MANILA, Philippines - The strong Philippine peso is hurting the competitiveness of the information technology-business process outsourcing (IT-BPO) industry, according to the Business Processing Association of the Philippines (BPAP).
In a statement, BPAP president and CEO Benedict Hernandez cited analysis by Everest Group and Outsource2Philippines which indicated that the appreciating peso and a depreciating Indian rupee has given India a "meaningful cost advantage" over the Philippines.
"With the 30% difference in peso and Indian rupee exchange rate with the US dollar, the cost differential has substantially widened. And that is much more difficult to manage," Hernandez said.
The peso hit a 57-month high of P40.85 to $1 last Dec. 6, already a 7% increase from its close of P43.84:$1 in end-2011.
A survey on the impact of the strengthening peso among BPAP members last week showed majority are already having difficulty in meeting revenue targets.
The survey showed 46.7% of respondent executives say it has been difficult to hit revenue targets due to the strong peso. Respondents also noted they have lost some business to other destinations (40%) or cancelled expansion plans (40%).
Earlier, traders said the peso is expected to remain strong next year and may even break into P39:$1 territory amid the country's good economic conditions.
While is a cost an important factor for clients outsourcing work to the Philippines, Hernandez said the IT-BPO industry has an edge in terms of quality of service and productivity.
"Quality of service and productivity continue to be at the core of our value proposition. But our industry must also be able to operate within acceptable market prices. That’s becoming increasingly difficult as the peso continues to appreciate," Hernandez said.
By the end of 2012, the Philippine IT-BPO industry is expected to have 772,000 full-time employees and over $13 billion in revenues. Next year, the industry expects to employ 926,000 full-time employees and earn $16 billion.
By 2016, the industry is targeting $25 billion in revenues and employ 1.3 million.