Bright prospects for BPO industry

News that the Philippines has edged out India as the call center capital of the world will definitely make the future even brighter for the Business Process Outsourcing (BPO) sector, also dubbed as the “sunshine industry” of the country. Over one million Filipinos are employed by the BPO and related IT sectors, 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.

Industry experts peg industry revenue to reach $25 billion by 2016, almost equal to the expected remittances coming from overseas Filipino workers. The IT and Business Process Association of the Philippines (IBPAP), however, has a more modest projection of $20 billion in revenue for 2016. But more importantly, however, is the estimated 1.5 million new jobs that will be created next year courtesy of the industry. As a matter of fact, the positive growth from the BPO sector was one of the reasons why credit ratings agencies have maintained the stable outlook for the Philippines.

A major reason why the country has emerged at the top of the call center industry, aside from lower labor costs, is the skill of the young workforce. US companies most especially prefer Filipinos because of their familiarity with the language, not to mention that their accent comes close to that of Americans. It also helps that Filipinos are more patient – a trait that comes in very handy in handling inquiries and complaints from angry customers, an industry source said.

BPO companies, however, are concerned that a proposed change in tax holidays will make it difficult to expand in areas outside of Metro Manila and other urban centers. The departments of Finance and Industry recently proposed the removal of income tax holidays of up to eight years from the list of perks in exchange for a 15-percent income tax – which is lower than the regular rate of 30 percent – for 15 years as a form of compromise.

The compromise proposal will discourage foreign companies and could undermine the position of the Philippines as the call center capital of the world, industry players lamented. Even if the government lowers the tax rate to 10 percent, removing the tax holidays might just make foreign companies turn to other countries that are offering bigger and better fiscal incentives, industry sources said. –Babe G. Romualdez (The Philippine Star)