MANILA, Philippines - The World Bank has ranked the Philippines among the best performers in the services exports, particularly in the business process outsourcing (BPO) sector, but urged further reforms in the travel and tourism sector if the country intends to sustain growth moving forward.
World Bank senior trade economist Sebastian Saez said in a report that the services sector depends on human capital, the quality of the telecommunications network, and the quality of institutions.
“The experience of exporting outsourced business services in the Philippines shows that by creating an enabling environment where the private sector can deploy its creativity, developing countries can reap the benefits that services exports opportunities are opening,” Saez added.
The Philippine experience shows that services are a viable option for export diversification, he said, adding that trade in goods is no longer the only vehicle to diversify exports for developing countries.
Services exports as a percentage of total exports increased from nine percent in 1999 to 21 percent in 2009 in the Philippines. Its services exports rose 3.6 percent on average per year during the period, higher than that of Asia as a group, which averaged 1.5 percent per year. Unlike many developing countries, the Philippines had been a net exporter of services since 2006.
The Philippines is currently the third largest player in BPO in the world, accounting for 15 percent of the global BPO market, after India (37%) and Canada (27%).
Business Processing Association Philippines (BPAP) chairman Fred Ayala said that the BPO sector currently employs close to 500,000 people and generated about $9 billion worth of exports in 2010.
The industry’s target in terms of annual revenue is $25 billion by 2016 and a direct workforce of 1.3 million.
“There is an urgent need to develop supervisors, middle managers, and more skilled workers to respond to increasing market demand for a broadening array of knowledge-based, complex services,” Ayala said.
The World Bank report also highlights the importance of developing the tourism sector.
Tourism accounts for about nearly seven percent of the country’s gross domestic product (GDP), and directly employs about 3.5 million people. But the report said that tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) are effectively implemented.
The study said major impediments to tourism competitiveness are largely associated with weak ground and air transport infrastructure - roads, railways, ground transport network, and airports. Weak physical infrastructure, it says, lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities.
Tourism Undersecretary Daniel Corpuz said the government has already started to put in place important reforms that will increase tourism arrivals in the country. The Philippines implemented a liberalized air policy in selected international airports outside Metro Manila to promote greater tourism flows to the country.
“More reforms are underway to transform the Philippines into a ‘must experience destination in Asia,’” Corpuz added.