Philippines’ rise as call-center nation lures expats home

Having grown up poor, Denise Sese found herself still mired in debt. It was 2009. A college dropout and one-time cashier at a Jollibee Foods Corp. fast-food outlet in Manila, she was out of a job.

At a Manila mall one day, she spotted a booth advertising a free call-center training program. She signed up and eventually landed a job, Bloomberg Markets magazine will report in its November issue.

Today, at 27, Sese exudes confidence as an account manager at Concentrix Corp., a unit of Fremont, California–based Synnex Corp. (SNX) In a high-rise building in the Eastwood City complex in Metro Manila, she leads an eight-member team that sells products to U.S. companies on behalf of clients such as online retailers and manufacturers of consumer electronics.

Linguistic diversity is a characteristic of life in the Philippines, which at different times was under British, Spanish and Japanese rule before independence from the U.S. in 1946.

Like many Filipinos, Sese listens to American pop music, studied English in school and grew up watching Sesame Street, Friends and other U.S. TV programs.

Over time, she’s picked up an American accent from her callers. This, she says, has elicited surprise from customers on the other end of the line: “When they find out I’m Filipino, they’d be like, ‘Oh, my God!’”

$15.5-Billion Industry

Sese got her foothold at Concentrix when call centers in the Philippines were flourishing. During the past decade, business process outsourcing — which encompasses call centers, health-care information management and computer animation, among others — has emerged as one of the fastest-growing segments of the country’s $272 billion economy.

In 2013, the BPO industry generated $15.5 billion in revenue and employed 900,000 people, up from $3.2 billion and 240,000 people in 2006, according to the IT and Business Process Association of the Philippines, or IBPAP.

Along the way, the industry eclipsed tourism as one of the biggest sources of foreign revenue, behind remittances sent home by Filipinos working abroad — payments that reached a record $23 billion in 2013.

It’s grown so fast that Philippine Senator Miriam Defensor Santiago last year proposed legislation to safeguard the welfare of BPO workers and ensure their rights to unionize.

‘Extra Effort’

Citing International Labour Organization studies, Santiago said 42.6 percent of BPO employees worked night shifts, and many suffered from insomnia and fatigue. As of mid-September, her bill was pending before the Senate Committee on Labor, Employment and Human Resources.

IBPAP Chief Executive Officer Jose Mari Mercado says the industry upholds high standards.

“Our assets are our people,” he says. “We take extra effort to ensure that we compensate them properly and provide them with health and wellness packages.”

Mercado says that by 2016, outsourcing may generate $25 billion in revenue and employ 1.3 million people, matching cash remittances for the first time. And BPO workers offer a plus that the Filipino diaspora doesn’t, he says.

“The difference is that our 1.3 million are here with their families, and they spend all of their money here,” he says, adding that each outsourcing job generates as many as 2.5 jobs in retail, public transportation and other service businesses.

Young Demographic

The outsourcing boom is fueling gross domestic product growth that has averaged 6.3 percent since 2010 and hit 7.2 percent last year.

For all that, poverty remains widespread, with 18.4 percent of the population living on less than $1.25 a day, according to the World Bank.

The economy is struggling to accommodate a strikingly young demographic. Half of the population is 23.5 years old or younger, according to the CIA World Factbook in 2014. By comparison, the median age in Thailand is 36.2; in Japan, it’s 46.1.

To boost the economy after he took office four years ago, President Benigno S. Aquino III has gone after tax evaders, cracked down on corruption, attracted foreign capital and invested in infrastructure and education.

On a visit in July, World Bank President Jim Yong Kim said Aquino’s policies have been good for the economy.

‘Asian Miracle?’

“Maintain these reforms, continue on the path that you’re on, and I think the future is very bright for the Philippines,” he said. “Can the Philippines be the next Asian miracle? Coming here, I think there is no question that is the case.”

If that’s to happen, places such as Eastwood City, where Sese works, will be one of the drivers.

Two decades ago, Eastwood was little more than a cluster of dilapidated textile factories. Then Andrew Tan, founder of Megaworld Corp. (MEG), a Manila-based real estate developer, set about turning 17 hectares (42 acres) of land into the country’s first development in which residential buildings and retail spaces were built around call centers.

Megaworld Senior Vice President Jericho Go, Tan’s executive assistant at the time, recalls the company’s efforts in 1997 to persuade Lilia de Lima, director general of the Philippine Economic Zone Authority, that Eastwood City should qualify as an IT park and get tax breaks.

‘Please Help Us’

“We told her, ‘Ma’am, the country needs this, so please help us,’” Go says. In 1999, Eastwood was granted IT park accreditation.

Today, 60,000 people work at 59 companies in Eastwood: More people are employed there than in any other Philippine development of its kind. About 25,000 residents, many of them call-center employees, live, work and play amid 500 commercial and retail shops.

Some are open day and night to cater to employees who work a dizzying array of shifts beneath wall-mounted clocks set to various time zones.

One of the most popular hangouts is Somethin’ Fishy, whose midnight-to-10-a.m. buffet is a big hit. Customers such as Brian Neil Hermosa, a 27-year-old college graduate with six years of call-center experience, can choose from more than 40 dishes for 199 pesos ($4.50) and, for 350 pesos, share six bottles of San Miguel beer.

Near dawn one day in July, Hermosa is catching up with five of his buddies after a nine-hour shift that ended at 2 a.m. He works at Magellan Solutions Outsourcing Inc., which serves small companies in the U.S. and the U.K.

‘Night Life’

“We sometimes come here to give ourselves a treat after a hard week,” he says.

At a table nearby, Ion Subion settles in with a dozen co-workers who’ve finished an 8-p.m.-to-5-a.m. shift at an English-language call center operated by Luxembourg-based Transcom WorldWide SA. (TWWSDBB)

“We don’t have a normal working pattern, but we try to have a night life,” Subion, 25, says. “I like what I do because I earn more than the minimum salary and my work requires me to use my brain.”

The scene at Somethin’ Fishy exemplifies how the Philippines’ burgeoning outsourcing industry is lifting consumer spending.

BPO workers earned $8,849 on average in 2012, according to a survey of the industry by the Philippine central bank. That’s almost three times the minimum wage in Metro Manila.

‘Domino Effect’

From elevated sections of Manila highways, drivers can see forests of construction cranes as new Eastwood-like developments proliferate, including McKinley Hill, with its Venetian canals, and Bonifacio Global City, which is modeled after Manhattan.

“There is a huge domino effect,” says John Corpus, a director of real estate firm CB Richard Ellis Philippines Inc., which because of the BPO boom plans to increase its workforce to 1,000 by the end of this year from 720 in mid-August. “Everything is growing.”

Since India’s takeoff as a global outsourcing destination in the 1990s, successive governments in the Philippines have cleared the way for the BPO industry’s growth.

Mentioned in the Philippines media as a possible Liberal Party presidential candidate for the 2016 election, Interior Secretary Mar Roxas, 57, claims some credit.

After he became Department of Trade and Industry secretary in 2000, Roxas says, he broadened tax incentives and leveraged his experience as an investment banker at New York–based Allen & Co. to attract call centers.

BPO-Favorable Policies

“You tell us what you need, and I will make it happen,” Roxas remembers telling companies he wanted to lure to Manila.

Roxas’s fellow Liberal, President Aquino, who by law is limited to a single six-year term, has built on his predecessor Gloria Arroyo’s BPO-favorable policies.

Marife Zamora, 61, chairman of Convergys Philippines Services Corp., recalls being at home in central Manila on a Sunday in July 2011 when her phone rang.

“Marife, this is Noynoy,” the caller said. Having no friends by that name, Zamora says, it took her a moment to realize the president was on the line.

Aquino — who, like most Filipinos, goes by his nickname — had met Zamora shortly after he took office when he was guest of honor at the opening of a new call center for the unit of Cincinnati-based Convergys Corp. (CVG)

Seeking Recruits

Zamora says Aquino told her he had just seen an ad on the side of a bus seeking recruits to expand her workforce to 30,000 by the end of 2011.

“What do you need to increase that to 50,000?” Aquino said, according to Zamora.

She asked him to carry on offering tax incentives to the BPO industry and state-funded tuition vouchers for students interested in pursuing outsourcing jobs.

Aquino listened — and today Zamora’s 11-year-old company is the largest private employer in the Philippines, with 55,000 workers. For his part, Aquino has set up a 500 million-peso fund to train would-be workers in the industry.

On a smaller scale, Butch Valenzuela has been making a success of his company, Visaya Knowledge Process Outsourcing Corp.

Valenzuela left the Philippines for California during the waning years of the dictatorship of Ferdinand Marcos.

Marked by political turmoil and martial law, Marcos’s presidency — which lasted from 1965 to his ouster and exile in 1986 — was brought down by public outrage over his suspected role in the assassination of a political opponent, Noynoy’s father, Benigno Aquino Jr.

Coming Home

Valenzuela returned to the Philippines in 2006 and, riding the call-center wave, started up Visaya, which has 200 employees.

About 30 of them were talking into their headsets or glued to their computer screens in Manila one midnight in July when Valenzuela stopped by to visit.

“One of the reasons why I came back was to help the country,” Valenzuela says as the murmur of many voices fills the room. “What better way than to be able to employ people?” –Yoolim Lee and Ian Sayson

To contact the reporters on this story: Yoolim Lee in Singapore at yoolim@bloomberg.net; Ian Sayson in Manila at isayson@bloomberg.net