How Does Outsourcing Affect The Philippine Economy

The Philippines is one of the fastest-growing nations in the outsourcing industry, with a staggering 30% growth within the last decade alone. In fact, business process outsourcing (BPO) accounts for one of the biggest boosts to the Philippines’ economy and currently employs more than 2 million people in several sectors, boasting a net worth of $24 billion. Examples of these sectors include SEO, call centers, online marketing, virtual staffing, IT services, and more. Along with the remittances of 10 million overseas Filipinos, outsourcing is one of the legs of the Philippine economy.

The BPO industry in the Philippines already has several key advantages as the top outsourcing destination...

low cost of labor, an English-proficient and highly skilled workforce, as well as cutting-edge technology and infrastructure, are strengths that will continue to give the country an edge in the future. These are highly valued attributes to the world’s largest process outsourcing companies in places like the US, Australia and the UK that rely on outsourcing.

How does outsourcing affect the Philippine economy?

According to Select Voicecom , the hundreds of established agencies settled in the Philippines has an expected annual growth rate is around 7% to 9%, which is higher than the expected global growth. Prime Outsourcing also elaborates how the Philippine BPO industry has contributed $30 billion to the Philippine economy annually. Furthermore, a buoyant outsourcing industry bodes positively well for the real estate sector as a result of increased demand for office space and residential condos, in addition to its benefits for the transportation, telecommunications, hospitality, and retail sectors, as Colliers explained. Through the economic advantages of BPO, the Philippines has been placed at the forefront of economic development. With continued government support, this industry can strengthen the country and carve its niche in the global society.

With the rapid growth in Philippine outsourcing, the industry is expanding to offer more specialized outsourcing services. In a 2022 report shared by superstaff , analysts shared that the Philippines has improved its capacity to offer non-call center outsourcing services, including high-skill services such as IT, software development, finance and accounting, healthcare, and knowledge process outsourcing.

What are the effects of outsourcing in the Philippines?

According to USource , the Philippine BPO industry contributed to nation-building as the Information Technology and Business Process Management (IT-BPM) sector opened millions of jobs and contributed billions to the gross domestic product of the Philippines. Philippine revenue growth is at 5.6% from 2016 to 2022, and the IT and Business Process Association of the Philippines (IBPAP) expected the IT-BPM industry’s 10.6% revenue growth and 9.1% headcount growth to double by the end of 2022. As outsourcing helps developing nations grow, one notable effect of outsourcing in the Philippines is the international recognition that this industry received, thus solidifying the years-long accolade of the nation as the call center capital of the world.

The key reasons why a lot of foreign investors and entrepreneurs find the Philippines so attractive when looking for an outsourcing location are the cost-efficient labor costs, where you get access to a highly-skilled workforce at such an affordable rate, and the deeply-rooted values they uphold in their personal and professional lives – there is an unmistakable, genuine sense of cultural compatibility that you can only find in the Philippines. These factors made the Philippines as the top outsourcing destination for USA, Australia, Britain, and other parts of Asia, and still counting.

What are the economic implications of this?

According to connectOS , the Philippine economy is one of fastest-growing economies in Southeast Asia, and a significant reason why the Philippines maintains this reputation is because the Philippine government has invested significantly to position Manila as the leading global provider of outsourcing services and the industry is currently valued at $250 billion, hailed as the Call Center Capital of the World with 16-18% of the global market share. Foreign investment is welcomed and government support is very much alive. The Philippine government continues to actively invest in the nation’s infrastructure and technology to support the outsourcing industry. Tax and non-tax incentives are available to support foreign investment.?

The Philippine BPO industry continues to grow every year due to competitive pricing that allows foreign companies like the US, UK, and Australia to enjoy high-quality output for a significantly reduced operating cost, a wide workforce pool that constantly expands beyond the capital region into other major cities, the rise in availability of highly-skilled talent from hundreds of thousands of university graduates and professionals joining the workforce, and strong support from the Philippine government through policies and programs. As the BPO industry is known for boosting and developing human capital by providing job opportunities for people, you get highly trainable, quality-driven and determined employees like no other when you outsource to the Philippines.

Frequently asked questions

Does outsourcing in the Philippines contribute to its economic development?

Business process outsourcing is the future of the Philippine economy. According to Connext , the Philippines is the top outsourcing destination for investors looking to outsource operations as it ranks 18th among the 2021 Top 50 Digital Nations Global Innovation Index by Tholons , a leading consulting firm. The Top 50 Digital Nations is an annual list which ranks top countries by Innovation / Digital, Super Cities, Population, Diversity & Inclusion. In addition, the Philippines has several highly urbanized cities, six of which placed in among the Top 100 Super Cities in the Tholons’ Global Innovation Index for 2021. Santos Knight Frank, the world’s largest independently owned property consultancy, also states that investors are “eager to capitalize on the Philippines’ sound macroeconomic fundamentals, excellent pool of low cost-skilled labor, outstanding customer support, continuous infrastructure development and one of the cheapest rental rates in Asia.”

BPO is a powerful force driving the Philippine economy that has created a ripple effect in many aspects like export growth, employment generation, telecommunication sector growth, real estate growth, small business growth, and transportation growth. Doing Business in The Philippines highlights how the BPO industry in the country has many great benefits that include paid holidays and vacations, life insurance, paid sick leave, free beverages, flexible schedule and dress code, the option to telecommute which many workers desire, professional training, and much more. Outsourcing Angel also emphasizes that over 500,000 Filipinos are employed by many BPO companies and BPO’s are now the top foreign exchange earners in the Philippines along with foreign exchange remittances, bringing in close to US$ 20 million (PhP 1 billion) total revenue.?

Do you think outsourcing is good for the Philippines?

The Philippine BPO industry exists as the resilient economic driver of the country with over 11% contribution to national GDP and employing over 1.3 million Filipinos in more than 1000 BPO companies – with that figure growing at an annual rate of 8-10%. According to USource , 27% of the BPO sector’s workforce disperse across the countryside. Emerging and established hubs expect to erect their offices in provincial areas, therefore bringing a significant rise in the real estate industry. Another benefit outsourcing brings to the Philippines is improved telecommunication and internet services, along with the installment of fiber optic cable networks to support the continuously growing business demands - which inevitably benefits even non-BPO employees with wider internet coverage and faster internet speeds at reduced costs. This means that the BPO industry offers valuable opportunities to all Filipinos for their welfare and the country’s overall economic growth.?

The outsourcing industry has other positive socio-economic impacts that helped stabilize communities and transform societies in third-world nations. Small businesses and outsourcing businesses are now being recognized by governments and non-government stakeholders in developing countries, thus presenting a bright future for countries like the Philippines. Because of the BPO’s impact on the country’s economy, the industry receives great support from the Philippine government, providing perks such as tax holidays and exemptions, and establishing international quality data privacy standards for the safety and security of the members of the BPO industry.

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