• M74 Group

Why the Philippines?

By Kneron Mark Dulay

Willy's Rock in Boracay Island. Image provided by the author.

At a time when we’re being tormented by a pandemic and a global recession, expanding your business abroad is probably the last thing on your mind. However, in times where we (or, in this case, the world) hit rock bottom, I believe that there is no way but up. For businesses, diversification via internationalization represents that “way up,” because it allows them to reduce risk in bad times and generate growth in good times.


The chance to change for the better, to adapt and evolve, isn’t something that we should take for granted. We must collectively seize such moments and become more resilient—just as we Filipinos have done throughout our history.


So, when someone asks me if the Philippines (PH) is a “good” country to invest in, all I have to say is: “If you’re looking for diversity and resilience, then yes, the PH is definitely a ‘good’ country to invest in!”


Why Manufacture in the Philippines?

COVID-19 has disrupted supply chains across China, and undermined the world’s confidence in Beijing. For these reasons, many foreign firms now want to (partially or fully) move their production capacity out of China. As Albert Einstein famously said, “In the midst of every crisis, lies great opportunity.” Filipino lawmakers across party lines seem to agree.


In the words of one PH Representative, Bernadette Herrera, in May, “The government should take a more aggressive approach to convince firms seeking to move out of China that the Philippines is a good alternative for them, given our unique competitive advantage, highly-skilled manpower, and improved ease of doing business. This [crisis] is a golden opportunity for the Philippines to up its game in securing more foreign direct investment projects to shore up the economy [which has been] battered by quarantine.” These sentiments have been echoed by a variety of Filipino political and industry leaders in the weeks and months since.


Manufacturing equals almost a quarter of the PH’s gross domestic product (GDP), and was on the rise until recently. PH factories are on track to rebound soon, though, as more and more companies decide to relocate from China (and elsewhere) to here.


Why Import From or Export to the Philippines?

Part of what makes the Philippines such a “good” place to invest in is the fact that it is evolving. Prior to 2000, the PH was known mainly as an agricultural country, due to our focus on farming and fishing, and lack of industrialization. However, as our incomes rose over the past two decades, we cultivated demands for new goods and services, some of which we import and others which we have developed the infrastructure and skills to produce ourselves. Although the emphasis of our economy has shifted to higher-tech sectors in recent years, our agricultural trade remains as strong as ever. For instance, in 2018, the PH was the second-largest exporter of coconuts and pineapples in the world (after Indonesia and Costa Rica, respectively).


Since 2000, electronics have become both our top export and top import. According to the Philippine Statistics Authority, since 2016, electronics amount to 51.2% of our annual export revenue. This is thanks to investments from foreign technology companies, like Texas Instruments that opened factories in Baguio and Pampanga. Meanwhile, electronics comprise 26.5% of our total yearly imports. The rising demand for electronics in the PH is fueled by our country’s ongoing digitization, which has led to the steady rise of the PH’s business process outsourcing (BPO) industry.


Why Outsource to the Philippines?

Repeated surveys indicate that BPO customers from the United States (US)—which is the largest national user of BPO services—interact better with Filipino agents than with Indian agents, due to their preference for Filipinos’ American English over Indians’ British English. This small difference has helped make the PH a leading hub for call centers since 2015, which is encouraging to US firms weighing whether to outsource their telecom-related processes here.


Our BPO industry experienced its first boom during the presidency of Gloria Macapagal Arroyo (2001-2010), which was an era of GDP growth and modernization for the PH. Since then, BPO has linearly developed into one of our country’s top industries. As a result, the PH is now often favorably compared to the global leader in BPO: India.


For all customer service and front-end business needs, the PH is a surefire choice. The high-quality service is reassuring. The around-the-clock availability is reliable. The labor costs are comparatively cheap. All of these factors make the PH a perfect pick for foreign firms that are looking to outsource their business processes.


A large number of Filipino workers can be found all over the world. These individuals are collectively referred to as Overseas Filipino Workers (OFWs). Many OFWs eventually return home—bringing with them skills and expertise in their respective fields, as well as an understanding of other languages and cultures. This influx of qualified OFWs is one of the reasons why the PH has excelled in BPO.


Why the Philippines?

Well, it’s simple: this small, developing, and resource-rich country is a “jack-of-all-trades.” Our literacy rate is 95%, our workers have proven themselves to be versatile, and the overall costs of doing business here are quite affordable. What more can you ask for?


The biggest obstacle in the Philippines, though, is the incomplete integration of technology into its industries and society. Fortunately, it is widely predicted that, by 2021, a huge majority of the PH workforce will be fully transitioned to the digital world. Before the pandemic, only the most “tech savvy” of Filipinos would use technology on a regular basis. Now, this is quickly changing, as the “remote lifestyle” becomes the new normal for most Filipinos.


The “Build, Build, Build” (BBB) Plan of President Rodrigo Duterte must also be taken into consideration. Through this ambitious (albeit controversial) development initiative, the PH government has invested 5% of its GDP in the construction and rehabilitation of 9,845 kilometers of roads, 2,709 bridges, 243 seaports, and 64 airports over a 3.5-year period. Many more projects of varying sizes are ongoing or have been proposed. “The Duterte administration will continue to spend heavily on infrastructure,” Finance Assistant Secretary Antonio Lambino said last November, “As it is the kind of state investment with the highest multiplier effects on the economy, and provides the best returns to our people.” Foreign investors would likely agree, as the deliverables of BBB will no doubt improve the logistics of doing business in the PH.


With its many natural resources, resilient and adaptable workforce, long-awaited digitalization, and heavy investment in infrastructure, the future of the Philippines is certainly bright. All this country needs now is for more foreign firms to invest in and unlock our country’s potential, for the benefit of everyone.


Kneron Mark Dulay is an intern at M74 and a Computer Science student at the University of the Philippines. He will be graduating this year. Kneron is from Iloilo City, Western Visayas.


This article is the first in the Why? Series of introductions to M74’s target markets.


The views expressed above are those of the author and do not reflect the official position of the M74 Group, which remains neutral on all matters. Publishers assume no liability for content.

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