RP urged to expand BPO sector to draw foreign investments

MANILA, Philippines - To continuously attract foreign direct investments (FDIs), the Philippines needs to accelerate the expansion of the business process outsourcing (BPO) sector in the immediate future, a foreign economist said yesterday.

“As an immediate response, the Philippines must accelerate the growth of the BPO sector,” MasterCard economic advisor for Asia and Pacific region Yuwa Hedrick-Wong said in an economic briefing.

He said global investors are looking for investment opportunities in the emerging Asian market, particulary India, Vietnam and Indonesia.

He added that the Philippines must also shift its export focus from the United States to China and the rest of Asia.

In 1997, 35 percent of Philippine exports found its way to the US, just one percent of to China, and 42 percent to the rest of Asia. Last year, the US market settled for 17 percent of Philippine exports, a larger 11 percent to China and 50 percent to the rest of Asia.

The MasterCard economist said the Philippines also has the potential to grow by 2.5 percent this year, and four percent next year.

However, Wong said the Philippines needs to lift some restrictions on FDIs and domestic investments if it hopes to take advantage of a strong emerging Asia and the global economic recovery next year.

In the recent 2010 Doing Business study conducted by the World Bank and the International Finance Corp. (IFC), the Philippines further went down in ranking to 144 out of 183 nations included in the study.

When the study started in 2007, the Philippines was ranked 136, and slipped to 140 the following year.

The study indicated that the Philippine government must have an extensive and long-term plan for the country’s economy to improve its ranking.

“The government must make it clear what kind of regulatory environment it wants, and it must design a long-term plan,” it said.

The MasterCard economist said bringing in FDIs will not only mean investments, but the technology to run the business, the experience, and the marketing and distribution network.

FDIs in the Philippines fell from 24.4 percent of GDP in 1997 to 21.2 percent in 2000. It further dipped to 16.1 percent of GDP in 2004 to 14.7 percent last year.

The regional economist said “some of the private monopolies need to be dismantled, and the government controlled companies and industries must be privatized.”

Strategically, the Philippines must also look at developing the agricultural sector if it is to grow and remain competitive in the region.

 “Thailand is selling mangoes, and other fruits and vegetables to China, and they are selling them in US dollars. They are considered premium products there, yet the Philippine has the same or better agricultural products,” Wong pointed out.