Philippine BPOs challenged by global rivals

The business process outsourcing industry in the Philippines now face a tougher competition against emerging offshore destinations as they struggle to surpass the incentive programs provided by their governments to lure more investors to their information-technology related services sector, revealed a research by PricewaterhouseCoopers.

Compared to offshoring hubs such as Latin America, China and Eastern Europe, who all have outstripped the Philippines through government policy integration, the country is still working on streamlining requirements on business and bureaucracy in the government.

The global accounting firm cited this as the reason why more BPO clients from the Philippines are moving to these destinations. PwC Philippines Chairman Judith Lopez said that the global competition in the outsourcing market led to national policymaking programs as governments use incentives to lure outsourcing businesses.

She also cited China as an example wherein more firms from the US and Europe prefer to outsource their IT-related services to Chinese providers because they have expanded their outsourcing sector and provided tax breaks, employment subsidies and labor-hour systems.

The country's Board of Investments managing head and Trade Undersecretary Elmer Hernandez was quoted by the Business Mirror as saying that they could only give incentives based on what is allowed by the law.

Hernandez added that this adds importance to the incentives-rationalization legislation that is pending in Congress since this would enable the investments board to grant perks.

Currently, the Philippines provides nontaxable importation of capital equipment, income-tax holidays and the option to pay 5-percent tax on gross earnings rather than paying all national and local duties in areas considered as economic zones in order to strengthen the BPO sector.