Posted by: Frederik Balfour on May 26, 2009
It’s tough not to feel upbeat sitting aboard a plane making its approach to Cebu, the second largest city in Philippines. With its lush, emerald green hills, a gentle surf breaking on azure waters and a luminous coral reefs, it’s a postcard perfect version of a tropical getaway. But in recent years Cebu has started to attract more than just sun worshipping tourists: it’s a hot new location for business process outsourcing in the Philippines, where despite the global slowdown, the industry is expected to grow 20-25% this year.
A good place to get a sense of how fast things are changing is at Asiatown IT Park. Five years ago, the area was just scrub grass, but today it’s home to more than two dozen new call centers and IT outsourcing shops trouble shooting for Dell customers, crunching numbers for banks and insurance companies such as Prudential of the U.K., and processing medical records for HMOs. Managing accounts receivables and debt collection is an areas that has seen lots of growth since thing started going pear-shaped in the U.S. With its careful landscaping and slew of funky cafes where twentysomething employees of the centers sip ice cappuccinos and cruise the web on laptops, it looks more Southern California than Southeast Asia—except the mood here is decidedly more bullish.
Just ask Marife Zamora, Philippines chief for Cincinnati-based Convergys, which hopes to nearly double its Philippines staff, to 20,000, this year in several centers, including Cebu. “We are growing like crazy,” she says. By the end of 2010 the Philippines hopes to grow its business process outsourcing revenues to $13 billion from $6 billion in 2008, and provide jobs for 900,000, up from 370,000 at the beginning of this year. Growth is coming from companies like Convergys, Wipro and Accenture which do work for third parties, while S.C. Johnson, JP Morgan and Siemens are expanding their own back office facilities there in the desire to complement their Indian operations.
That’s a tall order, to be sure, but businesses and being forced to find ways to save costs more than ever, and moving offshore is seen as one of the best ways to trim overheads. People are discovering that in the Philippines, things can be done “faster, cheaper and better,” says Beth Lui, country managing director at Accenture which employs 16,000 there.
The growth of the outsourcing sector in the Philippines is one reason why its economy is expected to grow a 2.5% this year, while neighboring Indonesia will expand 3.6% and Vietnam 4.5%. For an in-depth look at the region please check this week’s feature story in BusinessWeek magazine. While those figures about half the average seen in recent years, they look pretty attractive compared to most parts of the world. Another reason is these economies have large populations—Philippines has 96 million, Vietnam 86 million and Indonesia 237 million—-and are less dependent on exports than Singapore and Malaysia which have gotten whacked by the global slowdown.
So what solace can U.S. readers get from this news in Asia? Well, if you remember that the region went through its own painful crisis more than a decade ago that was kind of a dry run for what the rest of the world is experiencing today. Governments were forced to clean up their act, companies de-leveraged and banks patched up their balance sheets, one big reason why none of them ever needed a government bailout this time around. So while the business of shedding debt might be tough medicine for U.S. companies and consumers right now, things will eventually be healthier all around. Now that’s something to look forward to.