How the Philippines profited from the global financial crisis.

ALASTAIR HUGHES

The Philippines isn't famed for positive headlines: Political instability and natural disasters have contributed to the archipelago's checkered history. But while the West was busy fending off the effects of the global financial crisis, the Philippines was quietly undergoing an economic revolution.

     In 10 short years, the business process outsourcing industry has grown from zero to an estimated annual revenue just shy of $20 billion in 2014. My recent visit to the country was an opportunity to visit JLL's growing client base there. We fully leased 27 buildings for clients in the last four years and now manage around 370,000 sq. meters of office space. To cope with the demand for real estate advice, our workforce in Manila has grown from 100 in 2008 to 550 today.

Moving up the chain

The rise of BPO hasn't just had an effect on the efficiency of businesses; it's transformed the face of cities across the Philippines. There are new central business districts, from Manila to Cebu, serving this new sector with state-of-the-art office buildings. Set just 2km from the traditional business center of Makati City, Bonifacio Global City is the beating heart of BPO and a prime example of a new wave of built-to-suit business parks.

     Young graduates fill these modern office facilities. A career in BPO maintains a positive perception among the million-strong workforce employed in the sector, and their excellent English has proven popular with American and British call center customers.

     The rapid growth in the BPO sector has also fundamentally changed the way these cities operate. The needs of the "three shift 24 hour" worker has presented secondary business opportunities in the retail, food and beverage, entertainment and residential sectors. When these young, ambitious Filipino's aren't working, they're spending.

     Many people are asking whether the interest in the Philippines means India -- which has long reigned supreme as the word's outsourcing capital -- is losing its edge. But Indian cities such as Bangalore, Pune, Hyderabad and Chennai are now competing for a broader segment of the outsourcing business. Indian outsourcing has in part moved up the value chain. As international businesses become more confident about capabilities offshore, they're beginning to push more complex functions overseas -- they are building higher value manufacturing and research and development centers, for example. Meanwhile, the Philippines, for now, is focused mainly on offering companies great value in some of the lower-level process operations.

Spotlight on recovery

While offshoring and outsourcing are not new concepts, the rise of the sector in the Philippines marks a global trend in the shifting significance of BPO. It came in three phases.

Philippine President Benigno Aquino III, second right, gestures to Indonesian President Susilo Bambang Yudhoyono, second left, at the Philippine International Convention Center during the World Economic Forum on East Asia in Manila, Philippines on May 22. © AP

     In the first instance, companies experimented with BPO during the good times as a means of potential cost savings. Post-2008, it was a matter of necessity, as global businesses adjusted to harsher economic realities. The third phase, which we're seeing now as markets recover from the effects of the global financial crisis, marks a systematic change in the way businesses operate: "Increasing productivity" is no longer nice to have, it is essential in order to be competitive, and BPO plays a big part in supporting this. In the Philippines, but also in other outsourcing centers -- India and Eastern Europe, for example -- this can only mean growth, as jobs are created and spending power increases. It has fueled and will continue to drive the requirement for real estate.

     The Philippines hosted the World Economic Forum on East Asia for the first time in May. As a strategic partner to the WEF, we had five JLL delegates attend. The feedback from them was unanimously positive -- about the event and also Manila and the Philippines. Many delegates were first-time visitors and had only read or heard about the country prior to the trip, yet they left with a positive impression having seen for themselves that the country has much to offer. We expect the Philippines to remain in the spotlight of the global economic recovery for a good many years ahead.

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