Despite appreciation of the peso: Growth in BPOs remains strong

CEBU, Philippines -  Despite the appreciating peso, there is still a room for strong growth of the business outsourcing process companies in the country.

Two days ago, an economist from the University of Asia and the Pacific (UA&P) warned over ABS-CBN News Channel that the local currency strengthening to P39 against the dollar could prompt BPO companies to close shop.

The peso closed at P40.850 as of yesterday.

It gained 6.4 percent since the start of 2012, becoming Asia’s best performing currency after South Korea’s won.

UA&P strategic business economic program director Victor Abola said in ANC’s interview that the negative projection could be felt “a year or two years from now when factories would have closed down.”

But Cebu Investment and Promotions Center (CIPC) managing director Joel Mari Yu described the peso as “too strong for our own good.”

“BPO companies are spending pesos but with the budget in dollars. Peso appreciation will definitely affect the industry but it is still hard to know,” he said.

If the peso further appreciates, Yu said new investors will have to decide to continue, while the existing ones will have to reevaluate their investments.

“It’s not very easy to get up and go relocate to other places. What they have here in the Philippines is a resource they cannot find in the rest of Asia,” he continued.

Cebu Business Club President Gordon Alan “Dondi” Joseph echoed Yu’s suggestion on BPO companies redesigning their business models.

Joseph said companies have to deliver better products and services and be efficient and competitive.

“It is a real risk. The government is already defending the peso but it can only preserve its value on a limited basis. Exporters of services need to adjust to this new reality,” he stated.

Economist Fernando “Perry” Fajardo said that it is still uncertain if the currency would appreciate to P39 against the dollar in the coming months.

“Yes, the peso continues to strengthen but it still isn’t sure. On-the-verge ang profitability. To move out is also expensive. Who knows it will be different in the next three months? Nobody is sure and fluctuation is not permanent,” he said.

Fajardo said key drivers of peso appreciation include investment on stock exchange, government bonds, strong remittances Overseas Filipino Workers (OFWs), higher interest rate of peso compared to other countries, foreign funds and current account deficits.

He noted that if the gloomy projection would become a reality, some BPO companies might close shop but those proficient ones will stay.

He added that favorable factors such as less corruption and efficiency of the Aquino administration have contributed to the improved business climate in the country.

Rey Calooy, head of the Filipino Cebuano Business Club, said that BPO firms would still remain to operate even if the exchange rate will hit P39 against the dollar.

He cited that it is cost-efficient for foreign investors to outsource in the Philippines since Filipinos are competent who can handle stressful job.

“They are not just here for the dollars. They can still save here compared to other countries with the type of labor force we have. Filipinos are known for their English-speaking fluency and patience at work,” he said.

Mandaue Chamber of Commerce and Industry President Philip Tan, on the other hand, emphasized that the competitiveness of Filipinos would overcome the exchange rate factor.

“Anyway, most of our BPOs are foreign-owned and profits in dollars are retained in their own country,” he added.

This year, Cebu expects to hit more than100,000 employees in the Information, Communication and Technology (ICT) sector as some high-value outsourcing companies are interested in locating here.

At present, the local ICT industry in Cebu is directly employing close to 90,000 people.

In 2011, Cebu had a total of 75,000 people working in the ICT sector.

About 11,000 were added as new companies opened last year while about 5,000 were employed through the expanding BPO firms.

Yu said that CIPC has received approximately 56 inquiries in 2012 alone in the IT/BPO sector.

About 17 new firms opened in Cebu last year in the IT sector.

At least five companies are preparing their documentation to establish business in Cebu and may eventually set up early this year.

In the ANC report, the 300-member Business Processing Association of the Philippines admitted difficulty in hitting revenue targets due to the strengthening peso.  -/LPM (FREEMAN)