it & bpo profile_april 2012 (2)

7/31/2019 IT & BPO Profile_April 2012 (2)

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IT AND BPO SERVICES

I. INTRODUCTION

1. About the Industry

The Department of Trade and Industry (DTI) defines BPO as the delegation of service typebusiness processes to a thirdparty service provider. The industry is generally divided into thefollowing sectors: contact centers, back office services, data transcription, animation, softwaredevelopment, engineering development and game development.

The Philippines gained considerable traction as a BPO location based on the availability ofprofessionals with the required language skills, cultural affinity with the US (the main BPOmarket), and strong customer service orientation of its workforce. This government openlyacknowledged the industry as key driving force for growth and employment in its Medium-TermPhilippine Development (2004-2010).

Companies outsource because they would rather focus on their core business functions whileoutsourcing or sending non-core and routine tasks for others to accomplish. Its growth can beattributed to two main drivers1

From the demand perspective, the globalization intensified BPO activities with the loweringof barriers to trade. This allowed companies to explore alternative locations to loweroperating costs without sacrificing the quality of service.

.

From the supply standpoint, rapid advancements in information and communicationtechnology (ICT) made deliver services via the internet in a cost efficient and timely manner.Thus, while outsourcing and offshoring have long been part of tactical strategies ofcompanies, it increased dramatically in the past decade with the depth and coverage ofservices evolving into higher value offerings.

2. Local and Global Scenario2

1Ceferino S. Rodolfo, Center for Research and Communication Foundation, The Philippine Business Process Outsourcing (BPO) Sector and the Global Financial Crisis,April 2009, page 1

2BPAP Roadmap 2016, EverestResearch Group, 2010

The global offshore services market isgrowing at a healthy albeit slower pace,and will more than double by 2016.Companies now regard outsourcing farmore as a means to reduce costs forbusiness operations.

Overall, the outlook for Asia/Pacific's BPOmarket remains positive with thePhilippines aiming for 10% of the totalBPO market or about US$25 billion.

Figure 1: Global Offshore Services Market Size(US$ billion)


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The year 2011 saw the industry attain about $11 billion revenues while full-time employees(FTEs) reached about 640,000. The industry is expected to post roughly 20% revenue growthfor 2012.

3. Positive effects of promoting the industry

Heightened Public-Private Partnerships (PPP) or greater collaboration among stakeholders,including government, industry and the academe, is expected to buoy growth and lead theindustry to meet Road Map targets and contribute to 9% of GDP by 2016 (Figure 4).

The contribution of the BPO sector to the Philippine economy is undeniable. The industry hasgiven Filipinos jobs with above industry compensation and career paths that will make them stayin the country rather than seek employment abroad. As such, the value proposition of thecountry is anchored on the availability of a skilled and scalable workforce.

Although lower labor cost in the country vis--vis other locations is a primary factor in attractingBPO jobs, the sector, nonetheless, offer a premium wage structure compared to local firms and

domesticoriented industries. The resulting higher disposable incomes led the AsianDevelopment Bank (ADB) to conclude that the wholesale and retail sector tops the list ofindustries where the BPO industry has the strongest linkage.3

1. Investments/Number of Firms/Major Players

Since the sector depends on human capital, the quality of the telecommunications network, andthe quality of institution, the government created the enabling environment which reapedbenefits for both service providers and country, fuelling to the overall economic development.

II. INDUSTRY PERFORMANCE AND PROJECTIONS

Investments

Every year the Philippines has seen an increased in the number of companies setting up aBPO presence in the country except the period between 2007 to 2008 which marked thebeginning of the global financial crisis.

Source: BOI and PEZA

3Nedelyn Magtibay-Ramos, Gemm a Estrada, and Jesus Felipe, An Analysis of the Philipp in Business Process Outsourcing Industry, 2007


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The graph illustrates the total investments registered with the Board of Investments (BOI) andthe Philippines Economic Zone Authority (PEZA), two Investment Promotion Agencies (IPAs)under DTI which host more than 90% of all IT & BPO activities in the country.

Major Players

During the past decade, the Philippines attracted many companies, both third party providersand Global In-house Centers (GICs). There are more than 700 companies currently engaged inoffshore operations in the country.

The following table shows the extent of the success that the BPO industry enjoys in the country.

MAJOR PLAYERS

CONTACT CENTER

IT AND SOFTWAREDEVELOPMENT

BACK OFFICE ANDOTHER PROCESSES

CREATIVE SERVICES

ENGINEERINGSERVICES & R & D

2. Installed Capacity

Presence of a Demand-Supply Gap

Despite growing antagonism towards outsourcing from citizens of source countries and in spiteof economic and geopolitical uncertainties, the IT & BPO industry global delivery system is stillexpected to be part of corporate and business strategy.

Today, many countries across the globe are attempting to replicate the successes of thePhilippines in attracting corporations from United States as well as Europe to outsource and


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offshore business processes. The emergence of these new destinations will be the catalyst thatdrives future growth and evolution of the industry. Figure 1 shows how the global offshoreservices will double by 2016.

Even as the industry grows and evolves, the Philippines is well entrenched to exploit newmarket opportunities especially in non-voice services while cementing leadership position in

voice services. The country has surpassed erstwhile leader India in terms of revenues and headcount in voice services with US$7.38 billion, marginally higher than Indias voice-based BPOexports revenues of about $7 billion in financial year 20114

Moreover, aggressive campaigns to diversify into more complex services will sustain rapidgrowth with the Philippines intending to be the world leader in Healthcare InformationManagement Outsourcing, Finance and Accounting Outsourcing, HR Outsourcing, andAnimation and Game Development. Another goal is to double market share by 2016 inInformation Technology Outsourcing, Engineering Services Outsourcing and Multilingual BPO

.

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3. Sectors Served

.

The workforce demonstrates efficiency not just through process capability but by superiorbusiness expertise in both voice and non-voice services spanning a range of verticals.

Voice and Non-Voice Services

Sales and Customer Relations Management KPO (Marketing Research, Legal Case Research and Preparation, Medical Research,

Insurance, Mortgage) Back-Office (Finance and Accounting, HR, Payroll, Procurement) Software Development (Product Development, Embedded SW, Project Management,

Quality Assurance) and IT Services (Business Continuity/Disaster Recovery, WebHosting, Network Management)

Health Information Management (Claims Processing, Coding and Billing, EMR/EHR) Transcription (Medical, Legal, Publishing, Data Transformation, Film Subtitling) Creative Content (Games Development and Animation) Engineering and Architecture Design

Verticals

Banking Financial Services, Insurance (BFSI), Manufacturing, Healthcare, IT, Legal,Energy, Publishing, Retail, Travel, Automotive, Telecommunications, Media, Logistics,Procurement, Fast Moving Consumer Goods, etc.

4. Global Markets Served6

4Manila Bulletin, Philippines Poised For BPO Leadership, March 18, 2012

5Alejandro Melchor, After dominating call centers, Philippine IT-BPO seeks world leadership in four more fast growing services, DOST-ICTO, 30 January 2012


2006 2010

Domestic 1% 5%

APAC/AUS 8% 10%

UK, EU 10% 11%

0%10%20%30%40%50%60%70%80%90%

100%

Figure 3: Philippine IT-BPO source marketsIn US$ billion

Although the United States remains the primesource of outsource work, the UK, otherEuropean countries and APAC are emergingas major source of business.

This is attested by the recognition of theNational Outsourcing Association (NOA) of theUK recognizing the Philippines as OffshoringDestination of the Year in 2007, 2009 and2010.

Figure 3 shows signs of diversification ofsource markets as percentage share of US


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5. Economic Contribution

5.1 Multiplier Effect and Industry Linkages

The IT-BPO industry contributes to job generation as well as to the overall growth of theeconomy. Likewise, it creates influencing factors known as the Outsourcing Adjacencies7

Resourcing Requirements: Considers the labor or people intensive nature of the industrywhich influences related micro parameters such as:

orthose individual components which compose the entire outsourcing ecosystem. The impact andbreadth are further classified into 4 broad categories comprise related and supporting microlevel components.

o Housing and Infrastructure: Employees tend to stay close to places of work whichnecessitate development of transportation and commuting systems, as well asresidential complexes.

o Transportation: Boosts the types and scale of mass transportation and increasesupporting employment tributaries.

o Food & Commodities Supply Chain: Increases demand for food in and around theoutsourcing hubs and increases the demand from the agricultural sectors. Likewise,there is an increase in employment at food establishments, 24-hour convenience storesand related sectors of commodities and other retail goods.

o Lifestyle and Entertainment: Growing population and migration toward BPO hubs leadto construction of lifestyle and entertainment venues such as malls and recreationvenues which in turn create employment to support these venues.

Communication, Collaboration and Technology: Considers theservice delivery systeminvolved often in different time zones and geographies, and therefore heavily leverages on arobust and redundant communication platform.

Globalization: Considers the diverse time zones that require employees to work in shifts.Thus not does only the outsourcing sector workforce work round the clock but also thesupport service personnel bringing in the concept of working in shifts and round the clock

availability.

Skill Development & Propagation: Considers requirement for specialized skills andconstant pool of trained manpower, creating a virtual cottage industry of skill development/training schools which generates more ancillary jobs revolving around technical training,language training, and other process-specific education and formation.

7 Clark Lester Bautista, THOLONS, The IT & BPO Industrys Direct and Indirect Economic Impact, June 2011


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Overall, BPA/P estimates that by the year 2016, the IT-BPO industry would havecontributed US$12.9 billion in annual salaries and benefits or roughly PhP 564.3 billionthrough its consumption.8

From the estimated total annual salaries and benefits of BPO employees, the food sector isexpected to get 41%; housing, 13%; transport & communication, 8%; and other subsectors(as garments and gadgets), 4%. On the other hand, the government will be collectingroughly 20% from the salaries of BPO employees while about 14% is estimated to go tosavings. (Figure 4).

5.2 Revenue and Global Market Share and Contribution to GDP

IT-BPO services serve as catalysts for growth, the industry played a major role in fueling recenteconomic development in the Philippines. While the country experienced chronicunemployment because of low to moderate growth and intervening economic crises in the1970s, early 1980s and late 1990s, the past decade saw the IT & BPO industry growexponentially, rising in prominence to make the country a destination of choice for GICs andthird party service providers.

A World Bank study9

The country currently holds 8% of the global market for IT & BPO services and is expected toreach 10% by 2016 if Roadmap projections are met.

cited its significant contribution to the expansion of services exports in thePhilippines as a percentage of total exports increasing from 9% in 1999 to 21% in 2009. Thecountry's services exports rose 3.6% on average per year during the period, higher than that ofAsia as a group, which averaged 1.5% per year. Unlike many developing countries, thePhilippines had been a net exporter of services since 2006, emerging as one of the bestperformers in services exports, particularly in IT & BPO.

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8 BPAP and Everest Group, Philippine IT-BPO Road Map 2016: Driving to Global Leadership9Raja M. Mitra, Senior Consultant, World Bank Group, BPO Sector Growth and Inclusive Development in the Philippines, January 26, 2011


The industry can expect additionalrevenues venturing into high-value non-voice services.

Taking this into account, IT-BPO firms inthe Philippines contributed to the rise ofrest and recreation services as well ascommercial and residential real estatedevelopments. Higher income capacitiesof even an entry level contact centeragent - around $330 to $340 per month -has increased disposable income andbetter purchasing power.


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6. Industry Projections

6.1 Revenues

The industry showed resiliency even during the financial crisis that lingered through 2008-2009.Growing at a robust rate of 28% annually over the past six years, the industry is expected toreach US$25 billion in revenues by 2016 based on the higher end of Road Map projections (seeFigure 4).

The country is now considered as a strong alternative to India because investors regard theconsistency of policies on incentives for IT & BPO locators.

The positive business sentiment and improved investment climate would allow the sector togenerate higher revenues.

6.2 Employment

The industry created more than 110,000 new jobs in 2011 and is expected to create 120,000more in 2012. Voice BPO remains the largest sector at 65% of total industry followed by the

Figure 5: Philippine IT & BPO Industry(US$ billions)

At a compound annual growth rate(CAGR) of 20%, IT-BPO will become aUS$25-billion industry by 2016.

The industry is also expected tocontribute about 9% of GDP. The studyfurther indicates that if both the industryand government strengthen Private-Public-Partnership, the industry canreach loft revenue aspirations andpotentially employ 1.3 million workforceby 2016.


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non-voice BPO at 20%. By, 2016, the industry is poised to generate 1.3 million full time jobs(See Figure 4)

The year 2011 saw the industry reach approximately 640,000 employees as expansion ofcurrent locators and influx of new locators buoyed industry performance.

Table 1: Philippine IT & BPO Industry (US$ billion)IT & BPO Performance 2011

FTEs Revenue (US$M) Y-O-YVoice BPO 416,000 7,400 21%Non-voice BPO/KPO 128,650 2,058 24%ITO 49,908 993 37%Health Info Mgt & Care 24,700 277 172%Engineering Services 9,030 172 5%Animation 8,640 128 -10%Game Development 1,391 8 13%TOTAL FTEs 638,319 11,036 24%

III. THE PHILIPPINE VALUE PROPOSITION

There are several reasons why companies are drawn to the country for their outsourcing needs.These competitive advantages drove accelerated growth of BPO services in the Philippines andcontinue to set the country apart from competitor countries, as follows:

1. HUMAN RESOURCES

Highly Educated, English Proficient and Skilled WorkforceCompanies are assured of the best value-for-money proposition with natural pool of talentsand human resources that are skilled and adept in the use of English, commanding 72%proficiency among the population. The Philippines also enjoys high literacy rate at 95.9%11

Of crucial importance to the success of BPO is for a country to have a large population baseto be able to meet the soaring demand for human resource. This must also becomplemented with a strong educational system, which will equip people with the necessaryskills-set and capabilities to perform optimally and efficiently.The Philippines has a largepopulation base, about 100 million that is turning out to be an asset as it stimulates

investment in education translating to more workers and expanding the talent pool. Thecountry produces 460,000 graduates per year

,considered among the highest in Asia.

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Fast Learning Curves

of which 1/3 are graduates business relatedcourses and another 1/3 have degrees in IT and Engineering.

11CIA World Factbook

12 Commission on Higher Education (CHED), Philippines


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Expats held senior management roles at the first wave of outsourcing but local talentsgradually occupied managerial and C-Level positions even as operations became moreestablished and processes more complex. No significant loss in quality and productivitywere observed, thus, ensuring consistent returns and better value to clients.

Strong Customer Service Orientation and Loyalty

Filipinos are renowned for their strong customer service-orientation. This is an extremelydesirable trait because this demonstrates high level of customer interaction and problemsolving skills, both critical to performance indicators IT and BPO service providers.

Filipinos also have excellent work ethic and incomparable loyalty which translates to lowattrition rates. Employees are the most important and valuable asset of an organization,hence, companies do their best to hold and retain and make them stick in the organization.

Steady Supply of Graduates and Human Resources13

Every year, the country produces almost half a million college degree graduates, 66.6% ofwhom have courses suitable for the IT/BPO sector.

Philippines ranks 3rd among BPO destinations in terms of annual graduates:

Table 2: Summary of Graduates (000)Tertiary Graduates (College) Finance and Accounting /

BusinessInformation Technology (IT)

India 3,500 India 560 China 634China 2,000 China 127 India 510Philippines ~500 Philippines 107 Philippines 85Poland ~500 Poland 107 Malaysia 68Mexico 371 Mexico 68 Poland 53Egypt 330 Egypt 66 Mexico 50Malaysia 131 Romania 33 Egypt 39

2. IDEAL LOCATION

Expat Friendly

The Philippines ranks high among expatriates willing to relocate or work on multi-yearassignments. The country emerged as the 8th most preferred destination for expats for 2011according to a research by HSBC14

13 Commission on Higher Education (CHED) and Everest Analysis 2010 14 HSBC, Expat Explorer survey 2012

. The main objective of the research was to provideinsights on life as an expat experiences, issues, challenges and rewards, putting apremium on ease in quality of life, cultural assimilation, and language and even what it's liketo raise children abroad.


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Friendliest Countries1 New Zealand2 Australia3 South Africa4 Canada

5 United States6 Turkey7 United Kingdom8 Philippines9 Spain

10 Malaysia

In one particular component of the survey called the Expat Economics Luxury league table, thePhilippines ranked a strong 3rd among countries surveyed. It says Expats enjoy more luxuries inthe PHL compared to their home countries like domestic staff, swimming pools, owning theirproperty or owning more than one property, among others. This is predominantly due toincreased affordability rather than to increased income. Lower spending on essentials like

accommodation, public transport, food and childcare account for the extra level of disposableincome.

Adaptability and Affinity with Other Cultures

Companies can expect Filipinos to easily integrate with professional environment andbusiness culture of different clients and nationalities. Multinational companies operating inthe Philippines are quite impressed with the Filipinos ability to assimilate interpersonalnorms of behavior and organizational culture. Because of the Filipino workers ability toeasily adapt to other cultures and nuances of behavior, companies no longer need to investheavily for cross-cultural training.

3. INFRASTRUCTURE

Multiple Choices of Locations

The real estate industry continues to be bullish with the IT and BPO sector driving demand foroffice spaces in major cities. There are many ideal locations throughout the country as thegovernment encouraged the development of IT parks/centers and accredited buildings. Thesefacilities are equipped with the necessary infrastructure and systems support in order to functionat a world-class level.

Figure 1. PEZA 159 IT Parks / Centers

15 HSBC Expat Explorer Survey 2011


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Source:www.peza.gov.ph, December 2011

Redundant Telecommunications Network

The telecom industry is one of the more robust sectors in the country. Over the past two

decades, the sector witnessed substantial investment in infrastructure, driven by thederegulation of the industry in the mid-90s which initially encouraged fixed-line developmentfollowed by the burgeoning mobile telephony market, then by a surge in wireless broadbandservices. More recently, the boom in BPO activities spurred further investments from telecomnetworks to upgrade voice and data capacity both for domestic and international connectivity.

Because BPO services continue make up such a lucrative business, the government has takensteps for the continued growth of the industry by ensuring that a robust and redundanttelecommunications network is in place. The infrastructure includes satellites, cable anddomestic fiber optic network (DFON), among others. There are several submarine networksthat serve as critical components to the BPO industry, providing reliable and diverse linksbetween the Philippines and the rest of the world.

There are now seven submarine cable systems landing in the Philippines, including APCN,APCN-2, C2C, EAC, TGN-IA, AAG and Guam-Philippines, distributed in five cable landingstations in Batangas, Ballesteros, Capepisa, La Union and Nasugbu.

The good telecommunications infrastructure, both for voice and data makes the country theideal location for BPO services, as compared to other countries in the Asia Pacific region. Thecost of bandwidth has also decreased considerably over the last couple of years.

In addition, the presence of a number of carriers for telecommunications services assures asolid competitive landscape for outsourcing buyers. A number of operators have moved forwardon putting Next Generation Networks (NGNs). The major operators PLDT and Globe Telecom

continue to buy into regional and international submarine cable systems.

ROX

SAN

BACO

ERMISAMPA AUROMAK

SORSO

BATANG

PAGBIDONS

NA

BALLEST

SUBI

BAGSFCABANA

VIG

TARLA

MASB

SOLA

Figure 2 (Left): National Telecom Infrastructure Figure 3 (Right): International Capacity (17 International Cable Systems)
http://www.peza.gov.ph/http://www.peza.gov.ph/http://www.peza.gov.ph/http://www.peza.gov.ph/


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Source: PLDT Alpha Enterprises

4. COSTS AND OTHER COMPARATIVE ADVANTAGES

Filipino employees represent premium talent because of their ability to deliver service thatleverages both business expertise and process expertise. Add to the quality of human resourcepool is the significant benefits in terms of labor cost in the Philippines.

With one of the lowest hourly labor rates in the world, locators and potential investors gainsignificant savings on operations due to lower costs as well as operational efficiencies ascompanies can operate 24/7. Companies can easily implement shift-work schedule in thePhilippines. The morning shift typically starts before 12 noon for Australia/New Zealand clientsupport. The mid shift typically starts between 12 p.m. and 3 p.m. for UK client support. Thenight shift begins after 3 p.m. and is aimed to support clients in the United States and Canada.

5. SUPPORT INSTITUTIONS

As the 2nd largest destination for outsourcing, it is imperative to create an environment wherethere is heightened cooperation between the government and private sector. The resultingsynergy develops hard and soft infrastructure and creates a robust environment for business toprosper and further improve competitive advantages.

The following stakeholders and the general initiatives they have undertaken are instrumental tothe growth of the industry:

Government At the forefront of this initiative is the Department of Trade and Industry (DTI),conducting international investment promotion of the Philippines as an off-shore BPOlocation from the onset.

o TESDA Skills development training to create highly skilled, globally competitive andflexible workforce. This invigorates the workforce with valuable skills and acceleratesskills development.

o DOST Policy formation and development of locations for BPO thru the ICT Office(ICTO)

Source: BPAP Next Wave Cities 2010-2011


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o Academe Adapting curriculum to the needs of the industry. Many academicinstitutions are now implementing courses intended to address the needs of the industry.

Industry Associations Ensure responsible and dynamic participation in promotion andpolicy formation BPAP and associations under its umbrella, as follows: Contact Center Association of the Philippines (CCAP) Health Information Management Association of the Philippines (HIMOAP) Philippine Software Industry Association Game Developers Association of the Philippines Animation Council of the Philippines Inc.

Other private sector stakeholders:o Telecom providers Assure redundancy and latency that is vital in the delivery of

services. The world-class telecommunication network of the country and thedeclining rates further enhances competiveness.

o Real estate developers Modern buildings are rising in major cities in the country,creating, creating new business districts all over the country. The real estate industrycontinues to be bullish with the IT and BPO sector driving demand and robust growth foroffice spaces.

6. GOVERNMENT SUPPORT

6.1 Enabling Laws

EO 226 (Omnibus Investments Code of 1987) - BOI is tasked with identifying prioritysectors for investments through the formulation of an annual Investment Priorities Plan(IPP). The inclusion in the preferred activities serves as basis for granting fiscal andnon-fiscal incentives to locators.

RA 8748 - Authorizes the Philippine Economic Zone Authority (PEZA) to grant fiscal andnon-fiscal incentives for local and foreign investors who locate in economic zonesincluding IT Parks and IT Centers.

R.A. 7042 (Foreign Investment Act or FIA) Provides guidelines for foreign investors tobe allowed to invest 100% equity in companies engaged in almost all types of businessactivities subject to certain restrictions as prescribed in the Foreign InvestmentsNegative List (FINL). Foreigners can own up to 100% of the contact center activity.

COMPARISON OF INCENTIVES OF PHILIPPINES INVESTMENT PROMOTIONS AGENCIES

INCENTIVE BOI (Executive OrderNo. 226, as amended)

PEZA (Republic Act No.7916, as amended)

CDC/SBMA (RepublicAct No. 7227 BasesConversion Devt

Authority)

Income Tax Holiday (ITH) 4 6 years (max of 8 years)Exempted from all local

and national taxes


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ITH Bonus 2 years provided the firm meets certain conditionsvalue-added taxes,

franchise taxes, exciseand ad valorem taxes

Special Tax Rate of 5% onGross Income

Special Tax Rate of 5% on Gross Income

Importation of Capital

Equipment, Spare Parts,and Supplies 0% duty-free Tax and Duty-Free

Wharfage Dues, andExport Tax, Duty, Impost,and Fees

Exempted None

Simplification of CustomsProcedures

Available

Employment of ForeignNationals

Foreign nationals may be employed in supervisory, technical or advisorypositions within 5 years from a projects registration, extendible for limitedperiods. The positions of president, general manager, and treasurer or theirequivalents, of foreign-owned registered firms may be retained by foreignnationals for a longer period.

Foreign employees may bring with them their spouses and unmarried children

under 21 years of age

COMPARISON OF INCENTIVES VIS--VIS OUTSOURCING PROVIDER COUNTRIES

Area Philippines India China Egypt Malaysia

Investment related

Import duty waiver forcapital equipment

VAT, customs dutywaiver

Concessional 3.09%customs duty onimport of capitalsgoods

Varies CAPEX subsidiesup to 100%

Import duty waiver- multimediaequipment

Talent

developmentlinked

Training grants for

finishing schools(TESDA vouchers)

Training charges

tax exempt till 8%of payroll

Training

subsidy

Training subsidy:

20-40%

Other input costlinked

Exemptions on localtaxes and permits

VAT exempt inputs

Services, Sales taxexemption

50% exemption ofstamp duty

Telecomsubsidies

Rentaldiscount

Subsidy ontelecom, rentalsand utilities

Tax linked

6 years extendable tomaximum of 8 years(or) 4 yearsextendable to amaximum of 6 years

Post-tax holiday,

payment at 5% rate ongross income

5 year ITH only inSEZs; plus 50%exemption for 2successive 5-yearblocks subject toreinvestment

100% depreciationon capital goods for5 years

Preferentialcorporate tax 15%

Business taxexemption

Personal taxrate cuts

Corporate taxrate cuts

10 yearscorporate taxholiday

Accelerateddepreciation

INCENTIVES FOR ROHQSubject to preferential income tax rate of 10% in taxable incomeSubject to 12% VATMultiple entry visa valid for three (3) years (including spouses and unmarried children below 21 years old)Non-immigrant visa within 72 hours from submission of documentsExempt from securing ACR

CAPITAL

OPERATING

TAXATION


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Travel tax exemption (personnel and dependents)15% withholding tax on compensation income applicable to personnel holding managerial and technicalpositions subject to:

Position and function test Compensation threshold test Exclusivity test

6.2 Development of Next Wave Cities

Under the Information and Communications Technology Office (ICTO), ICT councils are createdand tasked with building capability and promoting awareness of the benefits of hosting IT &BPO companies. As of March 2012, there are 34 ICT Councils established nationwide.

There are existing collaborative engagements between government and the private sector toenable physical and social eco-system that will ensure wider portfolio of locations and improvechances of attracting more locators in the sector.

Dubbed as the Next Wave Cities (NWCs) program, the objective is to sustain growth

momentum and generate new investments in cities located in Luzon, Visayas and Mindanao, aspotential hosts for BPO companies. The will ease congestion in the National Capital Regionand the Central Business Districts by providing alternative choices of locations. This alsomitigates the pressure on wages and attrition, which is being experienced because of theconglomeration of locators in the NCR.

BPA/P, Commission on Information and Communications Technology (CICT), and theDepartment of Trade and Industry (DTI) developed a Next-Wave City Scorecard whichprovides information on the key buy factors: talent, infrastructure, cost, and businessenvironment.

The NWC scorecard reflects the market sentiment of investors, giving more weight to the cost of

doing business in different locations. It also takes into consideration each citys absorptivecapacity, or its local BPO sectors estimates employment capacity versus existing sectoremployment. Moreover, the scorecard recognizes each citys educational institutions, which areaccredited as Centers of Excellence/Development by the Commission of Higher Education(CHED). These metrics add dimensions in the employability of local talent particularly its qualityand availability.


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6.3 Talent Development in the IT-BPO Industry

Industry stakeholders identified 9 programs that best preempts a looming talent supply gap.Each program targets areas for intervention along the entire talent supply chain fromassessment to training and education to specialized knowledge requirements. Talentdevelopment initiatives are designed to attract, recruit, and develop the 1.1 million employeesthat industry needs to meet its Road Map 2016 accelerated growth target of US$25 billion inrevenues.

The following are the programs aimed at addressing talent supply capability building for thedifferent industry sectors:

1.1 Global Competitive Assessment Tool (GCAT) BPAPs Online test based on industry-standard Previsor. Assesses basic skills and abilities identified as relevant to sustaining an individual in a

career with the IT-BP industry. Measures the skills gaps and areas of improvement of test takers which guides schools

and companies in designing appropriate interventions.

1.2 Advanced English Proficiency Training (AdEPT) program Two-week course aimed at improving English proficiency. Offered to university students and individuals already in the industry wanting to improve

their English.

1.3 Industry Training for Work Scholarship Program (I-TWSP) - TESDA bridging programcomposed of courses designed by industry to prepare trainees for jobs in call centers,software development, medical transcription, and animation. Content for courses infinance and accounting, medical coding and billing, game development, and other courseare also being developed and will be offered within the year.

MoA between TESDA and BPAP for the joint management and implementation400 million allocation supports scholarships under a distribution system managed by

BPAP and its partner associations.


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Proven in the past years to be effective in converting near hires into employees afterthey complete the courses that range in length from 2 weeks to 6 months.

To further support the I-TWSP, TESDA has also provided 50 million to fund TESDATrainers Training (T3) to increase the number of trainers for the I-TWSP.

1.4 BPAP has also recently started two new programs: one on emerging services and theother for high school graduates.

Emerging Services Program - Addresses the training and educational needs forspecialized services such as finance and accounting, insurance, health care, IT,engineering services, creative services, among others.

Associate Program A 612 month program to help high school graduates becomeemployable.

1.5 Service Management Program (SMP) Recently approved by the Commission onHigher Education (CHED) under the leadership of CHED Chair Patricia B. Licuanan.

21-unit minor degree course that can be taken by university students intending to go intothe IT-BPO industry. By completing this course, students will receive specializededucation in service management to augment their major fields of specialization suchas business, IT, engineering, or other courses

SMP, which will be offered in at least 6 colleges in SY2012-2013, has been designed byindustry practitioners to provide students with skills required to qualify for internal jobs,practical experience, and industry-specific courses. SMP was approved by CHED in arecord time of just 4 months.

CHED also allocated about 125 million to SUCs to implement IT-BPO programs.

1.6 Service Technology Management (STM) - Program that can be offered by universitiesas either a post-graduate certificate or a masters degree for individuals with experience inother industries who want to join the IT-BP industry as a career shift. STM was specificallycreated to arm potential team leaders or managers with industry-relevant information,education, and experience.

1.7 Executive Development Program - Aimed at providing forward-thinking leadership andmanagement education for executives who already hold key position in IT-BP companies.This will help fast-track the development of a sizeable cadre of Filipino executives inmanagement positions in global companies.

1.8 Volunteerism and Sponsorship - BPAP encouraged members to sign up as volunteersfor programs of choice. Participants also signed up their bosses as Executive Sponsors toseal their companys commitment to deeper engagement in industry-wide efforts to sustainand enhance the IT-BP talent supply chain.

7. UNIQUE ADVANTAGES


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The country is a study in contrast and diversity, boasting of bustling megacities whilemaintaining the idyllic vibe of its islands. Modern buildings are rising in Metro Manila whilespectacular and pristine beaches offer perfect getaways for those who want to experienceFilipino tropical spirit.

The second-largest archipelago in the world with over 7107 tropical islands, visitors areinevitably touched by the Philippines beauty and people. A former Spanish and US colony, thePhilippines is renowned for warmth and hospitality.

Visitors can expect to be greeted with an affable smile which gives one a sense of beingwelcome. English is also widely used and as the medium of instruction in education, media andbusiness. The Philippines ranks as a preferred posting for Expats.16

Email:

VI. CONTACTS

ADRIAN S. CRISTOBAL, JR.Undersecretary for Industry Development and Trade PolicyBOI Vice Chairman and Managing HeadTelefax: (+632) 8953512 / 8953993Tel: (+632) 8809303 / 8809332 / 8904898Email: [email protected]: www.boi.gov.ph

LUCITA P. REYESExecutive DirectorIndustry Development GroupBoard of InvestmentsTelefax: 8953978Tel: 8953983 / 8976682 (local 326/325)

[email protected]

EVARISTE M. CAGATANDirectorInfrastructure and Services Industries Department

Board of InvestmentsTelefax: (+632) 8956617Tel: (+632) 8976682 local 228Email:[email protected]

JOY JOSETTE L. LACHICADivision ChiefSectoral Studies Division (Tourism and BPO Industries)

16HSBC, op cit
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]


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Infrastructure and Services Industries DepartmentBoard of InvestmentsTel: Trunk Line (+632) 8976682 local 279 ; Direct Line (+632) 8953997Email:[email protected]

Prepared by:

PAUL EDWARD E. TAJONVANDERBILT S. LEYNESSectoral Studies Division (Tourism and BPO Industries)Infrastructure and Services Industries DepartmentBoard of InvestmentsEmail:[email protected],[email protected]

April 2012
mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]

it & bpo profile_april 2012 (2)

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