Decline in BPO investments traced to local uncertainties

The American Chamber of Commerce of the Philippines (AmCham) sees domestic uncertainties in both the short and the long term as factors that may explain the continued drop in IT-BPM investment pledges in the first half of the year, a top official said.

AmCham senior adviser John Forbes told the Inquirer that a mix of short- and long-term uncertainties, including the move to change the industry’s tax policy, might be factors behind the 34-percent drop in new IT-BPM investments in the second quarter.

According to the Philippine Statistics Authority (PSA), new IT-BPM pledges reached P4.9 billion in the second quarter, falling 34 percent from the P6.27 billion registered in the same months last year. This continues the decline that the industry has been facing in terms of new investments since the start of the second semester of 2016.

“There are some short-term uncertainties in the sector such as future tax policy and insufficient supply of Peza-approved office space, while in the longer term lower skilled call center work will be automated and may be returned to sites in the US,” he said in a text message.

The Duterte administration’s first package of its comprehensive tax reform program wanted to reduce the tax perks that the IT-BPM industry is currently enjoying, choosing to remove some value-added tax exemptions in favor of a VAT equivalent of 12 percent of gross receipts.

Stakeholders have opposed this move, warning that it would affect the competitiveness of the Philippine IT-BPM industry, which has recently slipped in its global ranking.