Strong Philippine Peso Worries Business Process Outsourcing (BPO)

The business process outsourcing (BPO) sector, the country’s sunrise industry, has warned that the strong peso is becoming “worrisome” and a real threat to the viability of their operations.

“At P43 to the U.S. dollar, that is already painful and small operators are already operating at a loss. If your capital is small, you might close shop and that is understandable,” said BPO Association of the Philippines (BPAP) president Oscar Sanez.

The peso has continued to strengthen reaching a high P43.88 against the greenback last week.

Sanez said that while the Philippines is still very much in the game as a BPO destination country, the strong peso has become an issue.

The BPAP is projecting .2 billion revenues this year, which is about 26 percent increase over 2009. Jobs generation is expected to reach 540,000 from last year’s 45000.

“We are still on track. Our mid-year estimate shows that we are going to hit the target,” he said.

“But BPOs are all worried and are watching the foreign exchange rate closely,” Sanez said.

According to Sanez, BPO contracts are usually long term so if contracts were signed at the time when the peso was pegged at P46 and it is now P44, the operator is now running a four percent loss already.

“At P43 it is already hitting your bottomline,” he said.

Sanez, however, said that the forex issue is not unique to the BPO sector, but to all other export sectors including the overseas Filipino workers, whose dollar remittances are growing, but are getting lower peso yields.

“It is an issue because a very strong peso is not good for business. If you look at other countries, such as Japan and China they are trying to make their currency as weak as possible to attract investments and increase revenues,” he said.

In contrast, he said, the Philippine government is promoting strong currency.

“That is dangerous because we are not considering the fact that the economy is dependent on foreign investments, OFW remittances, exports of product and services,” he said.

Only traders and importers benefit from strong currency, but it will be cheaper peso that will make local companies competitive, and a strong peso is doing the reverse, Sanchez said.

“The Philexport to which we are a member wants the government to seriously challenge or think about their policy of promoting a strong currency in the midst of other economies around the region that are trying to make their currencies weak to attract foreign direct investments. We could be losing out in this game,” Sanez said.(PNA)

One thought on “Strong Philippine Peso Worries Business Process Outsourcing (BPO)

  • 2010-10-20 at 6:16 am

    Strong currency leads to weak revenues and investments, the paradox of globalized economies.

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