As the government summoned the IT-business process outsourcing (BPO) industry back to repopulate offices, property consulting firm Colliers has raised concerns that the Philippines may turn less competitive in this crucial space versus India and other markets that still encourage work-from-home (WFH) arrangements.
The Fiscal Incentives Review Board (FIRB) recently directed the outsourcing sector to start exclusively operating within Philippine Economic Zone Authority (Peza)-designated IT zones beginning April 1 this year. This will end a two-year allowance during this COVID-19 pandemic to keep 90 percent of IT-business process management (BPM) staff under WFH mode and still retain their fiscal incentives.
The Peza, for its part, had been pushing for the extension of the pandemic WFH arrangement until Sept. 12 this year to no avail.
In a commentary dated March 14, Colliers assistant manager Miguel Bengzon said the FIRB’s decision was in line with the government’s thrust to reopen the economy and allow for more consumer activity given that higher vaccination coverage and lower local COVID-19 contagion had been achieved.
With more employees returning to their physical offices, they are seen more likely to spend on food, transportation, and other incidental expenses, thereby contributing to the country’s economic recovery.
However, Bengzon said it might take some time for companies to return to normal office activities. He said it would be crucial for the sector to smoothly manage the transition.
“Public transportation is still gradually ramping up and employees need ample time to revert to a regular office schedule after two years of remote work,” he said.
He said it might also take some time for companies to adjust their functions—operations, IT, facilities—to increase activities in the office.
“Furthermore, occupiers are facing the risk of employee attrition with some individuals developing a strong preference for remote or hybrid work, which may lead them to join other companies that allow such,” Bengzon said.
“On a macro level, the competitiveness of the country’s outsourcing industry may also be at risk as it competes with other markets (e.g., India) where increased WFH allowance may provide the advantage of stronger employee retention, engagement and performance,” he said.
Ultimately, Colliers believes that policymakers and the IT-BPM industry must work hand in hand to arrive at the optimal work regulations in support of both economic and business growth.
“The IT-BPM industry has consistently been an integral contributor to the country’s economic output; it is vital that their operating environment in the Philippines remains competitive and adaptive to the evolving needs of the industry and employees,” he said.
BPO, a key driver of the Philippine economy, grew revenues by 1.4 percent to $26.7 billion in 2020 despite the pandemic-induced hard lockdowns as the industry shifted to WFH mode. It also expanded headcount by 1.8 percent.
In 2021, industry revenues grew by 12 percent to $28.8 billion while headcount expanded by 8 percent to 1.4 million workers.