The Advantages of Outsourcing to the Philippines
Updated: Jul 25, 2019
This post is taken from the Blog site of Philippine Software Industry Association.
You can see the entire post here.
Outsourcing has been around for more than two decades, and although they were a little late to the party, the Philippines has shown phenomenal growth in the industry. The Southeast Asian country with a population of more than 100 million has become one of the top outsourcing destinations in the world, owing to the combination of its highly qualified and cost-competitive workforce, plus strong government support for investment in outsourcing. In 2015, the outsourcing industry employed over 1 million Filipinos, with projections that it can generate up to $55 billion by 2020 or roughly 11 percent of the country’s GDP, according to World Bank estimates.
In terms of the Philippine IT-BPO Road Map, projections are that the industry will grow to employ 1.5 million workers and generate $25 billion in annual revenue this year. While the Philippines is now the world leader in voice-based business services (call centers), there are approximately 25 different sectors represented in its IT and shared services sector, and increasingly these sectors represent knowledge-based, non-voice services. More than one third of the industry is engaged in delivering complex services.
Commenting on the US Senate’s rejection of an anti-outsourcing bill, Benedict Hernandez, then President of the Business Processing Association of the Philippines (BPAP), said recently: “Outsourcing business services to the Philippines helps make American companies more competitive and profitable. Profitable companies hire more workers, both here and in the United States.” The BPAP is an umbrella organization for the IT-BPO industry in the Philippines and acts as an advocacy group for the country’s outsourcing and offshoring sector. It seeks to promote competitive advantages and growth potential in existing and new areas of outsourcing.
All-Out Government Support for BPO Industry In addition to supporting the BPO industry directly, the Philippine government is building the country brand to promote investment through increased visibility. In 2015, this initiative received a great boost when Manila hosted the year-long Asia-Pacific Economic Cooperation (APEC) summit which concluded with the APEC Economic Leaders Meeting. In attendance were top world leaders including Chinese President Xi Jinping, Japanese Prime Minister Shinzo Abe and U.S. President Barack Obama. The event was a unique opportunity for the Philippines to showcase its public-private partnerships, its tourism industry, Filipino arts and culture, and its world-class services.
Two main government enticement schemes are the incentives granted by the Board of Investments (BOI) and incentives under the Philippine Export Zones Authority (PEZA). BOI incentives include an income tax holiday for a period of six years for pioneer enterprises and four years for non-pioneer enterprises; the employment of foreign nationals in a supervisory, technical or advisory position for a period of five years; a deduction from taxable income of 50% of labor expenses; and unrestricted use of consigned equipment.
PEZA incentives include the option to pay a special 5% tax on gross income earned in lieu of all national and local taxes; exemption from payment of import duties and taxes on imported machinery, equipment and raw materials; a deduction equivalent to 50% of training expenses; permanent resident status for foreign investors with initial investment of US$150 000 or more; and employment of nonresidents required in the operation of IT enterprises.
Together with strategies being implemented by the Department of Education of the Philippines to improve education and training and produce more graduates for the labor market, these aggressive government incentives are strengthening the Philippines’ already healthy position as a value destination for investors.
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TeleDevelopment Services (TDS) has been playing a critical role in providing consulting services and solutions to the world’s biggest companies, helping them achieve their outsourcing objectives for more than 25 years. Our global experience, local expertise and client-centric approach to finding creative solutions to business challenges has given our BPO partners a significant edge in establishing, building and optimizing their global operations’ performance, capability and success.
Whether you’re starting out, looking for the best talent, entering new markets, reducing costs, aiming for efficiency, improving performance, enhancing profitability or leaping ahead of the competition, TDS can work hand-in-hand with you in taking your business to the next level.
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