NEW YORK (AP) - U.S. companies looking to outsource overseas have found an attractive new home for their back-office operations -- and it's not India or China.
It's the Philippines.
The Philippines has an aggressive new plan to more than double its market share of global business process outsourcing by 2010. Banking on newfound economic stability and an English-speaking work force, the country is aiming for 10 percent of the market for outsourced jobs in customer service, financial market research and, at the top end, software development.
India commands 40 percent of the worldwide business process outsourcing market, which is otherwise highly fragmented. The Philippines wants to increase its comparatively tiny 4 percent share and mount a challenge to India's domination of the business it pioneered.
It's an optimistic goal, to be sure. But there is no shortage of optimism these days in the Philippines, where economic growth is trucking ahead at the fastest pace in almost 20 years and where the country's president, a trained economist, has been able to push through crucial reforms to support business growth.
More than 600 foreign companies now employ about 240,000 workers in the Philippines, including Citigroup Inc., IBM Corp., insurer American International Group Inc. and the consulting firm Accenture Ltd. Companies say they're attracted to the country's low wages and large pool of English-speaking workers -- a legacy of U.S. involvement in the region a century ago.
The Business Processing Association of the Philippines recently previewed its 'Roadmap 2010' toward outsourcing growth of 40 percent per year for the next two years. The government commissioned the trade group's study; Philippines President Gloria Macapagal Arroyo promoted the plan at its release on Sept. 27 to industry investors in New York.
Business outsourcing is the fastest-growing sector of the economy, Arroyo said in a speech.
'We're now focused on growing the higher value-added services segment of the knowledge process outsourcing industry -- accounting, legal, personnel and administrative services,' she said.
The Philippines has a 'strong Western culture affinity' that makes it easy to do business there, said Neil Elias, Philippines manager for LogicaCMG during the seminar. LogicaCMG's clients in the Philippines include Chevron Corp. and Germany's Deutsche Bank AG, he said.
The Philippines economy has grown a brisk 7 percent so far this year, the fastest expansion in nearly two decades. The growth has been driven by consumer demand, which has in turn been fueled by the billions in remittances that Filipinos working abroad send home each year. Revenue from the influx of business process outsourcing companies has also contributed.
Still, there are threats to growth.
Politics have often undermined progress. Arroyo has managed to survive crises including two coup attempts and two impeachment bids. Terrorism remains a concern, although most bomb attacks and kidnappings have been confined to areas outside the country's capital and economic center, Manila.
But conditions have improved, and foreign direct investment has surged fivefold in three years.
Even India has taken notice -- as an investor. Standard & Poor's credit analyst Agost Benard, who covers India, Pakistan and the Philippines, says he has seen large Indian outsourcing firms start outsourcing in the Philippines.
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© 2007 AFX News
