Strong peso threatens BPO sector

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THE GROWTH of the local business process outsourcing (BPO) industry is under threat due to the strengthening of the peso, which has already taken away “low costs” as one of the Philippines’ biggest advantages over competitors like India and China.

In a statement this week, the Business Processing Association of the Philippines (BPAP) said that outsourcing to the Philippines is now 30 percent more expensive than India due to the strong local currency.

“With the 30-percent difference in peso and Indian rupee exchange rate with the US dollar, the cost differential has substantially widened,” BPAP president Benedict Hernandez said. “And that is much more difficult to manage.”

Hernandez is also president of the Call Center Association of the Philippines (CCAP), which groups companies that specialize in voice-based services.

Citing analysis by Everest Group and Outsource2Philippines, Hernandez said the combination of an appreciating peso and a depreciating Indian rupee had provided India with a meaningful cost advantage.

A survey of BPAP members on the impact of the strengthening peso revealed that 46.7 percent of respondents said it had been more difficult to hit their respective revenue targets.

Respondents to the survey, which was conducted last week, also said they had lost some business to other destinations (40 percent) or cancelled expansion plans (40 percent).

The industry, which contributes much to the domestic economy, ironically helped drive up the peso’s value, Hernandez said.

Southeast Asia has become a preferred destination for global portfolio investors as a result of sustained weakness in developed economies, Hernandez explained.

“Investment inflows result in increased demand for these currencies, including the Philippine peso, creating strong upward pressure on value,” he said, as he urged policymakers to act to stem the peso’s sharp climb.

“Our industry must also be able to operate within acceptable market prices. That’s becoming increasingly difficult as the peso continues to appreciate.”

Aside from the BPO industry, exporters are also hit hard by a stronger peso since they make less money in peso terms for every dollar they earn.

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  • Hayek_sa_Maynila

    Sa malakas na stock market (record high) lahat panalo…sa bumababang interest rates (record low) naman, mga bangko lang ang talo…sa malakas na piso, karamihan (Overseas Filipinos, exporters, BPOs at maging mga lokal na industriya na nakikipag laban sa murang imports) ay talong lahat! 
     
    Ang mga wholesale at retail trader lang ang panalo sa malakas na piso. Ito pa rin ba ang klase ng ekonomiya ang gusto natin, puro trader? walang mga producer? puro buy and sell, kawawa ang agrikultura at manufacturer? Panay contractual na trabaho lang ang makukuha natin sa mga traders na yan.

    Wag natin madalian na tumaas ang antas ng pamumuhay ng ating bansa at gamitin ang paglakas ng piso para marating ito. Basahin po ninyo ang kasaysayan ng ekonomiya ng Japan, China, Taiwan, Malaysia, Thailand, atbp at makikita nyo na ang ang pagpapataas ng palitan (o mahinang currency) ay mas nakabubuti sa bansa habang maliit pa ang income per capita nito. Wala pong short cut dito. Kailangang pagdaanan muna ito.

    Kapag nakarating na ng $10,000 ang ating pangkasalukuyan ay $2,500 na income per capita natin dito sa Pinas maari na nating pag isipan yang paglakas ng piso. Sa ngayon ay wala pa tayong karapatan. Kung ang Singapore nga, kung saan ang income per capita ay nasa $50,000, ay maingat sa pagpapalakas ng SGD, e tayo pa kayang ubod ng hirap na bansa?

    Ang 7.1% growth noong 3rd quarter ay hindi dahilan sa pagpapalakas ng piso. Isang quarter lang po yan. Kapag naulit natin ng 20 taon yan, puede na siguro.

  • http://profile.yahoo.com/TTBRJQ4KQM6HGMI64KNBT6E4FU JAwo

    I think it’s okay if the peso is beginning to strengthen.. Ang kailangan lang natin ay pagandahin ang “Quality” sa BPO Industry natin.. Quantity (China and India) vs. Quality (Philippines).. As an investor I go for quality, so my investment to have full return. 

  • oh_noh

    Aside from the BPO industry, exporters are also hit hard by a stronger peso since they make less money in peso terms for every dollar they earn.

    ni hindi man lang nabanggit ang mga bayani *kunong* mga ofw!!! *hehe*

    … sasabihin ng mga mga eksperto sa ekonomiya dito, lumipat na kayong mga taga/nasa bpo sa pinas duon sa india!!!

    for an import-oriented/consumer country like ours, cheers to a strong economy – in paper!!!

  • marivic mique

    strong peso=more investor, more investor=more jobs, more jobs=lesser ofw

    • oh_noh

      a new year’s wish? :)

    • loythegreat

      Wow! You should be the DTI secretary or whatever because you have discovered the formula for our economic success. Bravo!

  • http://pulse.yahoo.com/_4C2SFYIH52Y2KR7QPZPHJO2XQQ sl1

    quality of Filipino workers are better than our competitors so there is nothing to worry about…sa english lang talo na sila!

    • loythegreat

      We should not rest on our laurels. Last time I checked, India is fast churning out fluent English speaking workforces and they have a population 10x larger than ours. Plus they have the technological edge.

  • http://pulse.yahoo.com/_FKE56ZWNI2XKEVVLZQGRWG7WBI BURADOR—Phil. Voice

    PILIPINO workers HAVE to SHOW its WORKING QUALITIES and NOT because of WEAK PESO——STRONG PESO and QUALITY pilipino workers HAVE to GO HAND in HAND——
    NO more WEAK PESO because the Philippine ECONOMY is BOOMING——
    RAISE the STANDARD and QUALITY of PILIPINO workers and INVESTORS will STAY INTACT—

  • http://profile.yahoo.com/N2QA6YVV4JWJWH5OZ75MC5Y3ME BS

    A strong peso against the dollar does not translate to strong peso purchasing power.

    • http://pulse.yahoo.com/_FKE56ZWNI2XKEVVLZQGRWG7WBI BURADOR—Phil. Voice

      YES, IMPORT are MORE cheaper——-

  • http://pulse.yahoo.com/_D3LDMMAKC6UDQLDVFP2DGSJBXY Jezzrel

    BSP — since our country is listed as one of the currency manipulator.. let the peso appreciate, DTI watch out for skyrocketing food prices, take charge.. there’s no use of having a strong peso if its local purchasing power is the same.

    BTW, what are the exchange rate against our neighbors in SEA? 

    • Pitbulldog

      Trademark of P-noy’s hallucinatory tendencies.  Just to show a false impression his admin is doing good.  Manipulation and invention of lies….

    • robrano

      Unfortunately, the local purchase power is not the same. Contrary, the “stronger'” the peso became, the lower was the local purchase power. Because higher prices abroad are immediately put to local prices without to care that with a stronger peso imports become calso heaper in pesos. All the possible advantages of the overvalued peso go solely to big business and the government.

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