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Pandemic will hit BPOs with first revenue drop in 11 years
Prinz Magtulis (Philstar.com) – November 20, 2020 – 1:15 pm
MANILA, Philippines – The coronavirus pandemic leaves nothing unscathed, not even digitally inclined business process outsourcing (BPO) companies, a critical sector that generates dollar revenue and generates employment, now poised for its first 11-year revenue decline and slower future growth.
Members of the IT Business Process Association of the Philippines (IBPAP), the industry’s umbrella group, are expected to generate $ 26.2 billion this year, down 0.5% from last year’s $ 26.3 billion. The forecast dropped from $ 27 billion to $ 28 billion last year.
If realized, it would mark the first year-on-year decline in revenue since 2009, a year after the global financial crisis.
With revenue declining slightly, job creation would also stagnate at 1.3 million full-time employees, also below the 1.33 to 1.37 million projected a year ago. IBPAP President Rey Untal was not worried.
“I think that’s good news considering the fact that if we look at the GDP (gross domestic product) of the Philippines, we will probably end the year down 7-8%. That this industry is reporting flat growth is great again, ”Untal told reporters in an online briefing.
The impact would last beyond this year. BPO revenue next year is estimated to grow to $ 27 billion before reaching $ 28-29 billion in 2022, albeit below $ 32 billion originally. Full-time jobs are likely to reach as high as 1.36 and 1.43 million in 2021 and 2022, respectively, also down from 1.57 million.
To be fair, the performance of the local BPO sector is following global counterparts whose work was also hampered by extensive blockades to control the spread of the deadly virus. As expected, Untal said BPOs had no difficulty shifting to work-from-home arrangements, benefiting from years of digital investment in the workplace that only “accelerated” with the healthcare crisis.
That said, the current lousy projections for income and employment were considered unthinkable for a sector that, years ago, was thought to assume remittances as the main source of dollars in the country. That didn’t happen, although this year, remittances are forecast to fall a further 2% by the central bank, although actual inflows would remain well above BPO earnings.
But in addition to the pandemic, challenges unique to the Philippines are also clouding the prospects for BPOs. One of the most immediate and consistent was that the Duterte government eliminated tax advantages in key industries such as BPO through the Corporate Recovery and Tax Incentives for Businesses (CREATE) bill. This is not new, as in 2017 a similar but unsuccessful push pushed investment away from the sector.
However, with the dramatic policy changes introduced by the coronavirus elsewhere, Untal is optimistic that CREATE would prove “investment friendly” for BPOs in the long term.
Without going into details by subsector, Untal said growth was slowing in the IT segment, whose work has been hampered by movement restrictions. The animation and creative segments also face “unique” challenges, which he did not specify.
There was also a weakening in the growth of higher-earning call centers to a “minimal degree,” a scenario already seen last March when movement restrictions prevented workers from receiving calls in the office. The government asked BPO companies to subsidize free transportation and accommodation for their workers.
On the other hand, “an increase in demand” for healthcare is precipitating the growth of BPO medical services, including telemedicine. Expansion is also increasing for global inner centers.
Overall, Untal relies on typical sources of growth to find new locations away from traditional central business districts towards the provinces, skills training and large investments in the telecom sector before a new player and driven by demand for better services network. “I think there are tremendous opportunities across the board,” Untal said.
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