Gartner confirms the 2008-09 financial crisis has triggered widespread adaptation of BPO and shared services by European countries and corporations. Presentation for the Shared Services and Outsourcing Exchange in Europe.

1. The Philippines:
The Location of Choice for IT-BPO and Shared Services
6th Shared Services and Outsourcing Exchange
BrainWeave Session
10:00 a.m.-11:00 a.m., 17 September 2012
Prague, Czech Republic
Alejandro P. Melchor III
Deputy Executive Director for ICT Industry Development
Department of Science & Technology
Information and Communications Technology Office

2. Outline
• Philippine economic scorecard
• Policy directions
• Philippine Advantage
• Government Support

3. PHILIPPINES AT A GLANCE
Land Area: 300.000 km2
Population: 94.2 million
41% working group from ages 20-44
16% working group from ages 45-64
Capital City: Metro Manila
Political Structure: Democratic
(Presidential System)
National Language: Filipino,
Official Language: English
Religion: 93% Christian
Believers of which 83% are
Catholic
2011 GDP : US$224.8 Billion
Sources: 2011 Per Capita Income: $2,223
Bangko Sentral ng Pilippinas
National Statistical Coordination Board and
1
National Economic and Development Authority

4. PHILIPPINE ECONOMIC SCORECARD
GNP/GDP Quarterly Growth
Highlights
(2010-2012)
12
GNP GDP growth of 7.6% in
10 GDP 2010, highest in 31 years
8 7.3
BOP record surplus of
6.9
6.1 6.3 US$10.2B in 2011
6 5.6
6.3 5.1
4.9 4.5 5.1 Inflation at its lowest in 21
4 3.6
years
2.2 4.0
3.5
Stable and low interest
3.2
2 2.4
rate environment
0
Gross international
reserves (GIR) peaked at
$75.3 million in 2011
Sources:
Bangko Sentral ng Pilippinas
National Statistical Coordination Board and
National Economic and Development Authority

5. PHILIPPINE ECONOMIC SCORECARD
Consumption-driven economy + Nearly $80M Gross Int’l Reserves
100%
80%
60%
40%
20%
0%
2003 2004 2005 2006 2007 2008 2009
-20%
Pvt. Consumption Govt. Consumption Investments Net Exports
= Resistance to external shocks.
Positive GDP growth rate for 52
consecutive quarters since 1999
+ Prudent fiscal management
+ Sound economic policy

6. HSBC, The World in 2050:
• “Attention will increasingly turn to the
‘new emergers’ as the world economy
undergoes a seismic shift…”
• “We highlight the following:
The striking rise of the Philippines,
which is set to become the world’s
16th largest economy, up 27 places
from today.”
• “Who will deliver the
fastest growth enroute
to 2050?”
https://www.research.hsbc.com/midas
/Res/RDV?ao=20&key=hCmm8WiQC
0&n=317638.PDF

7. Ruchir Sharma, Morgan Stanley
• TIPs, poised to upstage BRICs
• Turkey, Indonesia, Philippines
• “Aquino is delegating power to
competent technocrats…”
World Economic Forum:
• Philippines leapfrogged 20 places in
global competitiveness in the 2 years of
the Aquino Administration.
Jim O’Neill, Goldman
Sachs:
• Philippines one of the
“Next 11”—the next
BRICs.

8. 2012 economic performance lives up to billing
#2 in Asia, 1Q 2012
#3 in Asia, 2Q 2012

9. POLICY DIRECTIONS
• A more responsive government and a business-friendly environment
• Continued fiscal consolidation
• Increased infrastructure spending
• Clear agenda for competitiveness
• Broad-based expansion led by services
• Prioritizes creation of jobs that empower the people
• ASEAN masterplan for ICT development
http://www.aseansec.org/22073.htm
• National development plan for rapid economic growth
• Inclusive agenda for national ICT development
http://devplan.neda.gov.ph/index.php
ilearn.gov.ph/PhilippineDigitalStrategy2011-2016.pdf

10. President Benigno S. Aquino III supports the IT-BPO Industry
“The BPO sector has successfully showcased
the skills of Filipinos to the world.”
“By the time I step down in 2016, we are looking at
revenues that will have more than doubled to $25 billion
and 4.5 million jobs — 1.3 million directly as a result of
the BPO sector and 3.2 million indirect jobs.”

11. Philippine IT-BPO Industry:
The country’s premier sunrise industry
Total Employees (000s) Annual Revenue (US$B)
700 $12.0
643 $11.0
600 $10.0
525 $8.9
500
442 $8.0
$7.1
400 372
$6.1
$6.0
300 $4.9
300
236
$4.0 $3.3
200 163
$2.2
101
$2.0 $1.3
100
0 $0.0
2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011
Source: Business Processing Association of the Philippines (BPAP)

12. The Philippine talent value proposition:
large pool of young, English-speaking talent
Number of college degree graduates 2010
 Abundant labor force of 38 million
Medical and natural sciences, allied 119,378
 Over 450,000 college graduates per year
fields
 Large pool of accounting and business
Business, accounting, and related 117,339 graduates
fields
 English proficiency
Social and behavioral sciences, 68,811
 Affinity with Western culture
education
 Customer service orientation
Engineering and architecture 50,734
 Highly trainable
IT-related and mathematics 47,928
 Cost effective
Fine arts, masscom, humanities 12,269  High level of commitment and loyalty
TOTAL Tertiary level 481,862
Pop Labor force Unemp rate Literacy
World 7,021M 3,264M 9.1% 83.7%
India 1,205M 488M 9.8% 61.0%
China 1,343M 796M
Suitability rates are empirically based on a total of >80 interviews 6.5% 92.2%
with HR professionals working in each country
Brazil 206M 105M 6.0% 88.6%
Source: CHED 2012; CIA World Factbook 2012; Philippines 92M 41M 7.4% 92.6%
NSO 2012 12

13. Philippines has abundant human and natural resources—
world’s 5th richest store of natural resources

14. Philippines is currently among the
most-competitive destinations
for IT-BPO services
MARKET AVERAGES
Direct operating cost1 per FTE for English voice work ENGLISH-LANGUAGE VOICE EXAMPLE
2010; US$ ’000 per annum per FTE
Reflective of market averages. Range
70-72
could vary depending upon
 Tier-1 vs. Tier-2 cities
 Suppliers vs. captives
 Scaled operations vs. mid-size
operations
29-32
24-26
19-20
16-17 15-16
14-15
US Tier-2 Mexico City Krakow Kuala Lumpur Cairo Metro Manila Delhi/NCR
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009 to Sept.
30, 2010
Source: Everest analysis

15. Likewise, The Philippines is among the
lowest cost locations for non-voice BPO
work
Direct operating cost1 per FTE for F&A transactional work
2010; US$ ’000s a year per FTE
MARKET AVERAGES
FAO EXAMPLE
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept.
30, 2010
Source: Everest analysis
Copyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.

16. …and for IT Services
Direct operating cost1 per FTE for IT Applications Development and Maintenance (ADM)
2010; US$ ‘000s per annum per FTE
MARKET AVERAGES
ADM EXAMPLE
1 Ongoing costs only; excludes margins/mark-ups, centralized corporate overheads, initial investment, set-up costs, and travel
costs
Note: Exchange rates for local currencies with respect to the U.S. dollar have been averaged for 12 months from Oct. 1, 2009, to Sept.
30, 2010
Source: Everest analysis
Copyright ©2011: BPAP, CICT, Everest Global, O2P. All rights reserved.

17. RELIABLE AND REDUNDANT CONNECTIVITY
TGN-IA
Transmission Backbone Networks
BALLESTEROS
 PLDT Digital Fiber Optic Network AAG
LAOAG
VIGAN
TUGUEGARAO
(DFON)
CAUAYAN
 Globe Telecom Fiber Optic SFLU
BAGUIO SOLANO ASE
DAGUPAN URDANETA
Backbone Network (FOBN) TARLAC CABANATUAN
CANERO
EAC
 TelicPhil (BayanTel) Nationwide SeaMeWe-3
SUBIC SAMPALOC
ERMITA
AURORA
MAKATI
Digital Transmission Network
BACOOR
APCN2 NASUGB
U NAGA
(NDTN) BATANGAS PAGBILAO
MAMBURAO
PILI
LEGASPI
C2C DONSOL
MASBATE
SORSOGON
SAN JOSE CALBAYOG
Cable Landing Stations ROXAS
TACLOBAN
ORMOC
SJC ILOILO
CADIZ
BANATE
SAN REMIGIO
TALISAY LILOAN
 Ballesteros, Cagayan (June 2013) BACOLOD
LAHUG
TALISAY
MAASIN
DUERO
MARIBOJ
 Tanza, Cavite OC
DAUIN
TAGBILARAN
CABADBARAN
 Nasugbu, Batangas CDO
MANTICAO
BUTUAN
ILIGAN
 Bauang, La Union PAGADIAN
COTABATO
DAVAO
 Daet, Camarines Norte ZAMBOA
NGA
GEN. SANTOS

18. World class, IT-BPO designed, infrastructure
Lowest rental rates in the region; dedicated IT parks right in the center of business districts
METRO MANILA
Eastwood City Cyberpark Ortigas Center,
Mandaluyong City/Pasig City
Quezon City
Bonifacio Global
UP-Ayala Technohub, City, Taguig City
Quezon City
McKinley Hill
Taguig City
Makati City Northgate
Cyberzone
Muntinlupa City

19. COMPETITIVE INVESTMENT INCENTIVES
 4 to 8 years Income Tax Holiday (ITH)
 Special 5% tax on Gross Income
 Other tax and duties exemptions*
 Domestic sales allowance of up to
30% of total sales
 Additional deduction on total
manpower training cost
1 Exemption from duties and taxes on imported capital equipment, spare parts, supplies, and raw materials
2 Exemption from export taxes, wharfage dues, imposts and fees
3 Exemption from Value Added Tax (VAT) on allowable local purchases such as telecom, power, and water bills
4 Additional deduction of 50% of total manpower training cost under the special 5% gross income tax regimec

20. GOVERNMENT SUPPORT
ICT & BPO Industry Development Programs
iPPP PROGRAMS GOALS PROJECTS
Stepping-Up the ICT: a $50B industry by 1 – Research & Road
Value Chain 2016: Mapping
• IT-BPO $25-27B
• All other ICT: $23-25B
2 – Training & Education
i-TalentDev.PH Global leadership in
multiple high growth 3 – Organizational
segments Development &
Next Wave Cities/ Capability Building
Smarter Countryside Countryside development 4 – Advocacy and
through ICT & BPO
Marketing
i-Creative.PH Increase size & 5 – IT-preneurship &
employability of talent pool Technology Business
Indicators
Develop knowledge 6 – Policy Framework,
ICT Marketing & workers with
Research st Century Skills
Business Environment
21 Investment Incentives

21. Stepping Up the Value Chain Program
We are #1 in call
centers and we Voice BPO
intend to become
market leader in
UK & Australia Healthcare Information
Management Outsourcing
We intend to Finance & Accounting
Outsourcing
attain world
leadership in 4 more HR Outsourcing
fast growing services
Creative Process Outsourcing ICT-enabled Creative
Industry Development
We intend to IT Outsourcing
double our market
Engineering Services
share in 3 other fast Philippine Technological
Outsourcing Council
growing services
Multilingual BPO

22. Development of World Class Talent
Knowledge Workers
with 21st Century
Skills for the Global
Knowledge
Industry specific Government
Economy
curriculum support to training
development, and development
assessments & of ICT-industry
certification workers
World Educational reforms
for mutual
450,000 college
graduates annually Class recognition of
qualifications and
Talent degrees

23. Next Wave Cities Program provides access to
talent throughout the Philippines

24. An Invitation
Discover
the
Philippine
Advantage!
For more details, visit:
www.icto.dost.gov.ph
www.dti.gov.ph
www.peza.gov.ph http://www.bpap.org/publications/research/investorprimer2012
Department of Science and Technology-
Information and Communications Technology Office