Knowing the Basics of Outsourcing in the Philippines

 

Outsourcing has been in the Philippines for more than 2 decades, and although it started a little late, the country has shown amazing growth in the said industry. The Southeast Asian country with a population of more than 100 million has become one of the top outsourcing destinations all over the world.

This is owing to the fusion of its highly qualified and cost-competitive workforce, and the strong government support for investment in outsourcing. In fact, back in 2015, the outsourcing industry employed over 1 million brand-new Philippine outsourcers.

According to World Bank estimates, the outsourcing industry could generate up to US$55 billion by 2020, or roughly 11% of the country’s overall GDP. It must be said, too, that the workforce involved is something to be admired.

The Philippine IT-BPO Road Map

In terms of the IT-BPO Road Map, projections state that the industry will grow to employ 1.5 million more workers and generate US$25 billion in annual revenue. While the Philippines is now considered to be the world leader in voice-based business services (call centers), there are approximately 25 different sectors represented in its IT and shared services sector.

Increasingly, these sectors represent knowledge-based, non-voice services, with more than one-third of the industry engaged in delivering complicated services.

Helping Make US Enterprises More Competitive

With regards to the US Senate’s rejection of an anti-outsourcing bill, Benedict Hernandez, then President of the Business Processing Association of the Philippines (BPAP), stated that: “Outsourcing business services to the Philippines can help American enterprises be more competitive and profitable.”

It’s obvious that profitable companies would then hire more workers, both in America and in the Philippines.

All-Out Government Support for the BPO Industry

In addition to the support that the Philippine government is providing for the BPO industry, the Philippine government is also building the country brand to promote investment through increased visibility.

In 2015, this initiative garnered a great boost when Manila hosted the year-long Asia-Pacific Economic Cooperation (APEC) summit which concluded with the APEC Economic Leaders Meeting. In attendance were top world leaders, including China’s President Xi Jinping, Japanese Prime Minister Shinzo Abe and Former U.S President Barack Obama.

The event was a unique opportunity for the Philippines to show off its public-private partnerships in the tourism Industry, Filipino arts and culture, and its world-class services.

Government Enticement Schemes

There are two main government enticement schemes granted by the Board of Investments (BOI), and incentives under the Philippine Export Zones Authority (PEZA).

BOI incentives include an income tax holiday for a period of six years for pioneer companies and four years for non-pioneering ones, as well as the employment of foreign nationals in a supervisory, technical, or else an advisory position for a period of 5 years. That’s a deduction from taxable income of 50% of labor expenses, and unrestricted use of consigned equipment.

On the other hand, PEZA incentives include the option to pay a special 5% tax on gross income in line to all national and local taxes. There’s an exemption from payment of import duties and taxes on imported equipment and raw materials.

Also included is a 50% reduction in training expenses as well as employment of non-residents needed in operation of web development and IT enterprises.