Region
Index: 5.8  
Philippines
Flag of Philippines
Updated: May 16, 2010

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.

Population:

Total Population: 98 million

Source: CIA World Factbook, July 2009

Economy:

Gross Domestic Product: 166.9 billion US dollars
Source: World Bank, 2009

Gross Domestic Product (PPP): 317.1 billion international dollars
Source: World Bank, 2009

Per Capita Income:

Gross National Income Per Capita (Atlas Method): 1,890 US dollars
Source: World Bank, 2009

Gross National Income Per Capita (PPP): 3,900 international dollars
Source: World Bank, 2009

Index: 8.7

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.

Index: 9.7
IT Salaries:

Software Engineer / Web Developer: 9.5 percent of US
Source: PayScale, SourcingLine, February 2010

Senior Software Engineer / Web Developer: 22 percent of US
Source: PayScale, SourcingLine, March 2010

IT Project Manager: 26 percent of US
Source: PayScale, SourcingLine, March 2010

Index: 10.6
BPO Salaries (Non-voice):

Junior BPO Resource: 8.7 percent of US
Source: PayScale, SourcingLine, March 2010

Skilled BPO Resource: 14 percent of US
Source: PayScale, SourcingLine, March 2010

Operations Manager: 26 percent of US
Source: Payscale, SourcingLine, March 2010

Index: 9.6
BPO Salaries (Voice):

Customer Service Representative: 17 percent of US
Source: PayScale, SourcingLine, March 2010

Customer Service Manager: 23 percent of US
Source: PayScale, SourcingLine, March 2010

Index: 1.8
Real Estate:

Office Occupancy Cost (CBD): 23.6 US$/sf/yr
Source: CB Richard Ellis, November 2009

Note: Occupancy costs are for Manila.

Index: 6.5
Taxes:

Corporate Tax Rates: 30 percent
Source: KPMG, October 2009

Indirect Tax Rates: 12 percent
Source: KPMG, October 2009

SMB Effective Tax Rate: 49.4 percent
Source: Doing Business (World Bank), 2010

Index: 2.1  

Index: 0.4
Workforce:

Total Workforce: 37.9 million
Source: CIA World Factbook, 2009

Index: 1.1
Outsourcing Sector:

Total Offshore Outsourcing (IT & BPO): 9,000 million US dollars
Source: Business Process Association Philippines, SourcingLine, 2009

Exports of Computer & Information Services: 400 million US dollars
Source: IMF, 2008

Exports of Misc. Business Services: 3,404 million US dollars
Rank: 12 of 24
Source: IMF, 2008

Index: 5.1
Basic Education:

Adult Literacy: 93.4 percent of population
Source: UNESCO, 2009

Expenditures on Education: 2.5 percent of GDP
Source: CIA World Factbook, 2010

Index: 0.5
University Graduates:

University Educated Population: 8.4 percent of population
Source: UNESCO, 2009

Annual University Graduates: 410 thousands
Source: UNESCO, 2009

Index: 4.8
Language:

English Speaking Population: 48 percent
Source: Crystal, 2003

Index: 0.5
Technological Readiness:

Internet Access: 6.2 users per 100 inhabitants
Source: International Telecommunications Union, 2009

Broadband Internet Access: 0.5 subscribers per 100 inhabitants
Rank: 22 of 26
Source: International Telecommunications Union, 2009

Index: 4.5

Index: 6.0
Economic Competitiveness & Stability:

Economic Competitiveness: 3.9 GCI score
Source: The Global Competitiveness Report, 2009

Macroeconomic Stability: 4.5 GCI Score
Source: The Global Competitiveness Report, 2009

Index: 4.7
Infrastructure:

Quality of Roads: 2.8 index (1-7)
Source: The Global Competitiveness Report, 2009

Quality of Electric Supply: 4 index (1-7)
Source: The Global Competitiveness Report, 2009

Mobile Phone Penetration: 75.4 subscriptions per 100 inhabitants
Source: International Telecommunications Union, 2009

Index: 6.3
Labor Market Efficiency:

Rigidity of Employment: 29 index (0-100)
Source: Doing Business (World Bank), 2010

Cost of Firing Employees: 91 weeks of salary
Source: Doing Business (World Bank), 2010

Index: 2.8
Regulation:

Overall Ease of Doing Business: 144 rank (1-183)
Source: Doing Business (World Bank), 2010

Complexity of Starting a Business: 52 days to register a start-up
Source: Doing Business (World Bank), 2010

Complexity of Paying Taxes: 195 hours per year
Source: Doing Business (World Bank), 2010

Index: 2.4
Corruption:

Corruption Perceptions: 2.4 CPI index
Source: Transparency International, 2009

Index: 6.2
Legal Protection:

Procedures to Enforce Contracts: 37 number
Source: Doing Business (World Bank), 2010

Time to Enforce Contracts: 842 days
Source: Doing Business (World bank), 2010

Cost to Enforce Contracts: 26 percent of claim
Source: Doing Business (World Bank), 2010

Index: 3.1
Intellectual Property Protection:

Intellectual Property Protection: 2.9 index (1-7)
Source: The Global Competitiveness Report, 2009

Software Piracy: 69 percent
Source: BSA-IDC Global Software Piracy Study, 2009

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.

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