The Philippines set to led the World for Knowledge Process Outsourcing (KPO) by 2015

Philippines is set to led KPO in the world by 2015. Philippines is the 3rd - largest English Speaking country in the world. 

By: James Grundvig - Epoch Times Contributor

The Philippines, the World's New Call Center Capital

Interview with Gillian Virata of Business Process Association Philippines

Quietly, with little advertising, the Philippines by has surpassed India as the number one call center in the world.  Now this South China Sea nation of 7,000 islands, 39 million people workforce, and 470,000 English-speaking college students graduating every year is going to overtake India in non-voice (back office) business process outsourcing (BPO) by 2015.

More than an inexpensive labor pool—one quarter of what it costs in the U.S.—has drawn many Fortune 1,000 companies, including Citibank, JP Morgan Chase, HP, Oracle, Cisco, and dozens of others, to the Philippines to outsource parts of their operations to gain a competitive edge.

Beside the Philippines being the third largest English speaking country in the world, with 93 percent literacy rate of 100 million people, its close ties to the United States is also a big draw.  With a good technical education system, a large and diverse talent pool, from animators and software developers to health IT and CPAs, the Philippines is the next Asian tiger on the rise.

Another plus is there's little turnover of employees at Philippine call centers and BPO organizations, which has plagued India's outsourcing.  The reason: the Philippines has a system of meritocracy.  Add the "night differential" pay for those working the graveyard shift and the youngest 25-and-under workforce in the world over the next decade and the Philippines will continue to grow at a rapid pace.

It's the merit system, in which a graduate Filipino can work at call centers, excel and rise up the ranks to the executive office based on performance.  This golden carrot is a key driver for the retention of their employees.

From Business Process Pool to Flourishing Delta

By 2016, healthcare outsourcing in Business Process Management (BPM) is expected to grow to $1 billion in revenues and employ 100,000 people, according to Healthcare Information Management Outsourcing Association of the Philippines.

The expansion into other BPO segments has just begun.

In coming to the Philippines, this author, who has worked more than 25 years in the engineering-construction industry, recognized a building boom when he saw one.  Like U.S. cities during real estate boom of the 1980s, commercial and residential office towers have sprouted up in a half dozen micro-cities in metro Manila,  including Makati City, Pasig City, Quezon City, and Bonifacio Global City.  Viewing the growth on top of a Makati City office tower helipad, I saw the robust growth in terms of new buildings and tower cranes.

How and when did this third world country change into an emerging, business-first nation?

To learn the answer, I sat down with Gillian "Gigi" Virata, Senior Executive Director of Business Processing Association of the Philippines, at its Global City headquarters.

Professional, astute, and well versed in the past, present and future of the Philippines as the next hub in outsourcing, Ms. Virata knew the growth her country was experiencing had deeper roots than many people realized.

The Asian Miracle as Dance

In typical Asian fashion it began with a dance.  It was a ritual dance between two opposing forces.  The modern version of that dance came center stage in the 1980s when the good intentions of politicians met the craftiness of real estate developers. Almost by accident, an edict launched an era of perennial growth.  A nation with 90 percent of its population poor saw the first glimmers of hope.

Manila politicians offered vast stretches of real estate to developers, sweetened with various incentives, to build projects by hectare (1 hectare is 2.47 acres or 107,639 square feet) across the open, flat land around Manila Bay.

Knowing an opportunity when handed one, the real estate developers built vertically, not horizontally as the politicians had imagined. They erected tall buildings to achieve the hectares of space, by adding the accumulative square foot of all the floors for each office tower. They built upwards instead of outwards.  Other developers followed suit and the race was on its way with residential buildings to follow.

During that time, the consulting giant Arthur Andersen (pre Accenture), one of the Big Five accounting firms, came to the Philippines to begin outsourcing many of its back office operations. This was the mid '80s, pre-Internet, pre-email, and little bandwidth. Once they setup shop, other U.S. conglomerates came, too.  By the 1990s, Pixar, Disney, and Hollywood studios, focused to control runaway production costs, courted Filipino animators, not just to save on labor costs, but also to tap into a creative pool of artists.

Interview with Gigi Virata

After rattling off statistics on growth, Ms. Virata's explanation of the dance continued: "During the 1997 Asian financial crisis, the government began breaking up the telecom monopoly and small call centers were setup by Sykes, the American company.  By 2001, startups and small developers arrived.  The government erected economic zones and more high-rises came.

"With the office towers we needed residential buildings.  Access to the work place had to support the mass hiring of new employees.  Soon we had a highly accessible work force with a great public transportation," she said.

"So we came up with a proposition to unlock those valuable assets on healthcare."

—Gillian Virata, Senior Executive Director of BPAP

"Is healthcare outsourcing the next phase of the Philippine outsourcing story?" I asked.

"We have 200,000 nurses in the Philippines that today can't find work overseas.  They have the skill set and education, but are in debt with student loans.  So we came up with a proposition to unlock those valuable assets on healthcare.  We have employed them to tag insurance codes for injuries and illness, and to do medical transcriptions.  It wasn't what they planned for, but they adjusted," Ms. Virata said.

What makes the Philippines a success as an outsource center is its ability to be flexible and continually fine-tune its business model.

"In 2004, BPAP was established.  We were the pioneers that setup Filipino companies for the BPO sector.  Two years later it was growing so fast that the growth needed a roadmap for filling up the buildings.  We also needed to keep the best graduates from moving overseas," she said.  "While the BPO sector is expected to grow 20 percent CAGR for the next five years, healthcare management and information systems, from Accenture and Cognizant to smaller Filipino companies, will grow even faster to serve the global market."

Ms. Virata paused, perhaps to take in how far her country has come in the past decade, and said, "BPAP has over 300 members.  The Philippines Software Association 200 members.  Call centers is the largest segment, with the next being IT."

After the interview, she sent a slide deck she presented on behalf of a half dozen outsourcing associations in October, titled, Experience the Excellence: The Philippine Advantage.

The deck showed the unique dance between government support and private partnerships has morphed from office towers to tax holidays, VAT exemptions, and other incentives to achieve the 20% YOY comprehensive growth as outlined in the BPAP Roadmap 2016.

With the Philippines being number one in outsourced voice—customer care, sales, collections, financial services, and technology—their BPM operations are a mature growing industry.  Today, it services IT, finance and accounting, human resources, healthcare BPO, procurement, banking, utilities, and telecom.  They are fast growing an analytics and Knowledge Process Outsourcing (KPO) capabilities.

"We have work to do as we move ahead," Ms. Virata emphasized. "We need to beef up the associations, put together more funding for real estate and telecom suppliers, attract more foreign investment just to keep pace of the growth."

To serve a global market starved for growth, she grasps how important the dance will become over the next few years. (http://is.gd/b6oE1S )

The Epoch Times

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Philippines top 4th Best Market in FORBES Top countries to do business: ahead of China, India

The Philippines placed 87th among 141 countries in the Forbes' Best Countries for Business List, beating China and India but still behind most of its Southeast Asian neighbors.

The Aquino government welcomed reports that the Philippines placed 87th among 141 countries in the Forbes' Best Countries for Business List, ahead of China and India, a Palace official said on Tuesday.

Deputy Presidential Spokesperson Abigail said during the regular press briefing in Malacañang Palace on Tuesday that the Forbes listing is a positive indicator of renewed business confidence in the Philippines.

The Forbes' list which ranks countries based on different factors such as trade freedom, monetary freedom, property rights, innovation, technology, red tape, investor protection, corruption, personal freedom, tax burden and market performance showed that the Philippines was a better place for business than China at 96th and India at 97th.

The list showed that Singapore was the fourth best country for business, while Malaysia was 31st.

The list also showed Thailand in the 67th spot and Indonesia on 76th.

The Philippines, meanwhile, was better positioned than Vietnam at 109th place and Cambodia at 112th.

The Philippine ranking was the same as last year during which 130 countries were in the list.

Out of 11 factors considered in the report, the Philippines' ranking in five has dropped.

In terms of tax burden, the country's position dropped 21 places to 110th. In terms of trade freedom, the Philippines saw its ranking fall by seven places to 86th this year.

The country also fell five places to 128th in terms of red tape, while it declined two places to 112th in terms of corruption.

In personal freedom, the Philippines placed 67th compared to last year's 63rd.

The country, meanwhile, saw its ranking improve in monetary freedom to 61st spot from last year's 62nd.

The country also improved in terms of innovation to 62nd spot from last year's 69th.

In terms of investor protection, the country went up three places to 105th, while it jumped 11 notches to 4th place in terms of market performance.

The country's ranking was unchanged for property rights (84th) and technology (77th).

The 10 best countries for business this year were New Zealand, Denmark, Hong Kong, Singapore, Canada, Ireland, Sweden, Norway, Finland and United Kingdom.

The countries at the bottom of this year's list or those considered the worst for business were Cote d'Ivoire, Yemen, Mauritania, Ethiopia, Haiti, Cameroon, Venezuela, Zimbabwe, Chad and Guinea.

"It's good that we've managed to maintain the ranking considering that there are now more countries that are being considered for the Forbes list," Valte said.

"We are satisfied for the time being. But, moving forward, we hope to see the improvements in the ranking. We also note that the ranking went up in terms of monetary freedom and in innovation, and this is very important. Likewise, we went up in terms of the ranking for investor protection," Valte said.

"And, as you know, that is one of the things that concerns the President when it comes to doing business in the Philippines. We've always said that the President has always been pushing that we level the playing field when it comes to, not just foreign investors but to domestic investors as well," she added.

"We've also gone down in some and we're trying to look at everything that contributes to the ranking," she said.

With report from Asian Journal and PhilSTAR

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With balls: BIR Kim Henares Equipped with Gun; rap cases ₱5.5 billion tax evasion to businessmen

Philippine Bureau of Internal Revenue (BIR) Commissioner Kim Henares. Photo: PhiSTAR

Philippine tax sheriff takes aim at cheats to hit target

MANILA (Reuters) - The Philippines' chief tax collector is constantly thinking about targets. Sometimes she picks up an assault rifle and hits them.

In July 2010, newly-elected President Benigno Aquino made Kim Henares commissioner of the Bureau of Internal Revenue (BIR) because he wanted a tough tax sheriff - and he got one who's taking aim at the country's legion of tax cheats.

Bureau of Internal Revenue Commissioner Kim Henares fires a 45-calibre pistol during target shooting inside a firing range in Mandaluyong city

Bureau of Internal Revenue (BIR) Commissioner Kim Henares inspects her target board during target shooting inside a firing range in Mandaluyong city

Aquino gave Henares presidential guards, but the tax lawyer and accountant said "I should know how to shoot their guns, just in case".

The president, a gun enthusiast, gave her lessons at shooting ranges. The 52-year-old Henares, who packs a pistol, now can wield an M-16 and SG552 Commando.

Her no-nonsense approach appears to be helping pull in more tax, which is pivotal to meeting a government goal - getting rating agencies to award the Philippines investment-grade status.

Historically, tax collection has sometimes been a "let's make a deal" game between taxpayers and bribable officials.

Henares, BIR's deputy commissioner from 2003 to 2005, has been chasing evaders and crooked bureaucrats to clean up collection and the image of the bureau, perceived to be one of the country's most corrupt institutions.

She is also trying to make tax-paying synonymous with patriotism. The chief, who amended BIR's vision statement to call it a partner in nation-building, makes sure her staffs attend weekly flag-raising ceremonies. She often wears a T-shirt sporting BIR's 2012 slogan: "I love Philippines. I pay taxes."

FEAR FACTOR

Her approach isn't just touchy-feely.

"We are changing ourselves from being primarily a customer service institution to a law enforcement institution," said Henares. "We were collecting taxes at the pace the taxpayer dictates."

Now, the bureau - which collects nearly 70 percent of all government revenue - is taking the initiative, and it wants taxpayers to be afraid of ignoring laws. "If you look at the psyche of the Filipino, if you do not put fear in them they will not obey," Henares said.

She does scare people, according to Budget Secretary Florencio Abad. "They fear her, rightfully," he said.

Headway is being made in plugging leakages. In January-October 2012, BIR collected  ₱858.6 billion pesos ($21 billion US Dollars), nearly 14 percent more than a year earlier and 28 percent above the same period of 2010. In 2011, when the economy grew only 3.9 percent, total collections rose 12.3 percent from the previous year.

Progress is still needed. In 2011, the Philippines had a tax revenue-to-GDP ratio of 12.3 percent, well below Malaysia's 15.3 percent and Thailand's 16 percent, according to the Asian Development Bank. But last year, the Philippines was ahead of Indonesia's 11.8 percent, which has won investment-grade ratings from two agencies.

CLOSE TO INVESTMENT-GRADE RATING

Aquino aims to get tax revenue to at least 15 percent of GDP by the end of his term in 2016. Helped by Henares's efforts with legislators, he is nearing approval of a "sin" tax bill that should lift cigarette and alcohol tax revenue by 40 billion pesos the first year.

Fitch, Standard & Poor's and Moody's Investors Service have all raised their Philippines ratings to one notch below investment grade, thanks to the government's improving finances.

"The tax ratio has been improving and that indicates they are getting somewhere to an extent," said Philip McNicholas, Fitch's Hong Kong-based director of Asia Pacific sovereign ratings.

"It is clearly a positive for the rating, but that's got to be sustained," he said.

To McNicholas, what's needed is a "structural uplift... you've got to change people's perceptions, change people's minds on these things, and get them to participate."

RUN AFTER TAX EVADERS

After taking the helm, Henares revived a BIR campaign to catch cheats and promised no let-up.

She quickly filed her first case, against a pawnshop chain owner who bought a Lamborghini for 26 million pesos during a year in which he and his wife allegedly did not pay tax. The case is pending in a tax-appeal court, with the accused out on bail.

The cases that Henares files at the Department of Justice can lead to arrests, but only a court can convict. To date, only five tax cheats have been convicted.

While Henares may have to wait years to get her first criminal conviction, she has filed 135 evasion cases so far. They include a ₱120 million peso suit against an impeached Supreme Court chief justice and a ₱5.5 billion peso claim against a billionaire businessman.

"I take pride in all the cases we file, they are fully backed by data and evidence," said Henares.

The tax chief said she isn't discouraged by how slow the legal process can be. For alleged cheats, "we can always attach their property, we can foreclose on them, and we can garnish their bank account," Henares said. "Don't push us to that point."

PLAYING HARD

The bureau is playing some hard-ball. Recently, it temporarily shut a hardware store in Davao which was accused of under-declaring sales by more than 30 percent.

Henares, who is married to a businessman, has an annual salary of only $17,000. Aquino gets paid about $20,000.

Abad, who was Aquino's campaign manager, said Henares long has had a reputation for being straight and firm.

"She is not very sociable, which actually is good because of the kind of work she does," Abad said. As she is incorruptible, people "don't even attempt to induce her with whatever form of inducement," he added.

In the office, Henares tries to make every minute count. She photocopied a newspaper article on places to get the tastiest roast pig in Metro Manila, not for eating-out tips but because she saw them as potential tax targets.

"I asked my people if they are registered and if they are issuing receipts," she said. (http://is.gd/E2LYKV)

($1 = ₱40.87 Philippine pesos as of November 27, 2012) 

Chicago Tribune

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