Wednesday, January 2, 2013
THE 56 business inquiries received by the Cebu Investment and Promotions Center (CIPC) in 2012 resulted in 17 companies that have set up shop in Cebu.
At least five companies are still preparing documents and are expected to set up operations early this year.
CIPC managing director Joel Mari Yu said the continued interest of foreign companies to relocate and set up operations in Cebu is a manifestation of their confidence on the city’s economy, talent pool and governance.
Yu said 2012 was “much livelier” compared with 2011 because most of the new entrants are knowledge process outsourcing (KPO) players. But “2013 is projected to be as good or even better,” he said.
Yu anchored his projections on what he described as the country’s sound macro-economic fundamentals, which restored foreign investors’ confidence to do business in the Philippines.
He said the Aquino Government’s policy reforms and the President’s serious fight against graft and corruption along with favorable market conditions like the US election results and decision to defer the anti-outsourcing bill in the US have increased the confidence of investors.
Jobs
The new investments generated 11,000 more jobs in 2012, adding to the 75,000 generated with the entry of 81 Philippine Economic Zone Authourity (Peza)-registered companies in 2011.This does not include the job opportunities created by companies that are already here.
The five companies set to start operations early this year are expected to generate 4,000 to 5,000 jobs. CIPC only keeps track of Peza-registered companies.
Yu said most of the new entrants are foreign non-voice companies, which strengthens Cebu Cebu’s leadership in Business Process Outsourcing (BPO) and, more importantly, in the high-value KPO industry.
Yu said the entry of non-voice companies in Cebu makes the IT-BPO/KPO industry more stable because it expands Cebu’s market, which was previously limited to the US, into other countries.
The presence of KPO companies in the country also helps slow the migration of skilled Filipino professionals abroad.
“This proves that Cebu is not limited in delivering the usual BPO services but (is also capable) in carrying out high value services,” Yu said.
Various industries like tourism, real estate, food and retail have attributed their growth to the country’s booming IT-BPO/KPO industry.
Businessmen said the strong domestic consumption is driven by young professionals, mostly working in IT-BPO/KPO companies, with high disposable income. They said these young professionals have helped companies achieve sales target.
Exist chief executive officer Jerry Rapes said the IT-BPO ecosystem in Cebu is growing.
“I believe that other markets of the US are starting to see opportunities to outsource IT projects to the Philippines and Cebu is one of the prominent locations that can deliver this service,” Rapes said.
He said the recovery in the US will open more opportunities for IT projects for Filipinos.
Silicon Valley
Exist was among the eight Filipino companies that became part of the US-Philippines Business Support and Information Technology Delivery Council that seeks to explore business opportunities and partnerships in Silicon Valley.
He said they are working to capture a larger chunk of the $1 trillion Silicon Valley business.
The country’s outsourcing industry, however, faced some challenges last year.
In early 2012 the industry was threatened when a bill was filed in the US Congress that sought to bring outsourced jobs back to the US. Industry stakeholders in the country predicted the bill will fail to muster votes, saying outsourcing will stay as this makes companies competitive in. The bill wasn’t passed.
The appreciation of the peso against the US dollar also affected the growth of the industry.
The Business Processing Association of the Philippines (BPAP) said the strengthening peso is “eroding the cost competitiveness” of the country’s IT-BPO industry.
Stronger peso
Citing analysis by Everest Group and Outsource2Philippines, BPAP president and CEO Benedict Hernandez said the combination of an appreciating peso and a depreciating Indian rupee provided India cost advantage.
“With the 30 percent difference in peso and Indian rupee exchange rate with the US dollar, the cost differential has substantially widened,” Hernandez said. “And that is much more difficult to manage.”
BPAP conducted a survey last December on the impact of the strengthening peso. In the survey, 46.7 percent of respondent executives said “it has been difficult for them to hit revenue targets;” 40 percent of the respondents said they have “lost some business to other destinations;” and 40 percent “cancelled expansion plans.”
The peso ended at P41.05 to the dollar on the last trading in 2012, stronger than the P43.92 on the first trading on Jan. 2 last year.
“The foreign exchange has negatively affected gains in volume of business,” said Rapes.
But BPAP is confident of hitting the $13 billion revenue target in 2012 despite the appreciation of the peso.
For 2013, the association hopes to achieve $16 billion in revenues with a target of 926,000 employees. Under the roadmap, the BPO industry is expected to hit $25 billion in revenues and 1.3 million jobs in 2016.
Growth
Rapes is optimistic the industry will continue to grow and “win more strategic deals.”
He said the overall positive outlook of the Philippine economy is being recognized globally and the aversion to Philippines, as an outsourcing destination is reducing.
“The world is starting to believe that the risk of doing business here is going down,” he said.
But aside from exporting services, Rapes believe the Philippines can also do well in exporting products. “It will be a process that is neither easy nor fast but this is something that we need to do,” he said.
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