PH outsourcing revenue growth seen slowing

Dutch financial giant ING sees growth in the Philippines’ outsourcing revenue to slow down to mid-single digits in the coming years as the United States—which accounts for at least 70 percent of the country’s business process outsourcing (BPO) business—enters a protectionist regime.

Newly inaugurated US President Donald Trump said he would impose a “very major” border tax on companies that would move operations offshore. He also signed a memorandum withdrawing the US from the Trans-Pacific Partnership.

“We believe the Philippines is the most exposed country in Asia, excluding Japan, to a Trump shock to US outsourcing,” said ING Bank Asia chief economist Tim Condon.

The economist noted that since 2005, the US had been the origin of an average of 33 percent of the Philippines’ foreign direct investment (FDI) inflows, ranging from a high of 61 percent in 2014 to a low of 17 percent in 2006.

Condon noted that the Philippines had exported $18-billion worth of technical, trade-related and other business services in 2015, which marked a 23-percent increase from the previous year.

Including information technology and other outsourcing revenue, total revenues from the BPO industry in 2015 were estimated at $22 billion.

Through September 2016, growth in revenue from the sector was 10.9 percent, he said.

“We expect the growth of outsourcing exports to settle in the mid-single digits in the medium term,” he said.

Trump had also met with business leaders and asked for their help in boosting US manufacturing.

“We believe the president wants a US manufacturing renaissance and views a strong US dollar as incompatible with this,” Condon said.

Other factors seen posing greater threats to the information technology/business process management (IT-BPM) industry include rising office rents alongside high internet and electricity costs, based on a separate research by property consulting firm Colliers Philippines.

While automation is dawning, the research said the indispensability of human intervention in the IT-BPM industry was still undeniable, adding that both automation and IT-BPM could grow together.