Robust Philippine currency threatens business process outsourcing industry

Outsourcing to the Philippines is now said to be 30% more expensive than India and China, according to Business Processing Association of the Philippines (BPAP). But what is ironic is that the business process outsourcing (BPO) industry, which contributes much to the domestic economy, actually helped drive up the peso's value. The combination of an appreciating peso and a depreciating Indian rupee had provided India with a meaningful cost advantage. Ditto the steady Chinese yuan.

A survey of BPAP members on the impact of the strengthening peso revealed the following:

• about 46.7% of respondents said it had been more difficult to hit their respective revenue targets;
• about 40% of respondents said they had lost some business to other destinations;
• about 40% of respondents said they had canceled expansion plans.

Southeast Asia has become a preferred destination for global portfolio investors in which case their investment inflows result in increased demand for the local currency.

Aside from the BPO industry, exporters are also hit hard by a robust peso since they make less money in peso terms for every dollar they earn.

In a related development, some property experts are encouraging property developers to look beyond the BPO industry. Global consultancy firm Urban Land Institute, for one, advises property players to find new growth areas. One suggestion is to consider developing “middle office” hubs for financial institutions.

Front office usually refers to sales and marketing, and the back office covers administrative and support services, where call centers and BPOs usually come in. But middle office, on the other hand, refers to the segment within a bank or financial services firm that takes care of risk management, calculates profits and losses, and handles the information technology platform using the resources of front and back offices. Hence, the business of assigning middle office tasks to a third party is known as “knowledge process outsourcing” (KPO).