INFOGRAPHIC: Car sales accelerate

Auto industry ‘confident’ of hitting 2014 sales target

VEHICLE sales in the Philippines this year are expected to be in line with or even exceed the forecast of 250,000 units, with the domestic auto sector registering one of the strongest growth rates in Southeast Asia, auto industry officials said.

According to the head of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), carmakers are on track to hit the target, which was revised in July from the earlier forecast of 230,000 units set at the start of the year.

In a text message, the president of CAMPI, lawyer Rommel R. Gutierrez, said the group is “confident that the 250,000-unit target will be met.”

“Our strong efforts to meet the market’s demand and favorable responses to new models have essentially helped in boosting the automotive industry’s confidence of achieving higher sales for the remaining two months [of the year],” Mr. Gutierrez said.

Froilan G. Dytianquin, assistant vice-president for marketing services at Mitsubishi Motors Philippines Corp. (MMPC), in an e-mail said: “The sales of brand-new vehicles may reach or even surpass the total industry sales target of 250,000 [units] set by CAMPI this year. As Christmas season approaches, we expect this month and December to be equally high as October.”

The statements follow a combined CAMPI and Truck Manufacturers Association (TMA) report, released on Monday, that puts sales coming from members of the two organizations at 22,278 vehicles in October -- a 32.6% spike from a year earlier. CAMPI called the result “an all-time high sales record” for the month of October.

October’s result is 6.5% more than the groups’ 20,924-unit total in September.

Sales in the first 10 months of the year reached 192,005 vehicles, 29.6% higher than in the same stretch in 2013, CAMPI reported.

The report also showed an increase in deliveries of cars and all types of commercial vehicles -- from Asian Utility Vehicles, to light trucks, and trucks and buses -- from January to October compared against the first 10 months of 2013. Sales of cars totaled 74,397 units, up 50.3% from a year earlier, while commercial vehicles notched 117,608 units, a rise of 19.2%.

Commercial vehicles continued to take up the bulk of the domestic auto market with a 61.25% share even as cars posted stronger growth.

The joint CAMPI and TMA forecast includes sales coming from the Association of Vehicle Importers and Distributors (AVID), which counts Hyundai Asia Resources, Inc. as its biggest member.

In its own report issued last month AVID put its tally from January to September at 27,013 cars and commercial vehicles, a 19% jump from a year earlier.

Hyundai models accounted for 17,693 units of AVID’s 2014 result, with the brand selling 2,017 vehicles in September.

AVID and Hyundai have yet to release their October sales reports.

Leading CAMPI’s January-to-October performance is Toyota Motor Philippines (TMP) with deliveries of 86,794 vehicles, comprising 45.2% of the group’s total, and an on-year jump of almost 42%. Toyota has topped the industry’s sales charts since 2002.

Mr. Gutierrez, who is also first vice-president at TMP, said “Toyota hopes to finish the year with 100,000 units [sold].”

Coming next after Toyota is MMPC with 41,651 units sold -- an 18.2% rise in the year to date growth. The local unit of Mitsubishi Motors accounted for 21.69% of the market.

Ford Philippines is the third-biggest seller in the industry group as it moved 16,514 vehicles so far this year, 51.8% higher than its year-earlier tally.

Honda Cars Philippines, Inc. is fourth with 11,117 units, down 3%, and Isuzu Philippines Corp. fifth with 11,007 units, up 12.9% hike.

A separate report for the January-to-September period filed by the Association of Southeast Asian Nations Automotive Federation showed that the Philippine automotive sector posted the third-best performance in the region with a 29.2% gain, following Singapore, where sales rose 34.2% and Vietnam, which posted a 30.5% rise.

Traditionally robust car-producing markets Malaysia and Indonesia notched up modest gains -- 0.9% and 2.7%, respectively -- while Thailand, which in 2013 had the biggest auto market with slightly over a million units sold, saw a 37.3% dip in the first nine months of 2014.

Car sales in the ASEAN region during the same period stood at 2,380,683 units, 10.8% less than in 2013.

They advance, we stagnate

In one of the more impressive political performances this year, Indian Prime Minister Narendra Modi used three words—democracy, demography and demand–before 20,000 Indian Americans at the Madison Square Garden in New York City last September to describe India’s “strengths.” It was a tour de force. No recent political speech has made as much impact upon thoughtful audiences around the world.

Modi, whose phenomenal parliamentary victory in May gave Delhi its first big- majority government in thirty years and virtually extinguished the old political dynasty that began with the great Jawaharlal Nehru, was not just trying to sell a vision or a dream. He was describing an awesome political reality, and calling every Indian everywhere to proudly take part in it.

It was a great nationalist mobilization on a global scale, launched from the world center of modern communication. From that standpoint alone, it seemed a stunning success. Only one other Indian could probably claim a better record–V. K. Krishna Menon, Nehru’s defense minister, who spoke for seven hours and 48 minutes before the UN Security Council in 1957 in defense of India’s sovereign claim over Kashmir. Menon collapsed in the course of that “filibuster,” and had to be rushed to hospital, but he resumed his speech for another hour as soon as he was back in the hall. As a result of his historic speech–unsurpassed in length to this day at the UN–the Soviet Union vetoed the UN Security Council resolution that would have given to Pakistan sovereignty and control over Kashmir.

Modi did not try to join Menon in Nobel laureate Amartya Sen’s listing of “argumentative Indians;” he spoke for not more than half an hour. But he spoke in a language that gave Indians everywhere, and the world at large, a clear view of what their country had and could become.

Democracy
America, he said, is the oldest democracy, but India is the largest. People from all over the world are in America, but Indians are settled all around the world. This is India’s first strength, Modi said.

By 2020, most of the industrial nations will be peopled by men and women, 65 years old and above. India on the other hand will have more young people than old. There will be a global demand for a large workforce, and India will be one of the few countries that could supply the demand. India’s demographic dividend is its second strength, Modi said.

Demographic dividend
What is demographic dividend? An online article by Ronald Lee and Andrew Mason says this occurs after a largely agrarian society with high fertility and mortality rates is transformed into a predominantly urban society with low fertility and mortality rates. During the transition, fertility rates fall, leading to fewer mouths to feed. Then the labor force grows more rapidly than the population it supports, permitting more resources to be invested in family welfare and economic development. Per capita income rises more rapidly, as a result. This is the first dividend.

The demographic dividend period could last five decades or more, says the article. But eventually lower fertility reduces the growth rate of the labor force, while improvements in health care prolong the lives of the elderly. Now, other things being equal, per capita income grows more slowly and the first dividend turns negative.

But a second dividend is possible, according to the article. Faced with an extended period of retirement, an older working population will tend to accumulate assets–unless it is confident that families or government will provide for its needs. National income will rise when these assets are properly invested. Thus the first dividend yields a temporary bonus, and the second transforms that bonus into greater assets and sustainable development, says the Lee and Mason article.

Modi was not the first one to talk to the world recently about this. In his bestselling 2009 book, Imagining India: The Idea Of A Nation Renewed, Nandan Nilekani, co- founder of Infosys, one of India’s biggest information technology firms, writes that “at a time when the rest of the world is growing gray, India has one of the youngest populations in the world with a median age of 23 and the second-largest reservoir of skilled labor in the world.” It has transformed its problem of 1.25 billion people into a mega asset of 1.25 billion people.

India’s second strength is also its third. The population, which with information technology has turned India into a leading IT center of the world, has also, with dramatically improved personal incomes, turned India into a robust consumer of the world’s products. It consumes as vigorously as it produces; therefore demand has become its third strength.

Demand
“No other nation has these strengths,” Modi said. And this is not easy to contradict. China, with its 1.354 billion people and its phenomenal two-digit economic growth rate for years, has India’s third strength, but not its first two. It has no aspiration to become a democracy; the latest democratization attempts in Hong Kong were initiated from outside the government, and against its wishes, and have now stalled.

As for its demographic destiny, Beijing’s one-child policy in favor of the male child is said to have created a generation of at least 40 million males without any prospective spouses, and a large and ever-expanding layer of seniors, not all of them able to support themselves, and not followed by young people after them either. China’s workforce is ten years older than India’s, its median age being 35.2 (as of 2010), as against India’s 25.9.

India’s 3 strengths could also have been ours
Now, India’s “three strengths” could also have been those of the Philippines, even though on a much smaller scale. As a “democracy,” we declared our independence from Spain at least half a century before India declared its own independence from the British Raj. And for years we were proud to call ourselves “the oldest democracy in Asia.” But at this time when India is proudly showing everyone how a real democracy works, we seem to be doing our very best to show how to undermine, frustrate and falsify it, both in form and in substance.

We have allowed our institutions and processes to be totally corrupted, our Constitution to be reduced into a scrap of paper, and the tripartite system of government to be hijacked by a psychologically challenged president whose passion for digital games has replaced any desire to learn the responsibilities and functions of his office.

In what democracy anywhere could you find a head of state who manages to insult, abuse and add to the division of a long insulted, abused and divided people every time he opens his mouth? Or a Senate whose members have been bribed to demolish the enemies of the head of state, but who seem to believe no one could touch them for their own theft, corruption and plunder so long as they strut like belated reincarnations of Inspector Javert in Victor Hugo’s Les Miserables and brazenly use the Senate to investigate the alleged theft, corruption and plunder by others, without first having themselves investigated?

So the democracy, which India has transformed into a great strength, we have reduced into a revolting outrage. And we are expected to pay obeisance to those who have destroyed it.

Now, we have a population of 100 million Filipinos. At least 10 million of those work overseas, and feed the economy a dollar remittance of now $26 billion a year. Our agriculture is shot, our manufacturing is non-existent, the services sector alone, which includes our Overseas Filipino Workers, is all that keeps our economy afloat. Better than India, the median age of our labor force is 22.7 years, the youngest labor force outside of Africa, which has much younger labor forces. But our economic planners and policymakers do not even seem to know about it.

A couple of years ago, at the European Days celebration in Brussels, I heard several African heads of state say, “The future belongs to Africa, because this is where the young people still are.” It is the same thing Modi is saying for India. It is the same thing we could be saying and should be saying if we have any appreciation of the value of what we are, and what we have. You probably do, but our leaders don’t.

Like India, we should be benefiting from our “demographic dividend.” But we chose to throw it away. In a bout of insanity or madness, we need not impute malice, the Aquino administration decided to kill the goose that laid the golden egg by enacting a foreign-dictated law on population control, which seeks to reduce our population growth to zero or below. And the Supreme Court, in obvious obeisance to US AID, which provides it so much money, and had a vested interest in the law, declared it “not unconstitutional” despite its patent violation of the Constitution, which rejects population control, and prohibits the State, as protector of the unborn, from being the provider and promoter of contraception.

Instead of investing in the unborn, in the present and in the next generations of Filipinos through education, technology, and health care, the Aquino government has put hundreds of billions of pesos in highly questionable lump sums, in violation of the Supreme Court ruling declaring such lump sums unconstitutional.

Despite the direct Court order that all those involved in the unconstitutional pork barrel system, otherwise known as the Priority Development Assistance Fund and the Disbursement Acceleration Program, be punished forthwith, not a single one has been touched by the Ombudsman, outside of three opposition senators who were specifically targeted by Malacañang.

Thus, our demographic dividend has been translated into “cash dividends” for our thieving politicians.

Finally, with a population of 100 million, we have a consumer society with an unmistakable purchasing power and demand, but without a common concept of development. To make sure that our purchasing power is used, we are now made to pay for every public good we use, such as roads, bridges and other facilities. The government is supposed to provide these for free, in exchange for its right to collect taxes. The taxes are still collected, even from the lowliest sidewalk vendor, but the government has engaged private providers to provide these public goods and to fleece the public for their use.

Aside from the lies, the b.s., and the arrogance we get from our officials, is there anything we still get for free from government? We are now guaranteed the most expensive power and water rates, transport services, food, shelter, medicines and other essential commodities, and a total absence of service from government.

To stimulate demand, the government uses its foreign exchange to support the importation of luxury items for the elite that owns 90 percent of the nation’s wealth, instead of using it to finance badly needed energy and water systems, irrigation and food production projects, dignified housing for the poor, reforestation, recreation parks, school houses, hospitals, satellite health clinics, sewerage systems and public toilets. Indeed, we use “demand” to promote naked consumption without any notion of development.

Whether we go forward or backward, advance or stagnate is now a function of leadership. In India, Modi seems determined to lead his country to the summit of achievement. Here, President B. S. Aquino 3rd seems determined to take us to the very abyss, in every respect.

fstatad@gmail.com

source:  Manila Times' Column of Kit Tatad

The distance from Tondo to Forbes Park

IT IS A CORPORATE boardroom in Makati, and the air is tense. The five directors are tackling a fatal corporate problem -- possible bankruptcy. The patriarch and chairman of the family corporation is ranting and raving, scolding his children about how it happened that unprofitable operations ate up capital funds, and mortgaged properties are now threatened to be gobbled up by unpaid loans from the banks. Property assets of the corporation must be sold.

Hell breaks loose as the patriarch booms: Sell everything, except my boyhood home in Tondo! I will live there, he says, and anyone who has the balls and wants to be with me can join me there. Yes, sell the big house in Forbes Park too.

The scene is from Hari ng Tondo, an entry at the Cinemalaya Independent Film Festival awards in early October. Veteran actor Robert Arevalo won Best Actor for his portrayal of Robert Villena, the patriarch, and Cris Villonco Best Supporting Actress for her role as the granddaughter. The retro-style film might have won Best Picture for its deep social message and the superb acting. But critics generally regret the wastage of a powerhouse cast delivering awesome performance on “situations (that) may not have been too possible to happen in real life,” confusing a “no-brainer idea that those who’ve succeeded in a community should not forget the less fortunate around them,” as two reviewers said.

By sheer natural responsibility of human beings for each other, the rich must care for the poor, initially by being aware of the disadvantaged, and then finding some way to give back to alleviate the plight of these underprivileged ones. But that is easier said than done, asHari ng Tondo tried to convey in its plots and sub-plots.

The reality is that although the Philippine wealth gap is seen as narrowing, the share of the 10% richest Filipinos has always been over 70% of the country’s wealth, in fact 76% this year according to the Credit Suisse Group. The National Economic and Development Authority (NEDA) Fifth Progress Report on the Millennium Development Goals (2010-2015) has confirmed the income disparity, also reporting a slightly declining Gini ratio that went down from 0.48 in 1991 to 0.47 in 2012. (As explained by economist Gerardo Sicat, “Among different measures of income inequality, the most popular metric is the “Gini index... (which) measures the extent to which the distribution of income or expenditure among individuals or households within an economy deviates from a perfectly equal distribution of income. A Gini index of zero represents perfect equality, while an index of 100 implies perfect inequality. Often, the Gini is represented as a ratio with a value from zero to one.”)

The decile dispersion ratio is probably close to what Credit Suisse described as 70% of the wealth being in the hands of the 10% richest in the Philippines. The MDG report says that the average income of the households of the richest decile is now about 18 times that of the average income of the poorest decile. The ratio has declined very slightly since 1985, when the ratio was 21 times.

Indeed, “despite the high economic growth in recent years, progress in reducing poverty has been slow.” The share of the population’s bottom quintile was only 5% of total income (GDP) in 2012. There was too little “trickle down” of the average 5.2% GDP growth over the last 10 years. We can see this in the squalor of the slum areas, as depicted in Hari ng Tondo.

The United Nations defines the slums as those households lacking flowing drinking water, insufficient sanitation (toilet facilities), not durable and cramped living areas, and no security of tenure (informal settlers). NEDA reports 40.9% of households in 2009 were slum dwellers, steadily increasing from 16.47 million in 1991 to 18.3 million in 2009.

In Hari ng Tondo, the rich man pondering on the filth and poverty of the slum scavengers on Smokey Mountain cries tears of desperation. His two grandchildren, who initially had “balls,” experienced the slums only on a three-month “testing” basis. But the balls retracted in the realization that such sordid living was not for them (nor were they really accepted by the slum dwellers), and back they went to Forbes Park. There were no redeeming solutions hinted at in the movie.

But it is a reality that Filipinos have to face -- how to contribute to poverty alleviation in the different roles of being Filipino -- individuals in their little spheres of capacity, and the government people in their sacred role as trustees for the welfare of all citizens The MDG report admits that the goal of halving extreme poverty by 2015 seems not to be achievable at this point, hinting that natural calamities have decimated efforts toward this goal, as “the Philippines is the third most disaster-prone country in the world.” However, the gains on education, specially of the poor, are touted as the key to poverty alleviation.

The low employment to population ratio, stagnant between 59% and 60% from 1990 to 2013, is directly affected by the low education completion levels, specially for the poor. Poverty hinders education of the children, and low-educated children have lower employment possibilities and are likely to stay in the poorest economic levels. Happily, for primary education, the net enrollment rate has increased from 82% in 2007 to 95.2% in 2013, with the completion rate (less drop-outs) improving to 73.7% in 2012, from 65.5% in 1991. The executive summary of the MDG report does not have tables on secondary education, but perhaps this is swept into the K-12 system.

The MDG promises on poverty reduction were targeting 2015 and were perhaps too ambitious. But amid all the natural calamities and man-made crises in this country, what it takes is focus by our governance and, as the Hari ng Tondo says, “have the balls to do what you must do.”

Amelia H.C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

source:  Businessworld

BSP to cap banks’ property lending: New policy will cut loan value to 60% of collateral

Local banks will soon be ordered to cap real estate loans at 60 percent of their collateral values, down from the average of 80 percent at present, as banking regulators try to head off the formation of a property bubble in the country.

The move is part of a broad measure of reforms that the Bangko Sentral ng Pilipinas (BSP) is set to roll out in the coming weeks to further buttress the Philippine banking system from the effects of market volatility.

More importantly, the new policy is expected to tighten the flow of as much as P200 billion worth of bank credit to the real estate sector, according to industry sources. On the short-term, the tighter credit policy will also translate to higher interest rates as banks demand higher returns to compensate for their higher risk exposure to real estate loans.

“Banks will still be able to lend above the 60 percent collateral value cap, of course,” said one banker, speaking on condition of anonymity because the policy has yet to be announced by regulators.

“But what BSP is saying is that, if the loan goes bad, the bank’s books are only insulated to the extend of 60 percent of collateral value,” he explained. “If they had lent more than that amount, they would have to set aside [loan loss] provisions immediately to cover that gap.”

That new policy of requiring immediate loan loss provisions—as opposed to today’s more lenient provisioning schedules—will have a direct impact on the capital levels of banks hit with bad real estate loans, the official said.

At present, banks have the flexibility to lend as much as 90 percent of a collateral’s value, depending on the asset class. The new policy, however, will cap loanable values across the board at 60 percent.

BSP will give banks a two-year adjustment period to comply fully with the regulation once the circular is released.

This policy shift—which has already been approved by the Monetary Board, but has yet to be formalized by BSP Governor Amando Tetangco Jr. through a circular—was confirmed over the weekend by a ranking BSP official, who explained that regulators wanted to coax banks away from their traditional collateral-based lending mindset.

“That’s how crises happen,” the official explained. “Banks lend based on the value of their real estate collateral which everybody thinks is worth a certain amount today, but is suddenly worthless the following day.”

Instead, the central bank will implement a system where lenders will have to scrutinize more closely the ability of borrowers—whether large corporations, small or medium enterprises, or individual borrowers—to pay off the loan based on the sustainability of their incomes.

“We want banks to focus more on the cash flow of the borrower, and not just the collateral,” the official said. “You can still have collateral as a lending consideration, but only as a backup.”

At the end of June 2014, the local banking system held almost P1 trillion worth of loans to the real estate sector, comprising 18.3 percent of the financial system’s total loan portfolio, according to BSP data.

Of this amount, P27.2 billion or 2.95 percent, were classified as past due, while P24.4 billion or 2.64 percent were booked as nonperforming loans—both still low, relative to the levels seen during real estate bubble-induced financial crises.

BSP officials have repeatedly—albeit gently—cautioned lenders about the ill effects of speculative lending to the high-end property sector, as it tries not to stunt the property sector’s growth by causing undue alarm among buyers.

source:  Inquirer

The Philippines Challenges India’s Call Center Dominance

EMPLOYMENT in the business process outsourcing (BPO) industry in the Philippines hit an all-time high in August, following a decade of phenomenal growth that has seen revenues and employment expand ten-fold since 2004.

The expansion of a number of companies will continue to drive growth in the BPO sector, after employment recently hit the 1 million milestone, rising from 930,000 in first quarter of 2014 and from 101,000 in 2004, said the IT and Business Process Association of the Philippines (IBPAP) in August. IBPAP’s CEO, Jose Mari Mercado, told local media that the 2014 target of 1.04 million would likely have been reached when end-September figures were published.

With the country a well-established global leader in BPO, other nations are feeling the impact. India, in particular, has seen its share of BPO activity eroded in the wake of unprecedented growth in the Philippines. However, with the global BPO industry potentially shifting away from pure voice services towards a multi-channel delivery model, technological innovation has joined human resources gaps and churn rates as a challenge to the long-term growth prospects.

GOVERNMENT INCENTIVES
The BPO sector is a major growth industry in the Philippines, expanding by an average of 20% annually. Although it accounted for just 2% of total employment in 2012, the run-off effects of the industry have had a positive impact on the real estate, telecoms and retail sectors. Export revenues from BPO have increased ten-fold over the past decade, growing from $1.3 billion in 2004 to $13.3 billion in 2013. IBPAP estimates the sector generated $15 billion in total revenues last year, and expects that figure to reach $18 billion in 2014 and $25 billion in 2016.

The government has been a key promoter of the industry over the past decade. The Philippine Development Plan, which runs from 2011 to 2016, has highlighted BPO as one of 10 high-potential and priority development areas. The Training for Work Scholarship Programme enabled the IT industry to provide training for BPO applicants, while investors are afforded a number of benefits including tax holidays, tax exemptions on imported capital equipment, simplified export and import procedures, and freedom to employ foreign nationals.

CHALLENGING INDIA
As a result of its expansion strategy, the Philippines has become a major rival to India, the world’s global BPO leader. In 2013, the Associated Chambers of Commerce and Industry of India (Assocham) announced that India had lost over 50% of BPO industry to foreign competitors, with the job migration costing India about $25 billion. The majority of lost business relocated to the Philippines, where an estimated 30% of graduates are employable, compared to just 10% in India. Graduates’ fluency in English, and their Western accents, have added to the country’s draw, and most of the world’s larger providers of BPO services have call centers in the Philippines, including Accenture and Convergys, which together employ over 60,000 people, as well as Teleperformance, Teletech, Stream and Sykes.

A ranking of the top 100 BPO destinations, published by consultancy Tholons in 2014, listed Manila as the second most important BPO destination worldwide, pushing Mumbai to third place. Although India’s southern city of Bangalore remains the top BPO destination, Philippine cities are rising. Seven Philippine cities made Tholons’ top 100 list, including two in the top 10, with Cebu ranked eighth. In a joint report with KPMG, India’s Assocham has projected that as much as 70% of incremental call center and voice business will be lost to foreign competitors.

“It is estimated that in the ongoing decade, India might lose $30 billion in terms of foreign exchange earnings to the Philippines, which has become the top destination for Indian investors,” said Assocham secretary general D S Rawat, quoted in Indian media.

LONG-TERM CHALLENGES
While this has given the Philippines’ BPO industry a positive long-term forecast, challenges remain. Aegis recently relocated 600 call center positions from the Philippines to India due to Indian workers’ success in sales and upselling, a technique whereby a seller induces the customer to purchase more expensive items or upgrades. The Philippines’ BPO industry also struggles with a staffing gap. The Commission on Higher Education estimated that BPO jobs created in 2012 -- around 137,000 -- represented more than 25% of graduating college students. In addition, the challenges of stressful, late-night work have resulted in a churn rate of over 50%, while high levels of emigration have exacerbated issues with workforce retention.

At the same time, the industry is increasingly shifting from pure voice services to multi-channel offerings, which combine voice, e-mail and online chat services, using sophisticated delivery models such as Platform BPO and the cloud-based Business Process as a Service (BPaaS). With pure voice services accounting for 62% of total BPO revenues in the Philippines in 2013, stakeholders have called for the industry to increase its technological uptake in order to maintain a competitive edge.

In an August editorial published in a local daily, Mark Lwin, CEO of AIG Philippines Insurance, said that while the Philippines will likely retain much of its voice business, lower-value voice services represent an increasingly smaller proportion of the American BPO market. The former head of the AIG Property Casualty BPO delivery center in Alabang noted that India’s establishment of “centers of excellence” offering e-mail, text and chat are putting pressure on the local BPO market. Shifting delivery models to meet changing demand will thus be critical for stable, long-term growth. 

source:  Investor Relations Office

The future of the Philippines’ KPO industry

IN recent years, the Philippines has shot to elite status in the global outsourcing stage, overtaking India specifically in the voice segment. The country’s business process outsourcing (BPO) industry began in the 1990s and has, since then, become a significant contributor to our export revenues and economic growth.

According to the Information Technology Business Process Association of the Philippines (IBPAP), our IT-BPO sector registered revenues of $15 billion in 2013, which was about 17% higher than the $13.2 billion generated in 2012. Overall, full-time employment at the end of 2013 reached 900,000 versus 777,000 from the previous year, and has already reached the one million mark in mid-2014, up 11% from 2013.

It is estimated that the IT-BPO industry’s revenues will increase by 16% to $18 billion in 2014, putting the industry on track to attain its 2016 target work force of 1.3 million and revenues of $25 billion.

IBPAP estimates that call center or voice operations make up two thirds of the industry, with the rest accounted for by software development and business services, among others. This projected growth is partly due to the increasing demand for BPO services from English-speaking industrialized countries such as the United States, Australia, United Kingdom and New Zealand.

Since most global companies are still focused on cost reduction and operational efficiency, it is expected that they will continue to tap our BPO providers for competitive labor costs and the huge pool of college-educated and English-speaking professionals. However, as these companies expand and strive to be more competitive, there has been a growing thrust for more value-added services. This demand may bring about the development of other non-voice services, in particular, Knowledge Process Outsourcing (KPO).

The KPO concept is reported to have gained prominence in India in the 1980s as technology increased the worldwide reach of multinationals. It saw wide acceptance in the early 2000s when global companies like General Electric set up captive research and analytics, and third-party knowledge services from offshore facilities in countries with knowledge capabilities. KPO is described as the outsourcing of core data-based business activities to another company, which plays an important part of a company’s value chain by providing highly specific expertise. Besides the cost savings, KPOs are also viewed as adding value. Some of the core processes served by the KPO sector include: market research, fraud analytics, equity research and investment banking, insurance and actuarial, engineering services, animation, web development, data integration, project management, remote education, research and development, radiology, medical transcript preparation and legal processes.

Unlike the traditional BPO, where the focus is on process expertise, KPO utilizes knowledge expertise. This requires service providers to possess advanced technical, interpretation, and analytical skills. It also requires more customized tools and a more predictive response modeling. In terms of talent, KPO firms need people with highly specialized skills, requiring superior educational qualifications and extensive training. For example, KPO services for the financial sector, such as insurance and banking, may require personnel who have acquired graduate degrees and certifications, such as being a Chartered Financial Analyst.

The KPO industry is highly prominent in India and Europe. Globally, it is expected to grow exponentially in the next few years. According to TechNavio’s analysts, the global KPO market will grow at a compounded annual growth rate of 23.12% from 2013-2018. This is expected to be due to the demand from developed western economies, such as the US, UK and other European nations where the availability of highly trained and specialized professionals is diminishing. This is particularly true for knowledge-intensive sectors, such as engineering, IT, design and finance, among others.

In the Philippines, the “Philippine IT-BPO Roadmap 2016: Driving to Global Leadership” report commissioned by IBPAP notes that non-voice services are not yet as visible as the more mature BPO voice sector. At the beginning of 2014, local BPO industry analysts predicted that with favorable economic conditions for investment, we can expect further entry of higher-value KPO services. Our local BPO industry indicated a shift in the kind of outsourced services -- from the usual contact center to more knowledge-intensive services the fields of IT, research, accounting and engineering. In fact, recent industry reports appear to validate this for the first half of 2014, indicating that non-voice BPO (which includes the KPO sector) is slowly catching up with the voice segment, with voice services dropping to around 60% from 65% of the Philippine outsourcing industry. In addition, the mid-2014 report from IBPAP showed that it is expecting non-voice services, including KPO and engineering services, to grow at about 20%. Some of the higher value KPO and finance and accounting outsourced services providers thriving in the Philippines today include Wells Fargo, Deutsche Knowledge Services, J.P. Morgan, AIG and Thomson Reuters, according to the 2014 report by Tholons, a strategic advisory firm for global outsourcing.

The question now is whether the Philippines can maintain this momentum and actually move up the value chain to become a top KPO destination. Future prospects seem bright, given our huge pool of educated professionals and with the Philippine Government now taking necessary steps to enhance its technology and infrastructure. What is needed now is for companies to identify the primary demand areas for knowledge-based services, and to strengthen capacity-building by focusing or training the available talent pool into areas of core specialization and competency.

Mariecris N. Barbaso is a Partner of SGV & Co.

source:  Businessworld

PHL found still good for the aged

THE PHILIPPINES remains among the Asian countries better suited for growing old in, though its scores in most measures of quality of life and economic well-being for those aged over 60 slipped in this year’s ranking by London-based nongovernment organization HelpAge International.

The Philippines found itself still 44th -- retaining its position in the 2013 inaugural report -- among 96 countries in Global AgeWatch Index 2014, which added Bangladesh, Iraq, Zambia, Uganda and Mozambique to the list.

But it was fifth among 23 Asian countries on the list, holding the same place as in 2013.

Countries were gauged against 13 indicators grouped into four key measures, namely:

• “income security,” which includes existence and coverage of a pension system, poverty rate, and consumption;

• “health status,” which measures how many years a person aged 60 can expect to live;

• “capability,” which measures older people’s education and skills, access to the labor market and therefore their ability to supplement pension income with wages, as well as their access to work-related support networks; and

• “enabling environment,” which covers support from relatives and friends, physical safety and access to public transportation.

The Philippines, the report said, got its highest marks in the “enabling environment” domain (15th from 21st in 2013) “with above average values for all indicators.” Its score of 77.3% in this field is slightly higher than 2013’s 76.3%.

It also ranks a relatively high 18th (though down from 17th in 2013) in the “capability” domain “with above average values in the employment (66%) and educational attainment (49.5%) indicators.” The Philippines scored 50.2% in this area, compared to 58.6% last year.

The country ranks low in “income security” at 73rd (flat from last year), “with low pension income coverage (28.3%) and higher-than-average old age poverty (13.7%) for its region” and an overall score of 41.9% (up from 37.5% in 2013).

“Many low- and middle-income countries introduced contributory pension systems a long time ago... However, with the exception of some countries in Latin America and the former Soviet Union, pension coverage has remained extremely low,” the report noted.

“In low- and middle-income countries, only one in four people over 65 receive a pension. Even in the more affluent countries of Colombia and the Philippines, only around one in five older people are covered.”

It also noted that “[c]ountries such as Bangladesh, Kenya, Peru and the Philippines target social pensions to the very poorest,” but clarified that “[b]y design, such schemes fail to cover those who are neither well-enough off to receive a contributory pension, nor poor enough to be eligible for the social pension.”

The Philippines got its lowest rank in “health status” at 76th (from 70th), with a 31.9% overall score (from 36.9%) due to “below average value of life expectancy indicators,” though it got “above average value for the psychological wellbeing indicator.”

The study estimated that there are 6.6 million Filipinos over the age of 60 this year, a complement that is expected to grow to 9.6 million in 2030 and to 13.7 million in 2050.

Topping the list this year is Norway, which was followed by Sweden, Switzerland, Canada, Germany, the Netherlands, Iceland, the United States, Japan and New Zealand, which rounded up the top 10.

At the bottom 10, in descending order, were Iraq, Zambia, Uganda, Jordan, Pakistan, Tanzania, Malawi, West Bank & Gaza, Mozambique and Afghanistan.

The report said the 96 countries on this year’s list represent 91% or nine out of 10 people aged over 60 across the world.

“Specific policies need to be put in place to address the implications of aging,” said the report, published on Oct. 1 -- the United Nations International Day of Older Persons. -- with AFP

source:  Businessworld

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