A strong peso to affect growth of Philippines’ BPM industry

According to industry experts from Philippines, the latest developments in the local economy pose a threat to the growth of BPM industry in the country. The recruitment experts from the country are of the opinion that a strong Peso growth against US dollar has the power to slow down the business process management industry as this would mean high labor cost in the country.

Peso currency

The Philippines currency Peso hit four year highest against the US dollar last week. The local currency now stands at P41.615 against one US dollar setting an alarm among the exporters. It is said that the strong economic growth showcased by the country led to the appreciation of the local currency and it is an inevitable fact that the BPM sector have made the major contribution to the economic growth of the country.

The BPM industry is considered to be the one of fastest growing industry in Philippines and powerhouse of the country’s economy. According to the reports released by Business Process Association of Philippines (BPAP), the industry has made the largest contribution of 5% towards the GDP of the country in 2011. The BPM or the business process industry of the country has grown at rate of 30 % over a decade making it the most popular destination for the foreign companies to outsource their business processes. In the year 2011, the BPM industry generated revenue of $11 billion and 640,000 jobs.  It is expected that the industry would grow 20% and generate 1.3 billion jobs by 2016.

However, strong peso growth has raised a concern over the projected growth of the sector. According to the industry experts from the country, strong peso growth will make investments more costly for foreign investors. This is because even though the contracts are executed in dollars, the expenses such as salaries are paid in pesos and an appreciation of peso against dollars means they have to pay more pesos to cover the local expenses. This is likely to have a negative effect on the growth of the industry as majority of its investment comes from foreign players in the sourcing industry.

Moreover, the depreciation of Rupee in India will drive the Indian BPM companies in the country to relocate their delivery centers to India as a higher rate of Rupee against dollar will fetch them more money when converted. In addition to it, the rising cost of operations in Philippines BPM industry when compared to Indian BPM industry will also be a reason for the sector to lose its competitive advantage.

However, the BPAP authorities are very positive on the growth of the BPM industry in the country. According to the president of BPAP, the sector will continue to grow despite a strong appreciation in the value of peso against US dollar. BPAP claims that the industry is moving up the value chain by providing more complex business process management process other than voice services to sustain and minimize the impact of a strong peso on the sector.

Latest Columns

BPO September 2010 News

China Could Eventually Overtake India in Outsourcing India may well be the current leader of the outsourcing market but China is slowly closing the gap with this nation, according to Ovum.NBC’s Outsourced: Separating Fact from ComedyInside IT Outsourcing The research firm says the competition is heating up and due to this, neither country can rest […]

VCs invest over $54-M in BPO sector during April-June 2004

Venture Capital and Private Equity firms announced investments of over US$54 million in three India-based Business Process Outsourcing (BPO) companies during the quarter ended June 2004. According to data from TSJ Media, which tracks venture capital investments in India and Indian-founded companies worldwide, the quantum of funds invested was more than that during the January-March […]

Speak Your Mind