The information technology-business processing management (IT-BPM) industry is keeping its 8 to 9 percent annual growth target under its current roadmap even as it recalibrates the growth areas in view of the changing landscape of the sector and the lingering concerns over the tax regime.
“The ongoing recalibration exercise by Everest (Group, a consulting company) is about looking at primarily the growth trajectory (of the industry). It is not discarding the roadmap at its core because the roadmap (2016-2022) is more than just numbers. It is about growth numbers and the interventions. …the 8 to 9 percent that is the holding forecast until it gets changed, which the study will validate,” said Rey Untal, president of the IT & Business Process Association of the Philippines (IBPAP) on the sidelines of the Digital Disruption Forum in Paranaque City.
The recalibration, Untal said, will look at the near-term revised trajectory, as well as the best case, worst case and likely scenarios taking into consideration the performance of the industry which has been below target the past two years.
The results of the study which started two months ago would be presented to Untal on September 5 and will be reviewed by the board incorporating the iterations by each subsector. The results will be formally announced at the IBPAP’s annual summit on November 12.
Untal said the baseline data being used by Everest is the end 2018 performance where IT-BPM grew 5 percent, slightly faster than the 2 percent registered in 2017. In both years, the growth rates were off the target.
“The last two years, (the industry) has not lived up to expectation. 2017 was challenging because of the perceived bias (and campaign) to bring jobs back to North America. In 2018, it was the uncertainty of fiscal developments,” Untal told attendees to the forum organized by the European Chamber of Commerce of the Philippines.
Untal said the Everest study will reveal how much of the global contracts being signed will actually go to the Philippines and which subsectors and the provinces will benefit.
“The question now is, the 8 to 9 percent growth in the roadmap, can that still hold? The answer to that (which the Everest study will provide) is what will be the maximum trajectory assuming all the interventions hold including the concerns … the uncertainties (we have),” said Untal.
Untal did not provide hard numbers on how the industry has performed for the year but cited there are anecdotal cases that some sectors like technology companies are growing within or even beyond the 8 to 9 percent range.
“(But) is that an indicator that everybody else is having the same growth? We cannot say that,” he said.
Untal said the uncertainties experienced the past two years remain although the protectionist policy of the US, which is the industry’s main market, has become less of an issue.
In fact, he sees recent calls in the US to push minimum wage on a federal level as benefiting the Philippines.
“If cost escalates in North America, then this will have a trickle down effect… labor arbitrage (where) countries like the Philippines, India and others will be more attractive,” he said.
IBPAP is still worried about losing incentives under the Comprehensive Income Tax and Incentive Rationalization Act. Recently, the group was dealt with another blow, Administrative Order 18 suspending the declaration of new economic zones in Metro Manila which would limit areas of operation of new and expanding companies.
These alongwith digital disruption continue to pose a challenge to the IT-BPM industry
Globally, Untal said the nature of contracts has shifted in favor of digital such in 2018 from 2016 when traditional contracts used to dominate.