The Philippines is a leading country in the business process outsourcing (BPO) market, both in call center services and the non- voice sector. It is an emerging player in the IT services market (web design, software development, application maintenance, etc.) with companies focusing on niche segments such as animation. Much of the attention (especially by US companies) on the Philippines is attributed to its main strengths: strong English speaking skills and awareness of Western business culture. In fact, many companies in the Fortune 500 have chosen the Philippines as the main destination of outsourced services thanks to other noticeable strengths such as competitive labor rates, high literacy and a stable telecommunications infrastructure. The numbers clearly show these facts: in 2006, Philippine offshore outsourcing (IT and BPO) was about $3.3 billion and has grown at over 30% per year to an estimated $9 billion in 2009. The offshore outsourcing industry in the Philippines first started in the 1990s, but really started growing in earnest at the start of this decade. As late as 2004, the industry was only about $1.5 billion, but grew at almost 50% for several years and is now estimated to be growing at about 30% and will reach $9 billion in 2009. Initially the focus was on call centers and low value added BPO, however growth over the last few years has centerd on higher value activities such as web design, software development, animation, legal services, medical transcription, and other shared services. Many of the older outsourcing operations are located in the capital city of Manila, but there is significant growth in secondary cities such as Cebu City, Pasig City, Quezon City and Mandaluyong City. |
With a population of 90 million, the Philippines is one of the 10 largest outsourcing countries, but is less than one tenth the size of China or India. It has a relatively low per capita income and consequently is in the middle of the pack in economic size. Politically, the Philippines is a representative democracy with national elections on a six year cycle. Economically, the Philippines has been doing well. Economic growth has averaged 5% since 2001 under President Macapagal-Arroyo’s leadership. In 2007, the economy accelerated and grew at 7%, but then slowed to 3.8% with the worldwide economic downturn. Despite this good overall performance, the economy still faces a number of long-term challenges. Poverty and uneven income distribution remain problems and sustained growth will be necessary to grow employment and support increased government investment in infrastructure and education. By sector, the labor force can be divided between agriculture (which makes up 35%), industry (15%) and services (50%). Unemployment has been estimated at 7.4% in 2008. The country's per capita income from 2006 to 2008 was at USD $3,100, $3,200, and $3,300 respectively. Language and literacy play an important role in the Philippines ascendance as an outsourcing destination. It is the third largest English speaking population in the world and has one of the highest literacy rates in the region. |
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Population:
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Total Population: 98 million |
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Economy:
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Gross Domestic Product: 166.9 billion US dollars |
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Gross Domestic Product (PPP): 317.1 billion international dollars |
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Per Capita Income:
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Gross National Income Per Capita (Atlas Method): 1,890 US dollars |
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Gross National Income Per Capita (PPP): 3,900 international dollars |
The Philippines is one of the most cost effective locations for IT (web design, software development, animation, etc.) and BPO (voice and non-voice) in the world. Employee compensation costs, the primary cost component of any outsourcing operation can be a tenth to a fifth of that for a domestic US operation. Furthermore, with recent wage inflation in India, these costs are below those of Indian based employees. Salaries, excluding bonuses or other non-cash compensation, for junior technical resources are $4,400 to $6,700 per annum. Resources are relatively more expensive at the senior levels, but still modest by US standards. Senior software engineers with 10-20 years experience can expect salaries of $12,000 to $24,000 which are about 20% to 25% of those in the US. Office occupancy costs are also relatively low. Costs for prime real estate in central business districts is about half that of the US and lower than what one finds in the large Indian cities. General tax rates are high in the Philippines, on par with the US, but the offshore outsourcing sector has numerous tax incentives that minimize the impact. Other expenditures such as communications and electricity are about 50% less than U.S. rates. |
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Index: 9.7 Rank 18 IT Salaries: |
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Software Engineer/ Web Developer: 9.5 percent of US |
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Sr. Software Engineer/ Web Developer: 22.9 percent of US |
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IT Project Manager: 24.9 percent of US |
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Index: 10.0 Rank 18 BPO Salaries (Non-voice): |
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Junior BPO Resource: 10.8 percent of US |
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Skilled BPO Resource: 13.6 percent of US |
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Operations Manager: 23.4 percent of US |
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Index: 9.7 Rank 18 BPO Salaries (Voice): |
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Customer Service Representative: 15.5 percent of US |
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Sr. Customer Service Representative: 20 percent of US |
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Index: 1.7 Rank 18 Real Estate: |
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Office Occupancy Cost (CBD): 27.5 US$/sf/yr |
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Note: Occupancy costs are for Manila. |
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Index: 6.2 Rank 18 Taxes: |
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Corporate Tax Rates: 35 percent |
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Indirect Tax Rates: 12 percent |
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SMB Effective Tax Rate: 49.4 percent |
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Index: 0.4 Rank 18 Workforce: |
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Total Workforce: 36.8 millions |
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Index: 0.8 Rank 18 Outsourcing Sector: |
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Total Offshore Outsourcing (IT & BPO): 9,000 billion US dollars |
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Exports of Computer & Information Services: 400 million US dollars |
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Exports of Misc. Business Services: 3,404 million US dollars |
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Index: 5.2 Rank 18 Basic Education: |
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Adult Literacy: 93.3 percent of population |
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Public Expenditure on Education: 2.5 percent of GDP |
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Index: 0.5 Rank 18 University Graduates: |
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University Educated Population: 8.4 percent of population |
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Annual University Graduates: 410 thousands |
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Index: 0.5 Rank 18 Technological Readiness: |
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Internet Access: 6.2 users per 100 inhabitants |
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Broadband Internet Access: 0.5 subscribers per 100 inhabitants |
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Index: 6.0 Rank 18 Economic Competitiveness & Stability: |
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Economic Competitiveness: 3.9 GCI score |
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Macroeconomic Stability: 4.5 GCI Score |
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Index: 4.7 Rank 18 Infrastructure: |
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Quality of Roads: 2.8 index (1-7) |
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Quality of Electric Supply: 4 index (1-7) |
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Mobile Phone Penetration: 75.4 subscriptions per 100 inhabitants |
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Index: 6.3 Rank 18 Labor Market Efficiency: |
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Rigidity of Employment: 29 index (0-100) |
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Cost of Firing Employees: 91 weeks of salary |
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Index: 2.8 Rank 18 Regulation: |
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Overall Ease of Doing Business: 144 rank (1-183) |
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Complexity of Starting a Business: 52 days to register a start-up |
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Complexity of Paying Taxes: 195 hours per year |
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Index: 2.3 Rank 18 Corruption: |
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Corruption Perceptions: 2.3 CPI index |
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Index: 6.2 Rank 18 Legal Protection: |
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Procedures to Enforce Contracts: 37 number |
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Time to Enforce Contracts: 842 days |
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Cost to Enforce Contracts: 26 percent of claim |
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Index: 3.1 Rank 18 Intellectual Property Protection: |
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Intellectual Property Protection: 2.9 index (1-7) |
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Software Piracy: 69 percent |
Business Process Association Philippines - BPAP is the umbrella organization for the Philippines offshore oursourcing sector. Commission on Information and Communications Technology - Philippines goverment agency with the charter to develop the country as a world-class information and communications technology service provider. |