PHL commended for rapid expansion in services sector

The World Bank urged the Philippines to implement reforms in the travel and tourism sector to further boost its competitiveness in the services sector. In the report “Exporting Services: A Developing Country Perspective," released Wednesday the bank noted the rapid development of the Philippines as one of the best performers in services exports, particularly in business process outsourcing. However, the study said that reforms could provide channels by which the Philippines could diversify its economy and achieve high and sustained growth, and reduce poverty. The draft study, which will soon be published into a book, aims to figure out the determinants of developing country participation in service exports and identify strategies for success based on the experiences of countries including Brazil, Chile, Egypt, India, Kenya, Malaysia, and the Philippines. “Service sector performance critically depends on human capital, the quality of the telecommunications network, and the quality of institutions," said Sebastiẚn Sẚez, World Bank senior trade economist and one of the authors of the report. “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." The Philippine experience shows that services are a viable option for export diversification, the report said. Trade in goods is no longer the only vehicle to diversify exports for developing countries. Services are also an option that is available to these countries. Services exports as a percent of total exports increased from 9 percent in 1999 to 21 percent in 2009 in the Philippines. Its services exports rose by 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 has been a net exporter of services since 2006. The Philippines is currently the third largest player in business process outsourcing (BPO) in the world, accounting for 15 percent of the global BPO market, after India (37 percent) and Canada (27 percent). “That’s a tremendous achievement in just over a decade," said Bert Hofman, World Bank Country Director in his opening remarks. “The liberalization of the Philippine telecommunications sector in the early 90's improved the quality and efficiency of telecommunications infrastructure through greater competition. That’s a very important factor for the success of the industry. But the bigger story is really the rich human capital that the country possesses and which it has to continue to nurture." According to Fred Ayala, Business Process Association of the Philippine chairman, the BPO sector currently employs close to 500,000 people and has generated about $9 billion worth of exports in 2010. The industry, he said, has agreed on an aggressive goal of $25 billion in annual revenue 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 Report also highlighted the importance of developing the tourism sector. Tourism accounts for about six to seven percent of the country’s gross domestic product (GDP) and directly employs about 3.5 million people. It says tourism could contribute more to help address poverty should reforms outlined in the National Tourism Development Plan (NTDP) are effectively implemented. The study says 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 said, lowers accessibility to tourism destinations and discourages private sector investments in accommodation facilities. Meanwhile, Daniel Corpuz, Tourism undersecretary, said the government has already started to put in place important reforms that will increase tourism arrivals in the country. He said country has 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,“ said Corpuz. He said that the NTDP seeks to improve market access and connectivity with the country’s major tourism markets, upgrade tourism transportation and infrastructure through public-private partnerships and improve tourism institutional and human resource capacities in the country. -- CMA/OMG, GMA News