Real estate and property consultancy CB Richard Ellis (CBRE) Philippines underscored the immense growth of the national economy due in large part to the business process outsourcing (BPO) phenomenon in the past decade.

“We are where India was 10 years ago, and the best is yet to come,” stated CBRE Philippines founder, chairman and chief executive Rick Santos.

The company’s report cited Tholons’ list of Top 100 Outsourcing Destinations, with latest figures placing Manila on the second spot, surpassing Mumba, India. The Philippine cities of Bacolod, Baguio, and Iloilo also rose a few notches to number 86, 95, and 91, respectively. Davao and Santa Rosa, Laguna maintained their rankings at 69 and 82, rounding up a total of eight Philippine cities in the top 100 list.

Santos made the statement in light of his company marking two decades of operations in the country this year. “Since we started 20 years ago, the Philippines is now at its peak. We can be considered the call center capital of the world, and this speaks volumes of our success story as a nation,” he explained.

According to Santos, the world has set its sights on the “bright spot of Asia.” With a market of 1.3 million jobs by 2016 and an annual growth of 17 percent, the BPO industry remains the backbone of the Philippine economy.

Of all sectors, the BPO industry tops the list for size and growth trajectory, providing employment opportunities and encouraging foreign investments into the country. More growth is expected outside of Metro Manila as well, as BPO companies are increasingly looking to set up shop in what CBRE dubs as “next wave cities.”

“We are optimistic on the movement of the real estate market, as more investors are flocking in to take part in the opportunities outside the major CBDs like Clark, Iloilo, Davao, and Cebu. The playing field is much more exciting now with the creation of developer and investor-driven CBDs and the strong momentum of the BPO sector in the coming years,” stated Santos.

The BPO industry was not always the hot market it is today, according to Santos. The first contact center in the Philippines was set up by the Accenture Group in 1992, but it was not until 1995 that the Philippine Congress passed the Special Economic Zone Act, which eased restrictions in terms of lowering area requirements for developments and offering tax incentives to lure investors.

Since 2004, revenue has grown from US$1.55 billion in 2004 to US$15.5 billion in 2013, with employment ballooning from 101,000 to 900,000 Filipinos.

The Philippines registers high take-up rates compared to markets like India, Hong Kong and Jakarta, and consistently presents the lowest office rental rates in the region.

On the economic front, the country maintains its resiliency to China’s slowdown as the yuan devaluation spells a huge win for the BPO industry. The highly anticipated APEC business forum in November will also gather global leaders and once again put the Philippines in the global spotlight.

“With ASEAN expected to grow by US$2.78 trillion in 2017, the integration will only ramp up activity and interest in BPOs. There is a wealth of opportunity for the Philippines to establish its seat with the top economies given the growing middle class, robust domestic consumption, rising retail activity, and sustained growth in manufacturing,” said Santos.

“The BPO industry has come a long way from its humble beginnings as a single call center to the mammoth it is today. Only the best is yet to come,” he concluded.

As seen on Manila Bulletin

In a Sept. 18 report, titled “Philippines Monthly: The bright spot in EM” (emerging markets), Deutsche Bank said local financial markets tumbled along with peers last month after the Chinese central bank devalued the yuan.

Despite the sell-off, Philippine markets performed better among emerging economies, the bank noted, citing the country’s strong macroeconomic fundamentals and smaller bond and equity exchanges.

While economic expansion eased to 5.3% last semester from 6.2% a year ago — as against the government’s 7-8% full-year target — the bank said the country “continues to face positive growth prospects just when its Asian neighbors are at risk of slowing down.”

“Private consumption and investments have been strong, fueled by at least $2 billion of remittances every month, better job prospects from the services sector, and more recently, lower commodity prices,” Deutsche Bank said.

“This improvement in incomes can be observed in changing consumption patterns, with expenditures on non-essential items, transportation, education, and health contributing increasingly to overall private consumption growth.”

Deutsche Bank said it expects the economy to grow at 6% this year and 6.5% in 2016 from last year’s below-target 6.1%.

Sustained inflows from overseas Filipino remittances and the business process outsourcing industry also led the Bangko Sentral ng Pilipinas (BSP) to shore up ample reserves that it can tap to cushion the peso from depreciation pressures.

“Its reserves — equivalent to about 14x its gross external financing needs — make the BSP better equipped within EM to protect the economy from external shocks,” Deutsche Bank said.

“The economy also stands as less vulnerable relative to its peers in the face of rising borrowing costs, which could be triggered by the looming policy normalization by the US Fed.”

Government debt has been reduced to below half of the economy while household and corporate borrowings have continued to lag behind those of other Asian emerging markets.

“More worrisome then may be the pace of increase in leverage over the years amid declining borrowing costs. But the adverse impact of rising rates will likely be confined to limited segments of the economy,” Deutsche Bank said.

Going forward, the challenge now lies in the government spending as planned.

“A change in leadership is forthcoming, with elections taking place in May 2016. And this is likely to pressure the incumbent to push for spending, especially towards infrastructure (where there is a substantial deficit), if he wants to leave a favorable mark on the country,” Deutsche Bank said.

A strengthening of the currently brewing El Niño that state weather officials now say could turn out to be worse than the 1997-1998 “strong” event, however, could drag both local output and further weaken farm exports at a time of a slowing Chinese economy and sluggish global trade, the bank said. — Mikhail Franz E. Flores

As seen on Business World Online