Thomas White Global Investing
Philippines Stamp
January 21, 2011
A Postcard from the Asia Pacific
Philippines: New Call Center Capital of the World

Portrait of a smiling Asian call center agent with headset

The “Sunshine Industry” is set to soar to new heights. Major call centers in the Philippines are situated in Metro Manila and Cebu City.

For so long now, call centers have mushroomed all over India’s premier IT city, and Bangalore has been considered the undisputed call center capital of the world. So much so that being ‘Bangalored,’ a term used to describe a layoff, has become a part of standard usage. However, despite India’s pre-eminent status as a back office processing (BPO) giant, there’s a new kid on the block. A new call center capital of world has emerged. Move over Bangalore, and welcome Manila.

In a recent report by the Everest Group, it is now forecasted that Philippine call center revenues in 2010 will touch $5.5 billion, exceeding India’s own expected revenues of $5.3 billion. The call center industry has grown to be one of the largest in the Philippines, employing around 530,000 people and contributing 6% to the country’s gross domestic industry. With 788 call centers spread over 20 locations in the Philippines, the outsourcing industry has been fondly named the ‘sunshine industry,’ by the government, which is thrilled by the rapid progress the sector has made over the past decade. And this is a government which has done its best to encourage the outsourcing industry, recognizing early on that it is a key driver of growth and employment.

While tax breaks given to outsourcing companies are set to expire this year in India, the Philippine government is getting its ducks in line. It has assured investors of faster clearances for building permits, has instituted selective tax breaks such as an exemption from import duties on computers, and has created a number of special economic zones with superior infrastructure. In contrast, Indian call center companies have typically had to struggle with high attrition rates and have been plagued by chronic power shortages, as well as suspect infrastructure. Also favoring the Philippines, Filipinos have had a natural cultural affiliation with America, ruled as they were by the U.S. from 1905 to 1945. Unsurprisingly, the call center industry in the Philippines is still dominated by clients in North America.

Still, the Philippines is not resting on its laurels. It has larger plans. India’s outsourcing sector evolved from being a call centered industry to one that handles more sophisticated back office processes. As a result, India continues to be number one in overall outsourcing revenues, and it is that bigger chunk that the Philippines is targeting, aiming to double its outsourcing revenue by 2015. There are challenges – the country does not have as many trained engineers and managers such as India, which has been able to use that advantage to transform its BPO industry. For now though, call centers are a short-term answer to unemployment problems in the Philippines, with the industry to add 70,000 jobs this year alone. And an immense source of Filipino pride.

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