Michael Alan Hamlin

Posted on October 13, 2007

The Business Processing Association of the Philippines (BPA/P) and Outsource2Philippines (O2P) recently completed the latest in a series of periodic surveys they jointly undertake. Complete results of the surveys will be announced in the next few days, but I’m providing a preview of those findings for questions focusing on country image and investment incentives.

Before I get to those results, here’s an overview of the respondents. There were 72 responses, more than double the responses in the previous survey, and representing a response rate of approximately 21 percent. That’s a very respectable response rate for the relatively small universe that comprises the business process outsourcing (BPO) industry. All BPO sectors were represented.

The software sector was most predominately represented, with 58 percent of respondents. Next was contact centers with 35 percent. Other respondents included BPOs, medical and legal services, animation, and engineering services. About half of the respondents’ firms are relatively small, with less than 100 employees. Another 28 percent employ 101-500 employees. And 23% employ 501 to over 10,000.

In my place marketing and branding persona, the results that resonate for me have to do with perception of the Philippines. When asked, “How would you rate the image of the Philippines to investors?” Fifty percent indicated positive. Another three percent responded very positive, and 29 percent said the Philippines’ image to investors is neutral. Only 18 percent said the Philippines’ image is negative – and no one responded that the Philippines’ image is very negative.

Country image is an important issue for respondents. When asked, “Please indicate whether positive perceptions of the Philippines facilitates client acquisition,” 92 percent of respondents said a positive country image is at least something of an issue. And 66 percent said image is an issue, a significant issue, or a very significant issue. So while it appears that the Philippines’ image has improved within the BPO industry, it is important to extend and enhance positive perceptions.

Investment incentives have been a contentious issue, with investors, the Department of Trade & Industry (DTI) and the Department of Finance (DOF) arguing over their relative merits. DOF-sponsored legislation has been filed in both the House and the Senate that would dramatically realign investment incentives, including the removal of income tax holidays for Board of Investments- and Philippine Export Zone Authority-certified investors.

When respondents to the BPA/P-O2P survey were asked, “Please indicate the impact of investment incentives on investment decisions,” 94 percent indicated that investment incentives have some to very significant impact. And 80 percent indicated that investment incentives have relative, significant, or very significant impact on investment decisions. These results clearly indicate that any tinkering to be done with investment incentives should be carefully contemplated, let alone major realignment of incentives.

Then there’s the matter of the competitiveness of investment incentives currently offered by the Philippines. When respondents were asked, “Please indicate whether investment incentives provided by the Philippines are competitive,” only 14 percent indicated current incentives are uncompetitive. Another 77 percent of investors, however, indicated incentives are somewhat competitive or competitive. These results suggest that the Philippines’ investment incentives as currently structured, in the view of investors, are reasonably competitive, but that they are not compellingly so. Only eight percent of respondents said incentives are very competitive or highly competitive.

Yet when respondents were asked, “Please indicate if you support efforts to rationalize investment incentives,” 50 percent of respondents indicated they are neutral on this issue. Sixteen percent indicated they are absolutely not supportive or not supportive. Only 19 percent of respondents indicated they are somewhat supportive or very supportive.

What accounts for the large number of neutral responses? Unfortunately, the survey doesn’t reveal the answer to that question. But if one were to speculate, or offer an opinion in an opinion column, it’s reasonable to suggest that the high number of neutral responses indicates that respondents are not familiar with DOF-sponsored moves to realign incentives.

Why aren’t they familiar with DOF objectives? Probably because the industry hasn’t been consulted. Instead, DOF went to the International Finance Corporation (IFC), a unit of the World Bank, for an opinion on investment incentives. While the IFC is composed of learned consultants and government bankers, it is not composed of investors who make real-life investments. In fact, the IFC’s job is to finance projects that private-sector investors feel are unsafe.

It may be that investment incentives should be rationalized. Or maybe not. But no one will know for sure until investors are asked.

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