Why The Philippines Is A BPO Destination

in association with
Why the Philippines?

Contents
 Philippines at a Glance
 General Overview of the Philippine BPO Industry
 Human Resources
 Real Estate Sector
 Infrastructure and Utilities
 Government Support/Initiatives
 Present Locators
Philippines at a Glance
Government Presidential with Bicameral Congress
and Independent Judiciary
Land Area 299,764 km2
Capital Metro Manila
Local Time GMT + 8 hours
Monetary Unit Philippine peso
GDP per Capita US$3,520
(PPP)
Climate Tropical with three (3) pronounced
seasons:
a) cool, dry (November - February)
b) hot, dry (March - May)
c) wet or rainy (June - October)
Population 88.57 million (August 2007)
94.01 million (2010 projection)
Life Expectancy Male: 68 years; Female: 73 years (2010-
2015 medium assumption)
Languages Pilipino (Tagalog derivative) and English,
Spoken along with around 170 local languages,
and some other major languages as
Spanish and Lan-nang (Chinese)
Functional 84.1% (2003)
Literacy Rate
Religion Christians make up more than 90% of the
population
Annual GDP Growth (%) Quarterly GDP Growth (%)

8.0% 7.1% 10.0%
6.1% 7.3%
6.0% 8.0%
5.4% 3.8% 6.0%
5.1% 4.6%
4.0% 3.9% 4.2%
4.0% 2.9%
2.0% 0.9% 2.0% 0.8% 1.8%
0.0% 0.0% 0.6% 0.4%
-2.0% -2.0%
-4.0% -4.0%
-6.0%
-6.0%
-8.0%
-8.0%
-10.0%
2004 2005 2006 2007 2008 2009 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110
 Membership in International Organizations:

 United Nations (UN)  Non-Aligned Movement (NAM)
 Association of Southeast Asian  Colombo Plan
Nations (ASEAN)  Asian Development Bank (ADB)
 Asia-Pacific Economic Cooperation  World Trade Organization (WTO)
(APEC)
 World Bank (WB)
 International Atomic Energy Agency
(IAEA)  International Monetary Fund (IMF)
 International Labor Organization  G – 24

(ILO)  G – 77
 International Parliamentary Union  G – 20
(IPU)  Next Eleven (N-11)
 East Asia Summit (EAS)  International Criminal Police
 Latin Union Organization (Interpol)
Contents
 Human Resources
General Overview of the
Philippine BPO Industry
 The Philippine IT/BPO industry has a wide breadth of

competencies in the following services:
 Contact/call centers;
 Business process outsourcing or BPO (finance & accounting, HR
administration, payroll);
 Knowledge process outsourcing or KPO (marketing research,
medical research, legal case research & preparation, insurance,
mortgage);
 Medical, legal and other data transcription;
 Film animation;
 Software development;
 Engineering and construction design; and
 Game development or content development
 The Philippines is recognized by UK’s National

Outsourcing Association as the undisputed Offshoring
Destination of the Year for 2009 and 2007.
 IT and BPO revenues reached US$7.2 B in 2009 which is

equivalent to 21% of the total offshore BPO market
next only to India. This is a 19% improvement in
revenues amidst the global economic crisis.
 Evolving to higher value non-voice BPO functions with

relatively high competence and maturity in Finance &
Accounting and Transcription services.
 As of January 2009, the Philippines represented 15% of

the offshore BPO market and has emerged as a key
destination for English-based work especially for the
North American market.
 The Philippines is poised to emerge as a leading

destination for non-voice business process outsourcing
(BPO) work.
 The Philippines is the No. 2 Offshore Nation in the

world, next to India. Cebu City is the top emerging
global outsourcing city.
“The (Philippine) BPO industry continued to grow

strongly during the crisis and is poised to emerge
structurally stronger from the crisis... The Philippines
seems to have established itself as the preferred
choice... thereby establishing its relatively new industry
on the global map.”
- World Bank, November 2009

Contents
 Human Resources
Human Resource Pool
 As of January 2010, Labor Force Participation Rate is

at 64.5% (38.8 M persons).
 More than 400,000 tertiary-level graduates per year
 Large pool of quality graduates of disciplines that

could cater to BPOs (i.e., Engineering, Accounting,
Education, etc.)
 English proficient workforce; Fluent in American

English as the language is the basic communication
medium used in schools, business, and government
Human Resource Pool
 Deep affinity with Western culture; universal cultural

adaptation with fast learning curves, and highly
trainable
 Strong customer service orientation and high level of

commitment and loyalty are inherent strengths
 Highly educated, productive, dedicated workforce

with excellent work ethics and attention to detail
Human Resource Pool
 Ability to deliver better quality service at a

significantly competitive cost
 Middle Management Program for BPO to accelerate

the training of middle managers to supervise entry-
level workers
Human Resource Pool
Tertiary-level Graduates (2008)
11,242, 3% Medical and Natural

42,965, 10% Sciences, related fields
40,894, 9%
125,005, 28% Business, Accounting, related
50,770, 11%
fields
Social and Behavioral
Sciences, Education
Engineering and Architecture
Mathematics and IT-related

fields
75,819, 17% Fine Arts, Mass
Communication, Humanities
98,120, 22% Other fields
Human Resource Pool
English Competence among Philippine % (2008)

Tertiary-level Graduates
Thinks in English 60
Speaks English 72
Writes in English 83
Salaries and Employee
Benefits
 The laws on labor standards and employment

relations are consolidated in the Labor Code of the
Philippines.
Benefits
IT and BPO Salary Matrix (1Q 2010)
Monthly Salary Range
Particulars
Php US$
Call Center Agents
Manila-based 12,000.00 – 20,000.00 260.70 – 434.50
Provincial -based 10,000.00 – 18,000.00 217.25 – 391.05
Software Developers 15,000.00 – 40,000.00 325.87 – 868.99
Animator / Graphic Artist 25,000.00 – 65,000.00 543.12 – 1,412.12
Medical/Legal 12,000.00 – 20,000.00 260.70 – 434.50

Transcriptionist
Systems Analyst 15,000.00 – 40,000.00 325.87 – 868.99
Team Leaders / Technical 30,000.00 – 50,000.00 651.75 – 1,086.24

Support
Manager / Department 50,000.00 – 80,000.00 1,086.24 – 1,737.99
Heads US$1 = Php46.0302
Benefits
 Aside from basic salaries, employees are also entitled

additional compensation and benefits in cash and/or
in kind as determined by law, implementing
government agencies, and the employer (fringe
benefits)
 Additional compensation and incentives:

 Over-time pay
 Holiday/rest day pay
 Night differentials
 Bonus
 Paid leaves
Benefits
 Fringe Benefits may include but are not limited to:
 Housing
 Expense Account
 Vehicle of Any Kind
 Interest on loans at less than market rate to the extent of the
difference between the market rate and actual rate granted;
 Membership fees, dues and other expenses borne by the
employer for the employee in social and athletic clubs or
other similar organizations;
 Holiday and vacation expenses
 Educational assistance to the employee or his dependents;
and
 Life or health insurance and other non-life insurance
premiums or similar amounts in excess of what the law allows
Mandatory Employment
Contributions
 13th-month pay
 Home Development and Mutual Fund (HDMF)
 National Health Insurance Program (NHIP)
 Social Security benefits

Contents
 Human Resources
Present Real Estate Situation
 Despite the real estate sector being affected by the

world economic crisis in 2009, including the office
market particularly for BPOs, major developers have
been bullish which led to a general increase in office
supply.
 Higher supply + poorer investor sentiments = Increase

in vacancy
 Increase in Vacancy = Lower lease rates
 This trend of lower lease rates and higher vacancies is

expected to persist at least for the 1st half of 2010.
 The office market has already bottomed out. Lease

rates are expected to recover gradually upon the 2nd
half of 2010 onwards.
 Since lease rates are at its market low and vacancies

tend to be higher, it is the best time to negotiate lease
agreements as it is still a tenant market.
 The success and results of the upcoming automated

elections is expected to influence investor sentiment,
hence, the office market as well.
 OFW Remittances and the REIT Law are expected to

continue to buoy the Real Estate Sector for the year
2010 and onwards. A return to pre-crisis levels is
perceived to be unlikely since full recovery is still far
ahead.
Business Centers Baguio City
Tier 1 Locations
Metro Pampanga
Tier 2 Locations (Clark Freeport Zone) East Bulacan
West Bulacan Metro Laguna
NCR (Metro Manila) Iloilo City

Makati CBD, Makati City Metro Cavite
Fort Bonifacio, Taguig City
Cebu City
Eastwood, Quezon City
Lipa City Cebu Business Park
UP-Ayala Technohub,
Asiatown IT Park
Quezon City
Banawa
Ortigas Center, Bacolod City
North Reclamation
Quezon-Mandaluyong-Pasig
Area
cities tri-boundary
Filinvest, Muntinlupa City
Cagayan de Oro City
Madrigal Business Park,
Davao City
Muntinlupa City
Major Developers /
Landlords
Space Accessibility
 Major business districts for both Tier 1 and Tier 2

locations are easily accessible from the capital (Metro
Manila) through major thoroughfares, which include
not only terrestrial highways but also airways and
nautical highways.
 Most of these locations also have international

airports, making them easily accessible from foreign
countries without having to pass by the country’s
capital.
Space Accessibility
 Business districts are strategically located such that

these are immediate to town commercial and leisure
centers, educational institutions, and, to some extent,
residential areas.
Leasing Guidelines
Typical Lease Length Usually 2 years

Lease Terms
Philippine peso per square

Rates Quoted In
meter per month
Typical Break Options Negotiable with Landlord
Frequency of Rent Payable Monthly in advance

Rental Payments
Rent Deposits
3 months rent
(expressed as X months rent)
Annual Index to Inflation No
Statutory Right to Renewal Tenants have to negotiate
Basis of Rent Review Open market value
Frequency of Rent Reviews 2 years
Leasing Guidelines
Service Charges,
Internal Tenant
Repairs, and
Insurance
Common Parts Landlord
External/Structural Landlord
Building Insurance Landlord

Taxation
Local Property Taxes Landlord
VAT Payable on Rent Tenant
Negotiated separately by
Assignment/Sub-letting
Disposal of
Tenant
Lease
Early Termination Yes, but usually with penalty cost

Tenant’s Building Reinstatement Original condition with reasonable
Responsibilities at Lease End wear and tear
Leasing Guidelines
Usually net usable area.

Measuring
Whole floor tenants may be

Code
Measuring Practice the exception wherein gross

areas are the usual measuring
practice.
Legislation Relating to
Legislation
None
Lease Contracts
Prospective Changes to
None
Legislation
Leasing Guidelines
 The rent typically includes the usage of office and

common space. Additional rental is charged for
parking slots; air-conditioning and utilities are billed
separately.
 Landlords usually provide a rent-free period as an

incentive.
 Measurement standards may vary from building to

building but the most common standard is the net
usable area. Gross areas are usually used as a
standard for whole floor tenants. Efficiency may be
anywhere from 70 to 95%.
Leasing Guidelines
 A formal lease contract is signed in English. Landlords

usually supply their own versions of lease contracts
and are not necessarily supplied from legal offices.
Long term lease contracts do not have to be
registered in the local government office.
 Landlords usually require rental advance payments,

security deposits and fitting-out costs. Rental advance
payments and security deposits may vary but are
usually equivalent to three (3) months respectively.
Leasing Guidelines
 Landlords may be willing to grant rights of first refusal

for premises within the same floor or contiguous floors
above or below the leased premises. However,
Landlords do not give these rights over long periods.
One to two years is usual.
 If the premises were leased to the Tenant bare of

improvements, the Tenant is usually required to retain
all hard improvements such as the ceiling, walls and
fixed partitions back to the Landlord upon conclusion
of lease term. Inventory checks are also usually done
prior to turning back the unit to the Landlord.
Leasing Guidelines
 Grade-A office buildings are usually fitted out with

raised flooring, drop ceiling, lighting, sprinkler systems
and basic air-conditioning systems. However, some
Grade-A buildings do not offer raised floors or ceilings.
There are a number of developers who also give the
option of just leasing the premises bare of any
improvements.
 Tenants have the right to make improvements with

plans subject to Landlord’s approval.
Leasing Guidelines
 Normal Tenant power provision is 60VA/m2 but other

buildings give a higher provision especially for IT
Buildings which offer up to 100 VA/m2.
 Landlords usually provide only emergency power for

the common areas such as hallway lights, lifts and
building management systems. Some buildings offer
limited emergency power to the Tenants. Grade-A
buildings offer 100% emergency power back up.
 The typical HVAC system is provided by chilled water

distributed to Air Handling Units (AHUs) from the
cooling towers or chillers.
Fit-out Costs
 Costs may vary depending on the design, finish, IT

requirement, cabling, construction schedule, etc.
Usually the following prices may be anticipated.
Fit-out Costs
Php/sqm US$/sqf
Item
Low Med High Low Med High
Consultants 2,300 4,375 6,450 4.64 8.72 13.01
General 13,500 29,310 45,120 27.22 59.10 90.98
Construction
Mechanical & 6,300 9,500 12,700 12.70 19.60 25.61
Electrical Works
Sub-total 22,100 43,185 64,270 44.56 87.42 129.60
Furniture (System & Loose)*

Made Locally 6,500 8,200 15,000 12.08 15.23 27.87
Imported 8,300 15,000 19,500 15.42 27.87 36.23
* Based on a typical office configuration of 1,000sqm US$1 = Php46.0302
Space Availability
 Makati CBD case
All Grades
Grade A & Grade B &

Premium Below
Available Occupied
Available Occupied Available Occupied

Rental Rates
Benchmark rental rates in Makati CBD

Grade Php/sqm US$/sqf
Premium 750 - 900 1.51 – 1.82
Grade A 440 – 851 0.89 – 1.72
Grade B 379 - 464 0.76 – 0.94
Contents
 Human Resources
Transmission
 Digital Fiber Optic Network (DFON) backbone

[PLDT]
 Fiber Optic Backbone Network (FOBN) [Globe

Telecom]
 Nationwide Digital Transmission Network (NDTN)

[TelecPhil (BayanTel)]
Communication
 Nationwide radio microwave terrestrial network
 Next generation networks (NGN)

 Internet Protocol (IP)
 Multi-Protocol Label Switching (MPLS)
 Wave Division Multiplexing (WDM)
 Expanding technologies on fiber and copper network,

wireless technologies (CDMA, GSM, WAP, GPRS, 3G,
wireless broadband), radio, and VSAT
Communication
 Redundant International Connectivity
 Expanding Multi-media Infrastructure

 24x7x365 support operation
 Short lead time in provisioning international leased circuits:
30-45 days
 Telecommunications Industry is deregulated

 More robust, stable, and highly scalable due to numerous
fiber optic landings/links
 Cost of bandwidth has gone down by at least 70% in the
last 4 years (From US$ 14,000 in 2001 to today’s rates of US$
2,000 per month for E1 lines to U.S.)
Communication
 Over 700 NTC-registered service providers

 553 Value Added Service Providers
 65 VOIP Providers
 93 Content Providers
Power
 Stable, with excess capacity over current demand
 Regulated by the Energy Regulatory Commission
 Power rates may vary among areas and/or distributor
 Sub-metering is standard market practice among

landlords
Contents
 Human Resources
Government
Support/Initiatives
 EO 561 (19 Aug 2006) created the Philippine Cyber

Corridor
 An ICT belt stretching from Baguio City to Zamboanga
 Supported by a $10 billion high bandwidth fiber
backbone digital network
 2009 Investment Priorities Plan providing fiscal and

non-fiscal incentives to BPO voice and non-voice IT-
enabled services
 Data Privacy Bill proposed in Congress

 Ensures protection of personal information in the ICT
systems in government and private sector
Government
Support/Initiatives
 Allocation of P350 million scholarship for the training

of near-hires in IT/BPO
 18 Jan 2010: over 26,000 work scholarship certificates
totaling P156 million distributed by the industry
association nationwide
 Employment yield rates: 67% for Contact Centers, 85%
for Medical Transcription, 85% for Software
Development, and 100% for Animation
Government
Support/Initiatives
 Medium-term Philippine Development Plan 2004-

2010
 Reduction of connectivity cost
 Development of ICT Human Resource
 Adoption of Service Science, Management and

Engineering (SSME) curriculum in colleges and
universities nationwide
Fiscal Incentives for BPOs
 4 to 8 years Income Tax Holidays (ITH)
 Special 5% tax rate on gross income after the lapse of ITH

(for IT Park/Eco-zone locators)
 Tax and duty exemption on imported capital equipment

(for IT Park/Eco-zone locators); duty-free importation of
capital equipment (for BOI-registered firms under EO 528)
 Exemption from 12% input VAT on allowable local

purchase of goods and services, e.g., communication
charges (for IT Park/Eco-zone locators)
 Additional deduction for labor expense

Non-fiscal Incentives for
BPOs
 Unrestricted use of consigned equipment
 Exemption from wharfage dues and export tax, duty,

impost, and fees
 Employment of foreign nationals: Special Investors

Resident Visa
Economic Zones
 As of March 2010, there are a total of 211 Operating

Economic Zones registered at the Philippine
Economic Zone Authority (PEZA).
 129 of the 211 Operating Economic Zones are IT

Parks/Centers.
REIT Law
 Republic Act No. 9856 or “An Act Providing the

Legal Framework for Real Estate Investment Trust
and for Other Purposes
 Enacted on Dec. 17, 2009 which seeks to

promote the development of capital market
 Tax incentives such as exception to minimum

corporate income tax of 20%, income payments
subject to lower creditable withholding tax of 1%
and sale or transfer of real property will only be
subject to 50% of the applicable documentary
stamp tax.
Contents
 Human Resources
Present Locators
 The BPO industry currently takes up around 70% of all

office transactions nationwide.
Key Players
Back Office / KPO
Software Development and
Creative Processes
Engineering and Design
WHY PHILIPPINES?
Comparison with Competitors
Sources
 Cuervo Far East, Inc.
 Board of Investments
 Business Processing Association of the Philippines (BPAP)
 Commission on Higher Education (CHEd)
 National Telecommunications Commission (NTC)
 Liwanag, Victor et al. The Philippines Contact Center Cluster, 2007.
 company logos care of their respective websites and/or web

advertising associates

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Why The Philippines Is A BPO Destination

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in association with

Why the Philippines?

 General Overview of the Philippine BPO Industry

 Real Estate Sector

 Infrastructure and Utilities

Annual GDP Growth (%) Quarterly GDP Growth (%)

 Membership in International Organizations:

 International Labor Organization  G – 24

 General Overview of the Philippine BPO Industry

 Real Estate Sector

 Infrastructure and Utilities

 The Philippine IT/BPO industry has a wide breadth of

 The Philippines is recognized by UK’s National

 IT and BPO revenues reached US$7.2 B in 2009 which is

 Evolving to higher value non-voice BPO functions with

 As of January 2009, the Philippines represented 15% of

 The Philippines is poised to emerge as a leading

 The Philippines is the No. 2 Offshore Nation in the

“The (Philippine) BPO industry continued to grow

- World Bank, November 2009

 General Overview of the Philippine BPO Industry

 Real Estate Sector

 Infrastructure and Utilities

 As of January 2010, Labor Force Participation Rate is

 More than 400,000 tertiary-level graduates per year

 Large pool of quality graduates of disciplines that

 English proficient workforce; Fluent in American

 Deep affinity with Western culture; universal cultural

 Strong customer service orientation and high level of

 Highly educated, productive, dedicated workforce

 Ability to deliver better quality service at a

 Middle Management Program for BPO to accelerate

11,242, 3% Medical and Natural

Mathematics and IT-related

English Competence among Philippine % (2008)

 The laws on labor standards and employment

Provincial -based 10,000.00 – 18,000.00 217.25 – 391.05

Software Developers 15,000.00 – 40,000.00 325.87 – 868.99

Animator / Graphic Artist 25,000.00 – 65,000.00 543.12 – 1,412.12

Medical/Legal 12,000.00 – 20,000.00 260.70 – 434.50

Team Leaders / Technical 30,000.00 – 50,000.00 651.75 – 1,086.24

 Aside from basic salaries, employees are also entitled

 Additional compensation and incentives:

 Home Development and Mutual Fund (HDMF)

 National Health Insurance Program (NHIP)

 Social Security benefits

 General Overview of the Philippine BPO Industry

 Real Estate Sector

 Infrastructure and Utilities

 Despite the real estate sector being affected by the

 Higher supply + poorer investor sentiments = Increase

 Increase in Vacancy = Lower lease rates

 This trend of lower lease rates and higher vacancies is

 The office market has already bottomed out. Lease

 Since lease rates are at its market low and vacancies

 The success and results of the upcoming automated

 OFW Remittances and the REIT Law are expected to

West Bulacan Metro Laguna

NCR (Metro Manila) Iloilo City

 Major business districts for both Tier 1 and Tier 2

 Most of these locations also have international

 Business districts are strategically located such that

Typical Lease Length Usually 2 years