Foreign investors looking to put up new ventures in the Philippines—particularly in the business-process outsourcing (BPO) sector—are expected to show a little bit of hesitation before sealing any deal this year, as protectionist policies still hover over the world’s largest economy.
In a recent report on Asia, international think tank BMI Research said emerging markets across the world will be seeing increased investments in service centers, such as in the BPO industry by global multinationals.
The Philippines is among the top 5 emerging markets with the largest market share in the BPO industry. It is also the country with the fastest growth rate in the years 2012 to 2016 at 63.6 percent. This is followed by Poland’s 28.8 percent and India’s 13.2 percent.
However, BMI Research senior Asia analyst Raphael Mok told the BusinessMirror that BPO companies will be less aggressive in expanding this year due largely to the protectionist stance of United States President Donald J. Trump.
“The US is one of the largest investors in the Philippines BPO sector. While Trump’s protectionist rhetoric is unlikely to see US companies reverse their existing investment in the country, it has led to many of them adopting a wait-and-see approach with regards to new ventures in locating their businesses offshore,” Mok told the BusinessMirror.
“We believe that this concern will continue to weigh new investment commitments into the BPO sector in 2018,” the analyst added.
Despite this looming concern, BMI’s expert said the pull on new investment commitments is likely to gradually ease over the coming quarters, barring any actual protectionist policies against the Philippines.
The rapid expansion of the BPO industry has been a boon to the local economy, providing local employment opportunities for an English-speaking work force, as well as pumping in new dollar revenues to support the local currency and the country’s balance of payments.
In 2016 data from the IT and Business Process Association of the Philippines reported that the country’s BPO industry was responsible for 1.2 million direct jobs in 2015.
Though competition in the sector is increasing, the Bangko Sentral ng Pilipinas estimated in mid-November last year that the BPO industry would generate revenues of $24.5 billion in 2017, up from the $22.9 billion earned in 2016.
Image credits: AP Photo/Andrew Harnik