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Threats to the Rapid Rise of the Philippine BPO Industry

Currently the fastest rising and best performing industry in the Philippines, the BPO industry, despite all its success and achievements, is not without trouble. While experts still see continuous growth, there are local and international threats that will surely have great impact.

New Taxation Scheme Takes Tax Incentive for BPO Companies

The recently approved tax scheme will have a negative impact on the IT-BPO industry. While it’s good news for workers, it’s doesn’t bode well for BPO companies.

To fill in the tax void the exemption will make, the government is planning to rescind the special VAT exemption for BPO companies. Currently, BPO companies are enjoying various incentives, among them the exemption of certain sales and imports from the value added tax. The tax reform is set to take that incentive away from BPO companies.

This is concerning, as the tax exemption is one of the attraction points for BPO companies to invest in the Philippines.

The BPO side of the tax exemption is without resistance. PEZA Chairwoman Charito Plaza is asking for the reconsideration of the decision. She argues that there is more loss at stake when the Philippines lose investors due to the new tax policy. Losses in investment and employment opportunities looms as unrest and uncertainty clouds the BPO industry.

The government has yet to make a decision regarding this concern as of the writing of this article.  

Automation=Future of the Global BPO Industry?

BPO companies all over the world are leaning towards automation of processes. An upcoming technology called Robotic Process Automation (RPA), which carries out business processes -especially the menial and repetitive ones, eliminates the need for human workers for the simpler BPO tasks.

The RPA, while still at its early stages, is an attractive investment for BPO companies. Its operating costs are about 1/3 of the Full Time Equivalent (FTE) of a worker in India or the Philippines.

Even though the current RPA is still immature, there are already cases where its value was seen.

The current RPA will impact about 20%-40% of the process in the BPO industry, but with the pace technology develops in this age, the tipping point for the RPA to become the core of the BPO industry will soon come.

As with the tax exemption threat, the local industry is prepared.

Information Technology and Business Process Association of the Philippines (IBPAP) Chairman acknowledges the automation threat and is now working on upgrading the skills of Filipino BPO workers to tackle on more complex jobs. Jobs that are unlikely to be affected by the automation.

The coming years will be crucial in determining how the industry will fare. It will be interesting how the Philippine BPO Industry will deal with not only threats but uncertainty that surrounds the high- performing industry’s future.

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