“Let’s talk.” Local officials in the Philippines get serious about attracting investment

Michael Alan Hamlin

Posted on July 11, 2012

For some local government unit (LGUs) officials, constituency service means putting up a diploma mill and providing a free education to individuals who emerge from these institutions as unemployable as they entered. They frequently wind up working in government.

Or schools.

Others are much more thoughtful, as I learned during two recent meetings organized by the Business Processing Association of the Philippines (BPAP). In the first, a CEO Briefing for IT-BPO executives co-organized with Outsource2Philippines (O2P), a panel including LGU officials discussed the cost of doing business in the Philippines and how local governments can help investors keep operating costs in check.

The second meeting was BPAP’s monthly general membership assembly meeting, where I moderated a panel composed of some of those same LGU officials. This panel, with the theme, “Next Wave Cities,” was devoted to efforts by LCUs to attract investors outside tier-one and tier-two IT-BPO hubs. A BPAP-O2P survey conducted last month identified Makati, Global City, and Cebu as the most popular IT-BPO hubs in the country among industry executives.

Next Wave Cities (NWC)—a term coined by BPAP and the former Commission on Information and Communications Technology—are urbanizing areas that have many of the attributes required to attract IT-BPO investors and existing services providers who are expanding operations. Those attributes include at least credible educational infrastructure, a large labor pool, commercial developments that support IT-BPO operations, telecom infrastructure, and public transport.

The idea behind the NWCs is primarily new sources of talent. As already hot competition for knowledge employees in tier-one and tier-two IT-BPO hubs increases, investors can expand to NWCs where largely untapped labor pools are available. But with the cost of doing business on the increase in popular IT-BPO hubs, NWCs potentially offer another dimension of opportunity to investors: low costs of operation.

At least that was the message two ambitious governors and a determined mayor sought to convey during the BPAP monthly membership meeting. The panel was manned by Governors Juanito Victor C. Remulla of Cavite and Maria Imelda R. Marcos of Ilocos Norte and Mayor Lorna C. Silverio of San Rafael, Bulacan. They were joined by Gemma Cruz-Araneta, vice president of the Manila Historical and Heritage Commission, representing Manila.

All of these officials argued convincingly that they have the labor pools to support IT-BPO services providers. Mr. Remulla said that his province already supplies 30% of knowledge workers in tier-one IT-BPO hubs, suggesting a compelling value proposition for services providers inclined to locate in Cavite rather than subject their employers to the tortuous commute to Metro Manila’s business districts.

Ms. Marcos told the standing-room only audience, “we have the people; we need the jobs,” and Ms. Cruz-Araneta pointed to Manila’s three university belts. “No one has more schools or a larger labor pool,” she said. Ms. Silverio was likewise convincing.

Perhaps surprisingly—given the industry’s concern with labor supply—the BPAP members in attendance, judging from their questions, didn’t need convincing that the NWCs offer attractive labor pools. Instead, they were concerned with two things. First, what are these LGU executives offering investors in terms of other incentives; and, second, how level and transparent is the playing ground? Both concerns dramatically impact costs.

Responding to a question from the floor on LGU incentives, Ms. Marcos said, “Let’s talk. Tell me what you need.” The most convincing response, however, came from Ms. Silverio. She turned to an investor incentives page in a marketing brochure for San Rafael, and began reading what seemed like a stunningly lengthy list of incentives, concluding, “I’m not after your money. I’m after jobs for my constituents.”

Officials of the Department of Finance as well as some LGU officials complain that incentives provided by the Philippines Export Zone Authority shortchange both national and local governments. These officials conveniently overlook the fact that these investments wouldn’t exist if it weren’t in significant part for incentives. And indirect employment and economic activity generates huge local incomes and personal income tax revenues.

Ms. Silverio, though, understands all that.

I was also impressed by Mr. Remulla’s response to a question regarding LGU support, good governance, and transparency. The governor said his government is working towards ISO 9001:2008 certification to provide a level playing field for investors, and insure good governance and transparency in the delivery of LGU services to all constituents as well as investors. That effort can remove hidden costs to doing business, as well as sudden shifts in investment rules.

These officials all did a convincing job, in my view and from feedback, in the view of IT-BPO executives in attendance. LGU officials are on the frontlines of national development. Integrity and good governance begin with them. So it’s important that they mean what they say.

(Michael Alan Hamlin is the managing director of TeamAsia and a Manila-based author and commentator. His latest book is High Visibility: Transforming Your Personal and Professional Brand. Write him at mahamlin@teamasia.com and follow him on TwitterFacebook and LinkedIn. Copyright © 2012 Michael Alan Hamlin. All Rights Reserved.)

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