social and behavioral sciences, education
68,811
Engineering and architecture 50,734
IT-related and mathematics 47,928
Fine arts, masscom, humanities 12,269
TOTAL Tertiary level 481,862
Pop Labor force Unemp rate Literacy
World 7,021M 3,264M 9.1% 83.7%
India 1,205M 488M 9.8% 61.0%
China 1,343M 796M 6.5% 92.2%
Brazil 206M 105M 6.0% 88.6%
Philippines 92M 41M 7.4% 92.6%
Abundant labor force of 38 million
Over 450,000 college graduates per year
Large pool of accounting and business
graduates
English proficiency
Affinity with Western culture
Customer service orientation
Highly trainable
Cost effective
High level of commitment and loyalty
Source: CHED 2012; CIA World Factbook 2012; NSO 2012
The Philippine talent value proposition: large pool of young, English-speaking talent
Philippines has abundant human and natural resources—world’s 5th richest store of natural resources
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009 to Sept.
30, 2010
Source: Everest analysis
29-3224-26
19-2016-17 15-16
14-15
70-72
US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR
Reflective of market averages. Range
could vary depending upon
Tier-1 vs. Tier-2 cities
Suppliers vs. captives
Scaled operations vs. mid-size
operations
Direct operating cost1 per FTE for English voice work
2010; US$ ’000 per annum per FTE
ENGLISH-LANGUAGE VOICE EXAMPLE
Philippines is currently among the most-competitive destinations for IT-BPO services
MARKET AVERAGES
Direct operating cost1 per FTE for F&A transactional work
2010; US$ ’000s a year per FTE
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept.
30, 2010
Source: Everest analysis
MARKET AVERAGES
FAO EXAMPLE
Copyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.
Likewise, The Philippines is among the lowest cost locations for non-voice BPO work
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept.
30, 2010
Source: Everest analysis
MARKET AVERAGES
ADM EXAMPLE
Direct operating cost1 per FTE for IT Applications Development and Maintenance (ADM)
2010; US$ ‘000s per annum per FTE
Copyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.
…and for IT Services
RELIABLE AND REDUNDANT CONNECTIVITY
Cable Landing Stations
Transmission Backbone Networks
PLDT Digital Fiber Optic Network
(DFON)
Globe Telecom Fiber Optic
Backbone Network (FOBN)
TelicPhil (BayanTel) Nationwide
Digital Transmission Network
(NDTN)
Ballesteros, Cagayan
Tanza, Cavite
Nasugbu, Batangas
Bauang, La Union
Daet, Camarines Norte DAVAO
CDO
DAUIN
TALISAY
LAHUG
LILOAN
SAN REMIGIO
ROXAS
SAN JOSE
MAMBURAO
NASUGB
U
BACOOR
ERMITA
SAMPALOC
CADIZ
MANTICAO
ILIGAN
CANERO
AURORA
MAKATI
ZAMBOA
NGA
GEN. SANTOS
BACOLOD
SORSOGON
BATANGAS
CABADBARAN
COTABATO
PAGADIAN
BUTUAN
MAASIN
TACLOBAN
ORMOC
PAGBILAO PILI
LEGASPI
CALBAYOG
DONSOL
NAGA
DUERO
TAGBILARAN
BALLESTEROS
ILOILO
LAOAG
SUBIC
BAGUIO
SFLU
DAGUPAN
CABANATUAN
VIGAN
TARLAC
URDANETA
MASBATE
BANATE
CAUAYAN
TUGUEGARAO
SOLANO
MARIBOJ
OC
TALISAY
TGN-IA
AAG
EAC
APCN2
C2C
ASE
SeaMeWe-3
SJC
(June 2013)
World class, IT-BPO designed, infrastructure
Lowest rental rates in the region; dedicated IT parks right in the center of business districts
McKinley Hill
Taguig City
Northgate
Cyberzone
Muntinlupa City
Ortigas Center,
Mandaluyong City/Pasig City
Bonifacio Global
City, Taguig City
Eastwood City Cyberpark
Quezon City
Makati City
METRO MANILA
UP-Ayala Technohub,
Quezon City
4 to 8 years Income Tax Holiday (ITH)
Special 5% tax on Gross Income
Other tax and duties exemptions*
Domestic sales allowance of up to
30% of total sales
Additional deduction on total
manpower training cost
1 Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials 2 Exemption from export taxes, wharfage dues, imposts and fees 3 Exemption from Value Added Tax (VAT) on allowable local purchases such as telecom, power, and water bills 4 Additional deduction of 50% of total manpower training cost under the special 5% gross income tax regimec
COMPETITIVE INVESTMENT INCENTIVES
iPPP PROGRAMS
Stepping-Up the
Value Chain
i-TalentDev.PH
Next Wave Cities/
Smarter Countryside
i-Creative.PH
ICT Marketing &
Research
GOALS
ICT: a $50B industry by
2016:
• IT-BPO $25-27B
• All other ICT: $23-25B
Global leadership in
multiple high growth
segments
Countryside development
through ICT & BPO
Increase size &
employability of talent pool
Develop knowledge
workers with
21st Century Skills
PROJECTS
1 – Research & Road
Mapping
2 – Training & Education
3 – Organizational
Development &
Capability Building
4 – Advocacy and
Marketing
5 – IT-preneurship &
Technology Business
Indicators
6 – Policy Framework,
Business Environment
Investment Incentives
ICT & BPO Industry Development Programs
GOVERNMENT SUPPORT
We are #1 in call centers and we
intend to become market leader in UK & Australia
We intend to attain world
leadership in 4 more fast growing services
We intend to double our market
share in 3 other fast growing services
Voice BPO
Healthcare Information Management Outsourcing
Finance & Accounting Outsourcing
HR Outsourcing
Creative Process Outsourcing
IT Outsourcing
Engineering Services Outsourcing
Multilingual BPO
ICT-enabled Creative Industry Development
Philippine Technological Council
Stepping Up the Value Chain Program
World Class Talent
450,000 college graduates annually
Industry specific curriculum
development,
assessments & certification
Knowledge Workers with 21st Century
Skills for the Global Knowledge Economy Government
support to training and development
of ICT-industry workers
Educational reforms for mutual
recognition of qualifications and
degrees
Development of World Class Talent
Next Wave Cities Program provides access to
talent throughout the Philippines
An Invitation
Discover
the
Philippine
Advantage!
For more details, visit:
www.icto.dost.gov.ph
www.dti.gov.ph
www.peza.gov.ph
Department of Science and Technology-
Information and Communications Technology Office
http://www.bpap.org/publications/research/investorprimer2012