Europe - Japan- Australia pouring in BPO & KPO in the Philippines - broader outsourcing role

The Philippines is the world's call-centre capital, but will need more graduates and better trained professionals if it's to be a major force in the broader outsourcing market, where growth is in providing research and analytics for the legal, healthcare and financial industries.

In little more than a decade, the Philippines has overtaken India in running call-centers, helped by an affinity for the language, culture and work ethic of the United States, its former colonial master.

The number of Filipinos offering a cheery "Have a nice day" while working the graveyard shift to answer calls on behalf of multinational clients such as Citigroup (C.N) and JPMorgan Chase now far exceeds India's 350,000, and the government wants to double the market to $25 billion by 2016, employing 1.3 million workers.

But to do that the Southeast Asian nation must convince investors it has more to offer than just a huge pool of talent speaking English with an American accent.

Research firm Everest Group has forecast the global business process outsourcing (BPO) industry could be worth $220-$280 billion this year, with 90 percent of that in non-voice work - providing more complex skills and services in research and analytics for lawyers, doctors and bankers.

In the Philippines, non-voice work last year accounted for just over a fifth of total BPO revenues of $10.9 billion, but employed a third of the BPO workforce, or around 220,000 people.

"The goal is aggressive but achievable as long as we know one thing: that what got us here won't get us to where we need to be," said Maulik Parekh, president and CEO of outsourcing services provider SPi Global, part of Philippine Long Distance Telephone Co (PLDT) (TEL.PS), the country's most valuable listed company.

"A lot of the focus of the tripartite relationship between the government, educational institutions and the private sector has been about English language skills. We need to start to focus on how we can have a thriving healthcare, publishing, finance, human resource, procurement, IT-related BPO," Parekh said.

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Video: Call centre boom: r.reuters.com/fag66s

GRAPHIC: BPO data: r.reuters.com/jeh96s

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India is expected to continue to dominate in outsourcing; with its first-mover advantage and skills in software development, but the Philippines has its eye on the non-voice market's potential.

"While some providers are leveraging the Philippines for non-voice functions, the scale of work is relatively low. However, tremendous market potential exists if service providers can successfully manage talent-related constraints," Nikhil Rajpal, partner at Everest, wrote in a study.

With China, Latin America and other Asian markets such as Malaysia also making strides in outsourcing, the Philippines must ensure it has a steady supply of professionals and highly-skilled workers to offer the more complex, added-value services to meet clients' changing and increasing demands.

In Manila, Cebu and beyond, demand for outsourcing is growing at around 20 percent a year, but the number of local university graduates is growing at only 3 percent, and only 5-8 percent of them are hire-able, based on government data, highlighting a need to re-engineer the country's educational system.

The Philippines has a 10-year basic education system, which the government is looking to extend by two years, by adding a pre-school kindergarten program, to match its Asian rivals.

"The challenge is to be able to supply the human resources to support the industry both from the entry level to middle managers and executives," said Trade Secretary Gregorio Domingo.

The country turns out 470,000 accountants, lawyers, nurses and engineers each year, but that figure is dwarfed by the 4 million college graduates in India and 2 million in China.

INSOURCING

The Americas remain the biggest clients for the Philippine outsourcing industry, accounting for nearly three-quarters of the domestic BPO market, but Europe, Australia and Japan are increasingly knocking at the door for business.

Some local BPO operators worry about the possible impact of U.S. President Barack Obama's election-year pledge to close tax breaks for companies that move U.S. jobs overseas and offer incentives to firms bringing those jobs back home.

But Jose Cuisia, Manila's ambassador to Washington, has sought to allay those fears, saying a pending bill in the U.S. Congress to end job exports lacks support from the Republicans that dominate the lower house of the Congress.

"I don't think that will pass, even in an election year," Cuisia said at a recent forum with Deputy U.S. Trade Representative Demetrios Marantis, noting that outsourcing backroom functions makes U.S. companies more competitive.

In its 2011 Global Services Location Index, consultancy firm A.T. Kearney ranked the Philippines 9th out of 50 outsourcing destinations, saying: "Politicians are using global services offshoring as an easy scapegoat for current economic woes and high unemployment levels in their home countries, stoking resentment against globalised firms and their host countries."

"Although signs of a slowdown in the growth of global services are evident in this environment, don't expect offshoring to end. In fact, the global services industry's full potential is ready to be tapped."

FORMIDABLE FORCE

The growth in the Philippine outsourcing sector has made it indispensable to the economy and to employment, with local officials citing it as one of the reasons the country escaped recession in the wake of the 2008 global financial crisis.

In 2009, when much of the world was reeling from the crisis, the United States invested $1.4 billion in the Philippine BPO sector, up from $986 million a year earlier, central bank data showed.

"The BPO industry is one that takes advantage of the strength of the Philippines, which is its people," Finance Secretary Cesar Purisima said.

"It's an industry that not only offers direct employment (but) also supports the real estate industry and the service industry, and, together with remittances from Filipinos working abroad and tourism, will form part of the three strong legs that will be the platform for growth of the Philippines in the next years."

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Philippines stop China from double digit Military Spending intended for War in the Disputed Seas

Wen urged China to enhance ability to take victory in 'local wars': South China Sea

Premier Wen Jiabao urge China to enhance the ability of its military to win "local wars, (South China Sea)"  said, as Beijing grows increasingly assertive about its territorial claims in Asia.

Beijing lays claim to large swathes of the West Philippines Sea (South China Sea) which are also claimed by its smaller neighbors, and must also secure supply routes and new sources of raw materials to fuel its booming economy.

Wen's made his comments at the opening of the National People's Congress (NPC), China's parliament, a day after the government announced military spending would top US$100 billion in 2012 — an 11.2-percent increase on last year.

"We will enhance the armed forces' capacity to accomplish a wide range of military tasks, the most important of which is to win local wars under information age conditions," Wen said in his "state of the nation" speech.

China's territorial disputes with countries including Japan, South Korea, the Philippines, Taiwan and Vietnam have grown rockier in recent years and its neighbors have accused it of behaving aggressively.

The Asian giant already has the world's largest armed forces and its defense budget has seen double-digit increases every year for much of the last decade, rattling the United States, which is forging ahead with plans to expand its own military power in Asia.

Analysts say actual defense spending is probably double the published figure, with funding for modernizing the country's military not included in the budget.

China has made advances in satellite technology and cyber warfare in recent years and invested in advanced weaponry including its first aircraft carrier, a 300-meter-long (990-foot) former Soviet naval vessel that had its first sea trial in August.

But it remains technologically far behind the United States. Wen said Beijing aimed to "enhance our capacity for making innovations in defense-related science and technology and in weapons and equipment development."

"We will vigorously carry out military training under information-age conditions," he told the 3,000 delegates gathered in Beijing's Great Hall of the People.

Philippines asks China to cut military spending for WAR in the disputed Sea

Foreign Secretary Albert del Rosario urged the Chinese government yesterday not to spend a huge part of its budget for military expansion that could lead to further intrusions into the disputed Spratly Islands of the South China Sea (West Philippine Sea to the government). He said Beijing should instead use its vast financial resources for peaceful purposes.

The Philippine government is impressed with the fast economic growth of China that is likewise benefiting the Philippine economy, he said.

"With this growth, China is also increasing its defense spending, which is its sovereign right to do so," del Rosario said.

But he also said the Philippines was "relying on China to fully utilize its vast global influence in the most responsible way, especially in terms of promoting peace, prosperity and stability in the region."

Beijing announced over the weekend that it would increase its defense budget by 11.2 percent after the US also bared plans to increase budget allocations for military spending by 2013 as part of its comprehensive plans to increase its military presence in the Southeast Asia amid increasing tensions in the disputed islands in the region.

Li Zhaoxing, spokesman of the National People's Congress, said Beijing would increase its military spending to 670-billion yuan ($106.4 billion) in 2012 which is 68-billion yuan more than its 2011 spending.

The US defense budget for the 2013 fiscal year is $613.9 billion, including $525.4 billion in base spending.

The Philippines has been protesting increasing military presence and activities in the West Philippines Sea (South China Sea) and proposed the adoption of a Zone of Peace and Freedom before the Association of Southeast Asian Nations (ASEAN).

ASEAN foreign ministers are now drafting a legally binding Code of Conduct in the South China Sea to ease tensions in the disputed Spratly Islands believed to be sitting on rich natural gas, oil and marine resources.

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