The Philippine Economic Zone Authority (PEZA) is looking at allyshoring or friendshoring as a stop gap measure while the digital hubs are still in the pipeline to boost the country’s competitiveness as destination for the IT business process management (ITBPM) services.
PEZA Director Genreal Tereso O. Panga
PEZA Director General Tereso O. Panga cited this strategy following the decline in the Philippines global ranking in the 2023 Global Services Location Index (GSLI) to 12th spot from 9th spot in the last index in 2021. The GSLI rates the attractiveness of a country as an offshore location of business services. The study covers 78 countries. Despite the decline by three rungs, the Philippines continued to be the BPO engine in Asia.
“We are banking on the improved perception of the Philippines as an investment destination of companies from the Western Hemisphere and attract them to re-engage with the Philippines,” said Panga.
According to Panga, allyshoring has been working for the Philippines not just for BPOs but even in manufacturing, especially when it concerns the American export producers which remained PEZA’s second biggest foreign investors next to Japan.
“This is further bolstered by the increasing trade and investments between the Philippines and the US and where the semiconductor-electronics products produced in the ecozones continue to be our country's biggest source of export revenues. In 2022, total electronics exports amounted to $49.1 billion, and where the US was reported to be the top destination for Philippine exports,” he noted.
Panga attributed the decline in the country’s GSLI ranking largely to the nearshoring or bringing back of BPO operations to home countries or those target markets with specific language requirement.
“The lowering of the Philippines GSLI ranking is acknowledged due to nearshoring by some US businesses. However, PEZA believes that this is temporary given that there is a renewal and strengthening of ties with the United States under our current administration,” he said.
For instance, he noted that most of the companies that have transferred to Mexico and Columbia are basically targeting the Spanish speaking market in the United States which is not really the Philippines’ core target.
“It is a shift. Instead, we are looking at the IBPAP to target English speaking countries like Australia and New Zealand as the new markets for their industry given the country's recent accession into the Regional Comprehensive Economic Partnership. This will complement our traditional market strengths in the US and EU for services exports,” he explained.
Overall, he believes that the Philippines still remain as a prime destination for the traditional IT-BPM services where the country ranked in the top 10 among choice destination locations. “This is in part due to the high English language proficiency of our workforce as well as the high quality of our IT Engineers,” he said.
The IT companies registered with PEZA directly employ around 1 million Filipinos. Moreover, the total IT-BPO industry's exports in 2022 valued at $32.5 billion and employs 1.2 million.