Using the words “Philippines” and “Rich” in one headline is something you don’t see everyday; in fact you might not see it at all. Sure, we might have shown a fast-growing GDP last year, which puts us on the radar of many institutional and private investors, but the harsh reality is that majority of the country remains poor (with 4.2 million families as of 2012). However, there is still a silver lining — the country’s young and large population can be an asset and an important driver of Philippine economy.
The Rise of Offshoring and Outsourcing Industries
The BPO and KPO industries have grown to be one of the major drivers of growth of the economy. The industries have employed over 493,000 Filipinos in 2012 alone and have contributed to the large demand of commercial spaces in the major CBDs: Makati, Bonifacio Global City, and Ortigas. The IT-BPO industry has also generated over $13-billion export revenues in 2013 and is expected to hit $15.34-billion this year. Its rise also spurred growth in other industries — it created 24/7 cities where food outlets, transportation, and other services are available even at night to cater to night shift workers, encouraging the expansion and establishment of many small businesses in the country.
In a span of a few years, the Philippines has become the outsourcing and offshoring hotspot, beating other BPO and KPO destinations such as India and other Asian countries Thailand, Malaysia, etc. Some of the factors that helped boost the country’s BPO and KPO industries are the following:
1. Skilled and talented population: Because Filipinos place a high premium on education, the country has a 93.4% literacy rate and a vast resource of college graduates specializing in a wide variety of areas: engineering, medicine, humanities, and more. Our professionals have become important assets as Western countries start looking in the Philippines for experienced managers and experts in certain fields, as they experience shortage of talent in their own countries. The US alone lacks engineers, technicians, IT staff, teachers, sales representatives — even mechanics and drivers. This places the country at a huge advantage, encouraging firms to move offshore or outsource jobs in the Philippines.
2. Low cost of living: The Philippines also has a lower cost of living, making it easier for foreigners and expats to start their own businesses in spite of having a small capital. The Philippines has the lowest rental rate in Asia, with Makati Grade A office spaces ranging between $16 (PHP 733) to $21 (PHP 950) per sqm, according to this report. Find out how much it costs to run a business in the country here.
3. Beneficial tax incentives and government policies: The Philippine government provides very lenient tax rules and incentives to encourage foreign investment into the country. Companies accredited by the Philippine Economic Zone Authority for example, enjoy 0% income tax for the first 4 to 6 years depending on the project type as well as 0% withholding tax. It also allows tax and duty-free importation of equipment and parts and VAT zero-rating of local purchases of goods and services.
4. Stable political climate and Western-influenced culture: In spite of the widespread issue of corruption in the government, the Philippines has a stable political climate under the Aquino administration, which has helped spur investor interest in the country, allowing its GDP to expand by more than 7% last year. The Filipino culture is also heavily influenced by the United States, making Filipinos effective communicators and more receptive to Western concepts and ideas. Most of the cities in the country are tourist and foreigner-friendly, so it’s easier for expats and tourists to adapt to lifestyle in the Philippines.
The Philippines is rich with opportunities
With these advantages, the Philippines can capitalize on the offshoring and outsourcing industry to create jobs and encourage Filipino professionals to stay in the country. The government should invest on science and education to ensure that the country is capable of responding to the high demand of talented and educated individuals for all fields, not just a workforce that can do low level or blue collar jobs. It should also work towards stifling corruption and spend on improving its infrastructure and funding its cities to encourage development from the grassroots. Doing these steps can make our dream of a rich Philippines closer to becoming a reality.
Comments are closed.