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The Philippines is plagued by economic and political woes. But a bright spot remains: hi-tech
By Deidre Sheehan/MANILA
Issue cover-dated June 28, 2001
Far Eastern Economic Review
WHEN JONATHAN CHURCH arrived in Manila last year, he noticed something familiar about the city. Amid all the chaos, noise and dirt of the Philippines' capital, there were constant reminders of home: On almost every block, Church spotted a McDonald's, a Dunkin' Donuts, a Kenny Rogers Roasters outlet. "It made me feel more comfortable than if I had been in KL, Bangkok, or Bangalore," says Church, the head of operations for United States software developer Enterworks.
Having a McDonald's nearby wasn't the only reason Enterworks chose Manila last August to set up its $2 million Asian hub for developing e-marketplace software, but it was one of them.
Although Enterworks had been attracted mainly by cost savings of up to 60% on skilled, English-speaking workers, other countries have that attraction, too. India, in particular, is far stronger in software development.
But the Philippines has something India doesn't. It's a former U.S. colony whose people speak English with an American accent and share many things culturally with the world's biggest economy.
This ease of communication and shared culture is important for Enterworks, which expects its Filipino software developers to work closely with its team in Ashburn, Virginia. "For the folks back home, it feels easier to become part of the development team," Church says.
Enterworks is not alone. In recent years a number of U.S. companies have chosen to locate back-room operations, contact centres, or other IT-enabled services to the Philippines. America Online runs an e-mail-based help centre here, book-store chain Barnes & Noble has an electronic-publishing operation in Manila, and Caltex chose the Philippines to base a finance-and-accounting support team.
Most importantly, the recent high-profile kidnappings by Muslim rebels and the street protests that toppled President Joseph Estrada in January have not tarnished the country's attraction for U.S. companies.
As long as the workers can get to the office and the phone lines work, "the country-risk issue, like the Abu Sayyaf, doesn't concern them too much," says Robert Blume, who handles queries from U.S. investors at the Philippine government's Board of Investment.
That's just as well. With most foreign investors deeming the country too hot to handle, this small sector is one of the few growth areas the Philippine economy has. Hi-tech exports don't earn much hard currency for the Philippines or tap many local suppliers for products, but they create jobs--a vital fact, given the 13.3% unemployment rate.
There's no doubt that India is still the giant in hi-tech services, particularly software development, the most lucrative field. India's National Association of Software and Service Companies says the country exported software worth $6.2 billion in the year ended March 31, 2001, with hi-tech services accounting for $890 million.
In contrast, the sector is so small in the Philippines that its revenues aren't even broken out from total export or investment figures. But just attracting a chunk of the 70,000 contact centres in the U.S., which are used for everything from making airline reservations to checking bank balances, would certainly help the employment environment.
SKILLED WORKFORCE
Interest in contact centres in the Philippines is currently hotter than interest in software development, according to Blume and others in the industry.
It's not surprising. Filipino employees with college degrees are prepared to work for one-fifth of what their U.S. counterparts would demand. Employees in the Philippines tend to stay in their jobs for at least a couple of years, while in the U.S. staff turnover is high.
One company taking advantage is Missouri-based contact-centre operator PeopleSupport, which hired 300 people when it opened its Manila office last August. PeopleSupport plans to double its staff by the end of the year in order to handle a growing volume of e-mail queries from its client companies in the U.S.
While companies like AOL and PeopleSupport handle mostly e-mail queries, some call-centre executives believe the real growth area for the Philippines will be in handling live voice inquiries from the U.S. Ma-an Hontiveros, chief executive of Telemessage Philippines, Inc., aims to expand her local operations by picking up U.S. contracts. "Filipinos are naturally nice and it shows in the voice," says Hontiveros. "That gives us an edge."
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