Philippine is becoming the country of choice for investors because of the similarity of culture between the Philippines and the western world. One of the key areas in which foreign investment keeps flowing is the Information and Communication Technology industry (ICT). The value of the ICT market in the Philippines is estimated to be US$ 37 billion, with business process outsourcing (BPO) contributing 30 percent to total ICT sales. The ICT industry is expected to contribute as much as US$ 50 billion in annual direct revenues and US$ 150 billion of indirect investments by 2016. The ICT industry currently provides employment to 600,000 young people in the IT-BPO sector and one and a half million in indirect jobs.
The ICT sector in the Philippines includes hardware, software and services. The BPO segment is the fastest growing industry in the Philippines, contributing to 15 percent of the global outsourcing market. The BPO sector employs 708,000 full-time employees and the segment earned nearly US$ 11 billion in 2011. In 2011, the Philippines mobile market had approximately 90 million mobile subscribers. Penetration is approaching the 100 percent milestone. The rapid growth of the Philippine BPO industry continues to attract foreign investors. Major players such as Accenture Philippines have generated US$ 25.5 billion in net revenues last year.
Indian BPO Operations giant Tech Mahindra and its sister company Mahindra Satyam has vowed to expand operations in Philippines with an estimated investment of US$ 240 million over the next three years. US bank Wells Fargo has further boosted confidence in the BPO industry by revealing that it had chosen the country for a US$ 2billion BPO operations centre. BPO major Sutherland Global Services will also be investing US$ 50 million as part of expansion plans in the Philippines.
Further, Canadian business process outsourcing (BPO) firm Simpro Solutions Inc. is setting up shop in the Philippines after entering into a joint venture with locally listed firm Paxys. Citibank N.A. is also bullish on the Philippines, citing its plan to expand its lending business here and relocate some of its offshore-based services to the country. Leading Russian technology firm Noda ranked third when it comes to software solutions has also revealed it plan of opening a facility here soon.
According to the International Telecommunication Union (ITU), the Philippines telecom market raked in revenue worth US$ 5.3 billion in 2011. The market is dominated by the mobile segment, which accounts for 80% of the telco sector and consist mainly of prepaid services. The country is known as one of the most prolific text messaging markets in the world, accounting for almost 10% of global SMS messages. With the future of the telecom expected to shift from the mobile voice space to 3G and mobile broadband due to growing demand for social media and multimedia content, all the major players are investing to upgrade their infrastructure. PLDT has earmarked Peso 67 billion for its network upgrade and modernization program, while Globe would be spending US$ 640 million for the improvement of its network facilities and transformation of its IT systems up to 2013.
To further develop its ICT sector and to become more globally competitive and to attract foreign investments, the government has embarked on several ICT initiatives. The reorganization of related communications agencies under a new dedicated body, the Department of Information and Communications Technology (DICT) is one such measure. The DICT will ensure the provision of a strategic, reliable, cost-efficient and citizen-centric ICT infrastructure, as well as systems and resources that will support nation-building and global competitiveness.
For telecom operators, there is strong market potential with the Philippines large and active domestic market. Private consumption accounts for more than 70% of the economy (GDP). This is expected to increase further, with the government targeting GDP growth of 7% to 8% p.a. over the next five years (2011 to 2016). There is also growing interest in broadband services, with the major players in the local telecom market starting to invest heavily in the expansion of broadband access. Rising revenues and job creation, backed by new investments, are currently highlighting the surging growth in the Philippines business process outsourcing (BPO) segment. Hence the ICT industry will remain as one of the attractive industries in the coming years.
(Source: Insight Alpha)