BPO sector on strong peso: No impact yet

Katherine Visconti
A strong peso could send companies to cheaper outsourcing destinations, like India, warn business leaders in the Philippines
 

 

MANILA, Philippines – In a global market where price is a key factor, a stronger peso may hurt the ability of Philippine call centers and other business process outsourcing (BPO) companies to compete with peers abroad, explained Benedict Hernandez, President of the Business Processing Association Philippines (BPAP).

But so far, the local outsourcing sector feels no impact yet from the strengthening of the peso against the US dollar, Hernandez told reporters on the sidelines of the 2012 International Contact Center Conference and Expo (ICCCE) on Tuesday, September 18.

“We continue to watch the currency and its impact. Quite frankly, we haven’t seen yet any impact on market demand for the Philippines. If the impact were there, we would not be at a 19% growth rate this year.”

Economists earlier warned that the higher peso would make investing in the Philippines more expensive for foreign businesses. For example, salaries in dollar terms go up when the peso appreciates.

However, they expressed confidence that monetary authorities won’t allow the local currency to rise to “unstable” levels.

Hernandez said, “we don’t want the peso to further strengthen to maintain cost advantage. We don’t want our cost to be different from other markets like India.”

Ideal rate to remain competitive

Hernandez said it is ideal for the currency to trade at P42 to $1 and stay at that level. “Our belief is that we want to see it at the 42 level. Forty-two is like our magic number, just keep it at 42,” he said.



Sticking to that rate is crucial so that the country can compete with India, explained Bong Borja, President and Philippine Country Head of Expert Global Solutions and director of the Contact Center Association of the Philippines (CCAP).

The Philippines has overtaken India as the top voice outsourcing destination and has earned a reputation for being the call center capital of the world.

India and the Philippines both have large English-speaking populations given their colonial pasts. The majority of demand worldwide is for English-speaking call center agents. According to CCAP, American English accounts for about 75% of the languages spoken by agents around the globe.

The worry is that if the rupee becomes much weaker against the dollar, it will be more profitable for countries tap India to meet their business needs.

Borja said, “a few years ago we were almost at parity with the rupee. Now we’ve gone to 41 and they’ve gone over 50. But can we control the rupee? of course not.”

As of 3:30 pm on September 18, the Indian rupee stood at 54.02 per dollar, while the Philippine peso stood at 41.75 per dollar.

Gov’t intervention

Borja said the strong peso poses a threat not just to the BPO sector, but the other export-oriented sectors, too.
 
“A lot of the export-oriented are [small medium enterprises]. I don’t know if you realize that the small manufacturers of furniture and handicrafts, they are bleeding heavily,” said Borja.
 
“This is hopefully one area where the government can work with us,” he said.

Federico Macaranas of the Asian Institute of Management, said stability in the foreign exchange rate is a “pre-condition” for contact center companies. “We’ve heard that if the peso would turn 38:$1, it will wipe out a few of you,” he told participants of the ICCCE.

He is confident though that monetary authorities will not let the peso rise to that level. “Stability is well-guarded by monetary authorities. It’s for the interest not only of your industry but the families of OFWs as well.”

Winston Padojinog of the University of Asia and the Pacific agreed. “There are a lot of compelling reasons why the BSP (Bangko Sentral ng Pilipinas) has to stabilize the currency. There are 600,000 BPO workers, 10 million OFWs who will be affected. It’s a big sector to ignore.” – Rappler.com