WORLD Bank ranked the Philippines among world's top service exporters

The World Bank has ranked the Philippines among the best performers in the services exports, particularly in the business process outsourcing (BPO) sector, but urged further reforms in the travel and tourism sector if the country intends to sustain growth moving forward.

World Bank senior trade economist Sebastian Saez said in a report that the services sector depends on human capital, the quality of the telecommunications network, and the quality of institutions.

“The experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening,” Saez added.

The Philippine experience shows that services are a viable option for export diversification, he said, adding that trade in goods is no longer the only vehicle to diversify exports for developing countries.

Services exports as a percentage of total exports increased from nine percent in 1999 to 21 percent in 2009 in the Philippines. Its services exports rose 3.6 percent on average per year during the period, higher than that of Asia as a group, which averaged 1.5 percent per year. Unlike many developing countries, the Philippines had been a net exporter of services since 2006.

The Philippines is currently the third largest player in BPO in the world, accounting for 15 percent of the global BPO market, after India (37%) and Canada (27%).

Business Processing Association Philippines (BPAP) chairman Fred Ayala said that the BPO sector currently employs close to 500,000 people and generated about $9 billion worth of exports in 2010.

The industry’s target in terms of annual revenue is $25 billion by 2016 and a direct workforce of 1.3 million.

“There is an urgent need to develop supervisors, middle managers, and more skilled workers to respond to increasing market demand for a broadening array of knowledge-based, complex services,” Ayala said.

The World Bank report also highlights the importance of developing the tourism sector.

Tourism accounts for about nearly seven percent of the country’s gross domestic product (GDP), and directly employs about 3.5 million people. But the report said that tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) are effectively implemented.

The study said major impediments to tourism competitiveness are largely associated with weak ground and air transport infrastructure - roads, railways, ground transport network, and airports. Weak physical infrastructure, it says, lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities.

Tourism Undersecretary Daniel Corpuz said the government has already started to put in place important reforms that will increase tourism arrivals in the country. The Philippines implemented a liberalized air policy in selected international airports outside Metro Manila to promote greater tourism flows to the country.

“More reforms are underway to transform the Philippines into a ‘must experience destination in Asia,’” Corpuz added.

 

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Standard Chartered revised up 2011 economic growth forecast for the Philippines to 5.7 percent

Economy: British-owned Standard Chartered Bank revised upwards its 2011 economic growth forecast for the Philippines to 5.7 percent from the original 5.4 percent.

In a research note, Standard Chartered economist Vincent Tsui said the investment bank raised the country’s GDP growth forecast to 5.7 percent instead of 5.4 percent this year due to the projected strong investment inflows in the second half.

“In anticipation of more broad-based and sustainable growth dynamics ahead, we raise our 2011 GDP forecast to 5.7 percent from 5.4 percent previously. We expect growth momentum to pick up in the second half,” he stressed.

Tsui said the investment bank raised its GDP growth forecast for the third quarter of the year to 6.4 percent instead of six percent but lowered its growth forecast in the fourth quarter to 6.8 percent instead of seven percent.

“We expect the strong investment pipeline to remain a key growth driver in the coming quarters. While we expect headline GDP growth to slow further in the second quarter due to the high base effect and temporary disruptions to electronics manufacturing from the Japan earthquake, the underlying  fundamentals of the economy remain solid. We believe headline GDP growth is set for a strong rebound in second half,” Tsui added.

He pointed out that the growth in the second half would be fuelled by investments instead of consumer spending.

“Near-term weakness aside, we believe the shift from consumer spending to business investment as the Philippines’ key growth driver deserves more market attention,” Tsui added.

The National Statistical Coordination Board (NSCB) reported late last month that the country’s GDP growth slowed down to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same period last year due to weaker government spending and slow global trade. The National Economic and Development Authority (NEDA) was expecting a growth of between 4.8 percent and 5.8 percent for the first quarter.

“Even so, we believe the weaker headline numbers mask underlying strength in an economy that is now driven by more sustainable and balanced growth dynamics,” the economist said.

The sharp drop in government spending in the first quarter of the year helped the Aquino administration post a budget surplus of P61 billion in the first four months of the year, a complete reversal of the P131.6 billion budget deficit booked in the first four months of last year.

“This is in line with our expectation that this year’s budget deficit will narrow to P256 billion due to fiscal prudence and stronger tax collection on the back of buoyant domestic demand,” Tsui said.

The Aquino administration hopes to trim the budget deficit to P300 billion or 3.2 percent of GDP this year from a record level of P314.5 billion or 3.7 percent of GDP last year. It has committed to trim the deficit to two percent of GDP starting 2013 until the end of the term of President Aquino on 2016.

Standard Chartered reported that inventory restocking particularly of durable equipment resulted to a sharp 37 percent rise in gross capital formation in the first quarter of the year reflecting the booming investment activity in the country.

It added that remittances from overseas Filipino workers (OFWs) remained strong despite the tensions in the Middle East and North African (MENA) states as well as the disaster in Japan while foreign direct investments (FDIs) would pick up later this year in light of the public private partnership (PPP) scheme of the Aquino government.

“The launch of 10 infrastructure projects this year as part of the government’s PPP initiative is also expected to attract $1 billion of FDI inflows and support construction-related sectors,” Tsui explained.

Tsui said the investment bank sees the country’s GDP expanding by six percent in 2012 and 2013.

The Philippines posted its strongest growth in 34 years after its GDP expanded by 7.6 percent last year exceeding the revised growth forecast of five percent to six percent set by economic managers. It was on the verge of a recession when its GDP growth slowed down to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

The Cabinet-level Development Budget Coordination Committee (DBCC) has set a GDP growth target of between seven percent and eight percent this year and next year.

Bangko Sentral Governor Amando Tetangco Jr. said the country’s GDP would grow slower than expected this year as the economic growth targets were set by the DBCC prior to the tensions in the MENA region and the disasters in Japan.

“We think the economy will continue to grow this year. The government is projecting seven percent to eight percent although that projection was arrived at prior to the events at the MENA region as well as the earthquake, the tsunami and the nuclear disaster in Japan,” Tetangco said earlier.

 

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Hongkong based firm will invest Million Dollars for RORO - PPP & Natural Gas in the Philippines

Hong Kong firm Hopewell Holdings Ltd. is planning to participate in the government’s Public-Private Partnership (PPP) program by investing in a transport linkage between Luzon and the Visayas.

In an interview with reporters, Department of Trade and Industry Assistant Secretary Felicitas A. Reyes said Hopewell is eyeing a toll road and RORO (roll on roll off) terminal in order to connect the islands.

Hopewell, the flagship group of Chinese tycoon Sir Gordon Wu, has expressed interest to invest in toll roads and putting up ferry service for cargo trucks and buses to further connect Luzon – with San Juan, Batangas as starting point — to the central business hubs of the Visayas.

It would also explore other PPP projects and would identify specific projects interests in the long run.

Reyes, who is also officer-in-charge of the Board of Investments (BOI), said the focus of the Chinese group is the eastern seaboard, also known as the Spine of the Philippines. “We presented to Wu the road project and the idea was to combine the RORO or the nautical highway with toll roads.”

When asked if the project will present problems since it is not included in the current PPP list, Reyes said it could be presented to the proper agencies and will not be considered an unsolicited project.

The DTI said Wu has expressed willingness to put up a 200-kilometer, 10-lane toll road as well as a ferry service for cargo trucks and buses to further connect Luzon with the Visayas, specifically Iloilo, Bacolod and Cebu.

Hopewell had already invested several years ago in two power projects during the time of President Corazon C. Aquino.

Other Hong Kong-based firms that have expressed willingness to ramp up their investments in the Philippines are Luen Thai International Group, Youngor Group and Energy World Corp. (EWC), Reyes added.

The Luen Thai International Group is now in the process of stepping up production of its world-renowned Coach brand of bags by expanding its facility in Tarlac which will boost the Philippine vision of creating a global supply chain city that will link up with its other major plant in Dongguan, China. Aside from fashion apparel, Luen Thai has extensive interests in shipping, aviation, logistics, insurance, property development, tourism and high brands in other garments subsectors.

Meanwhile, the Youngor Group of Eddie Chung and Mark Pressly is planning to put up a $20-million state-of-the-art textile knitting facility as well as a possible $100-million cutting-edge weaving facility on top of its existing smart shirt facility in Clark which now boasts over 4,000 personnel.

EWC, on the other hand, is also in the stage of providing a possible solution to the enormous power requirements of the Tampakan Xstrata mining project. EWC has proposed setting a LNG terminal and storage-hub that will house a 500-megawatt gas-fired power facility. The gas tankers of EWC will source LNG from Papua New Guinea and other parts of Australia and Indonesia and can replenish its LNG facilities in the country if the need arises.

 

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Philippines Tops Global Ranking for BPO with 500,000 English-speaking college graduates per year

The Philippines has taken over the lead as the world's number one country for business process outsourcing and shared services, according to the 2010 IBM Global Locations Trend Annual Report.

Increasingly, multinational companies building an alternate support hub have been establishing their presence in the Philippines owing to the intrinsic strengths of the country's labour market, world-class telecommunications infra-structure and business environment.

With a 92% literacy rate and an abundant supply of nearly 500,000 English-speaking college graduates per year in relevant disciplines, the Philippines' affordable high quality workforce is valued by BPO firms for its strong work ethic, flexibility and productivity. Based on a survey of the McKinsey Global Institute, a relatively high proportion of Filipino finance and accounting professionals as well as life sciences professionals, researchers and analysis is suitable for work in a multinational organization and global work.

The Philippine IT/BPO industry spans across a wide range of competencies that include contact/call centers, business processing outsourcing (BPO), knowledge process outsourcing (KPO), medical, legal and other data transcription, film animation, software development, engineering and construction design as well as game or content development.

Top-notch telecommunications and low-cost real estate in major urban areas also contribute to the Philippines' global reputation as a BPO location.

Fiscal and non-fiscal incentives from the government have supported the growth of the Philippines' BPO industry.  IT BPO enterprises enjoy an Income Tax Holiday (ITH) of 4 to 8 years and a special 5% tax rate on gross income after the lapse of the ITH, in addition to a host of tax and duty exemptions for capital equipment, deductions for labour expense, 12% input VAT exemption on allowable local purchases of goods and services and employment of foreign nationals.

The Philippines' BPO industry was recognized by the National Outsourcing Association in London as the Offshoring Destination of the Year in 2010.  The Philippines first won the title in 2007 and again in 2009.

This year, the Philippines' sunshine industry is expected to yield some $11 billion in revenues or a 20% increase from the estimated revenue of US$9 billion in 2010 with over 500,000 employees.

In its IT-BPO Roadmap for 2011-2016, the Business Processing Association of the Philippines (BPAP) sees the Philippines' share of the global IT BPO market doubling to 10% by 2016 for $25 billion in annual revenues, if current conditions are sustained.

New locators share this optimism such as Tata's Consultancy Services of India, which recently opened its first Southeast Asian BPO center in the Philippines.  The growing list of industry players include Accenture, American Express, Citibank, Convergys, DELL, Hewlett Packard, IBM, JP Morgan Chase Bank, and Siemens, among others.

 

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US think-tank sticks to 4.8% growth forecast for the Philippines

New York-based Global Source Partners is sticking to its revised gross domestic product (GDP) growth of 4.8 percent this year despite the economic slowdown experienced by the country in the first quarter of the year.

In its latest market brief entitled “Philippines: Facing Stronger Head Winds,” Global Source said its still expects the country’s domestic output as measured by the GDP expanding by 4.8 percent this year despite the lethargic economic growth in the second quarter as shown by leading economic indicators released by the National Statistical Coordination Board (NSCB).

“At this time, we are still sticking to our projection of 4.8 percent growth for the year, though it is obvious the economy now confronts stronger head winds. As we previously reported, the leading economic indicators index released by NSCB suggests an increased lethargy in the economy in the second quarter,” Global Source stated in the report.

Socioeconomic Planning Secretary Cayetano Paderanga reported last week that the country’s GDP expansion slowed down to 4.9 percent in the first quarter of the year from the revised 8.4 percent in the same quarter last year due to modest government spending and a slowdown in global trade.

The actual GDP from January to March was within the lower end of the GDP growth forecast of 4.8 percent to 5.8 percent set by the National Economic and Development Authority (NEDA) for the first quarter.

“GDP grew by 4.9 percent in the first quarter 2011, in line with our expectations as reflected in the previous quarterly outlook, and just barely hitting the tail end of the government’s 4.8 percent to 5.8 percent forecast,” the report added.

It explained that the GDP growth in the first quarter was the lowest since the fourth quarter of 2009 and continues a trend of declining growth since the first quarter of 2010.

“As we predicted, a slowdown in government spending compared to the pre-national election quarter last year, as well as lackluster trade due to rising oil prices stemming from the political turmoil in Middle East and North African (MENA) states, were cited as the main culprits for the lower growth,” it said.

Global Source originally projected the country’s GDP growth slowing down to 5.4 percent this year but lowered the growth forecast to 4.8 percent last month.

The think tank said the tensions in the MENA region and the disasters in Japan would result to lower personal consumption.

“Additionally, the woes in MENA combined with the continued sluggishness in Europe, point to remittances remaining relatively flat in the short term, indicating it may just be a matter of time before it starts dragging down personal consumption,” Global Source added.

The Philippines posted its strongest growth in 34 years after its GDP growth expanded by 7.6 percent last year after slackening to 1.1 percent in 2009 from 3.8 percent in 2008 due to the full impact of the global financial crisis.

Earlier, BSP Governor Amando Tetangco Jr. said monetary authorities see the country’s economy growing slower than expected this year due to the political tensions in the MENA region as well as the disasters that struck Japan last March.

“We think the economy will continue to grow this year. The government is projecting seven percent to eight percent although that projection was arrived at prior to the events at the MENA region as well as the earthquake, the tsunami and the nuclear disaster in Japan,” Tetangco stressed.

The BSP chief said the country’s inflation is likely to peak either in the second quarter or third quarter of the year amid the escalating prices of oil and commodities in the world market.

In fact, the BSP sees inflation this month exceeding the higher end of the central bank’s three percent to five percent target on the back of the seasonal increases in school supplies in light of the opening of classes in June, remaining adjustments in taxi fare, and the impact of the Aquino administration’s fuel subsidy program

 

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Philippine Economic Zone Authority (PEZA) reports P 67 Billion new investments end May 2011

The Philippine Economic Zone Authority (PEZA) registered P66.956 billion worth of new investments as of end-May, 44.46 percent higher year-on-year, the latest data show.

PEZA Director General Lilia de Lima expressed more confidence that this year’s 10 percent target increase in investments, exports and employment within the zone is achievable.

Before delegates of the Philippine Semiconductor and Electronics Convention and Exhibition at the SMX yesterday, de Lima assured investors that problems connected to power and the high electricity costs will be resolved soon, or as early as next year, which should attract more locators to PEZA areas.

De Lima said investors still think highly of Philippine competitiveness as a location despite lingering concerns in the salary scale, which may be a disadvantage compared to other nations such as Vietnam, China, India and Indonesia.

Japanese manufacturers, however, remain bullish about the Philippines as investment site, she said.

De Lima recently met with 11 Japanese investors while in Japan, most are in the electronics sector, some in agri-processing and tourism. She expects more projects with an estimated worth of P1 billion from Japan will be relocating to the Philippines soon.

De Lima said the focus is to encourage companies that makes and supplies raw materials and components to attract more Japanese investments. “Difficulty in procuring raw materials and parts is the chief but only complaint cited by the Japanese, compared to what they cite in other countries in the region,” said de Lima, citing a JETRO survey called ‘Management Trouble for Japanese Managers in Asian Countries’ released last November.

 

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