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- Category: Top News
- Published on Thursday, 24 January 2013 21:10
- Written by Bloomberg News
For the Philippines’s $13-billion business-process outsourcing (BPO) industry, the peso’s surge has been compounded by a slide in larger rival India’s rupee.
The peso’s 6.5-percent gain to 40.618 per dollar in 12 months makes it Asia’s best performer, according to data compiled by Bloomberg, while the rupee’s 6.7-percent slump to 53.67 is the region’s third-worst decline. Both currencies traded around 44 to 45 versus the greenback two years ago.
“The peso appreciation has become a significant cause for concern,” Benedict Hernandez, president of the Business Processing Association of the Philippines (BPAP), said in a January 15 telephone interview from Manila. “While our costs have always been higher than India, the disparity has widened simply because of the currency.”
The Bangko Sentral ng Pilipinas (BSP) has sought to curb the peso’s gains as Southeast Asia’s fastest-growing economy lures investors seeking higher returns than in developed markets, where interest rates are near zero. In a December survey by BPAP, members of the group cited the currency’s strength as a bigger business risk than corruption, natural calamities and poor infrastructure.
“The competitiveness of outsourcing companies may be affected because their revenues are in dollars and costs in pesos,” Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore, said in a January 17 telephone interview. “India’s rupee has been going in the other direction,” affecting Philippine outsourcing companies even more, he added.
Paracuelles said the rupee has “stabilized a bit.” The Indian currency has rebounded from a record low of 57.3275 per dollar reached on June 22, data compiled by Bloomberg showed. It will strengthen to 50 this year as the central bank cuts interest rates to jump-start the slowest growth in a decade, according to Commerzbank AG, which had the closest estimates in the last six quarters as measured by Bloomberg Rankings.
The peso touched 40.55 per dollar on January 14, its strongest level since March 2008, according to data from Tullett Prebon Plc. The Philippine currency will probably strengthen to 40.5 this quarter, according to the median estimate of 26 analysts in a Bloomberg survey.
“We’d rather have a stable currency because it would make it easier for us to sign long-term contracts,” Som Mittal, president of Nasscom, the industry lobby group for Indian software and technology companies, said in a January 17 interview.
“We’d rather the exchange rate not be a source of profit or loss for our companies.”
Convergys Corp., Aegis PeopleSupport Inc. and Teleperformance are among global companies operating in the Philippines that develop software, run call centers and back offices providing services such as medical transcripts, finance and accounting. The BPO sector generated about $13 billion in revenue last year, according to BPAP, which predicts that sales will almost double to $25 billion in three years.
The industry employed 772,000 people in the Philippines last year and made up about 5.9 percent of gross domestic product (GDP), making it the country’s third-largest net dollar earner after tourism and remittances, according to Hernandez, also the local BPO operations chief at Accenture Plc., the world’s second-largest technology-consulting company.
BPAP estimates that the industry will employ 1.3 million people in 2016 and account for 10 percent of GDP, matching the share of remittances by overseas workers.
While India’s annual outsourcing revenue of $100 billion to $105 billion is eight times the size of the Philippines, the Southeast Asian nation’s pool of English speakers gives it an advantage in offering voice services to customers in the US, according to an October 31 report by industry adviser Everest Group.
Voice services accounted for 69 percent of 2011 BPO revenue in the Philippines, and the industry is starting to diversify beyond call centers, the Everest Group said in a separate report dated May 14, 2012. The Philippines has overtaken India as the largest provider of voice services, according to BPAP’s Hernandez.
“Our English-speaking work force can do it at a lower cost, with better quality,” Hernandez said. Even so, “we can’t sustain our growth and attractiveness if the peso continues to strengthen,” he added. According to him, BPAP has sought a meeting with the BSP to express concern about the appreciation.
In last month’s survey by the outsourcing group, 47 percent of respondents said that meeting sales targets has become tougher, while 40 percent said that they lost some business to foreign rivals.
BSP joined South Korean authorities last month in clamping down on exchange-rate volatility.
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