The Joint Foreign Chamber of Commerce (JFC) of the Philippines has backed the call to retain the incentives currently being enjoyed by the Business Process Management (BPM) industry, noting the latter’s decline in terms of global standing should already be a “wake up call.”
This is according to the sixth Arangkada publication, titled “Arangkada Philippines and the Ten-Point Socio-Economic Agenda of the Duterte Administration,” which listed more than 400 multi-sectoral recommendations aimed at helping implement the government’s socio-economic objectives.
The Arangkada report included a list of recommendations in the BPM industry, which it called an “extremely important business sector in the Philippine economy,” as it grew exponentially into a multi-billion dollar revenue industry in less than 15 years.
“Government should maintain competitive incentives and regulations, including training incentives, tax breaks for location-related expenses, funding for university partnerships,” one of its recommendations read, noting the need for the government to be a “strong and supportive partner of growth strategies of the sector.”
To recall, the Duterte administration’s first package of its comprehensive tax reform program, currently filed as House Bill (HB) 5636, includes provisions that would remove the zero value added tax (VAT) exemption on the imports and sales of BPO firms, charging transactions with the VAT equivalent of 12 percent of gross receipts. A similar version of the bill is currently being debate in the Senate.
The JFC, which is made up of seven foreign business chambers including the country’s largest overseas investors, cited the most recent results of the Tholons Services Globalization Country Index, a report which ranks global outsourcing locations.
Prior to this year, the Philippines was the second global market leader in the BPM industry. However, in the 2017 Tholons Service Globalization Country Index, the country was pulled back to the third place, trailing behind India and China, which were first and second, respectively.
A similar decline was also reflected for Philippine cities, Manila (falling from 2nd to 4th place) and Cebu (declining from 8th to 12th), the index showed.
“This should be a ‘wake-up’ call for the industry and the GPH (Government of the Philippines) in the Philippines,” this year’s Arangkada report read.
In the press briefing that followed the release of the report, leading officials of business chambers acknowledged the importance of the BPM industry. In particular, Tom Grealy, president of the Australian-New Zealand Chamber of Commerce Philippines (ANZCham), said that “wiser heads” should prevail.
“Our hope, is that while we support the overall tax reform program, this industry, which has become the golden goose of the Philippine economy, is nurtured. As lawmakers move forward, they should move with great foresight to ensure the future of the industry,” he said.
Safdar Quraeshi, director of the Philippine Association of Multinational Companies Regional Headquarters, Inc. which represents a subsector of the BPM industry whose tax perks are also threatened to be removed, said that the incentives must be “maintained, if not accelerated.”
The current roadmap includes the Information Technology sector in the country. In general, the IT-BPM industry targets to reach $38.9 billion revenue in 2022 after reaching $22.9 billion last year. It is also considered the largest private sector employer, currently with 1.15 direct employees in its workfoce, which is expected to reach 1.8 million in 2022.
The seven JFC members are the following: American Chamber of Commerce, Inc.; Australia-New Zealand Chamber of Commerce, Inc.; Canadian Chamber of Commerce, Inc.; European Chamber of Commerce, Inc.; Japanese Chamber of Commerce and Industry, Inc.; Korean Chamber of Commerce, Inc.; and the Philippine Association of Multinational Companies Regional Headquarters.