Pay­ments, mar­tial law ham­per­ing Min­danao out­sourc­ing growth

Business World - - Theeconomy - By Car­mencita A. Car­illo and Maya M. Padillo Correspondents

DAVAO CITY — The growth of tech­nol­ogy start-ups and the over­all out­sourc­ing in­dus­try in Davao is be­ing ham­pered by pay­ment sys­tem prob­lems and the mar­tial law in force in the Philip­pines’ south­ern is­lands.

“Small tech­nol­ogy com­pa­nies here are uti­liz­ing Pay­pal and it’s a to­tal dis­as­ter as we have to go through mul­ti­ple lay­ers of de­nial from banks. Pay­pal points fin­gers and the worst case sce­nario is it will freeze your ac­count,” US-Philip­pines Com­merce & In­dus­try Agency (USPCIA) Vice-Pres­i­dent Rick Von Pfeil told Busi­nessworld in an in­ter­view dur­ing the re­cently-con­cluded Liveli­hood Ex­change 2018 and In­no­va­tion Sum­mit held in the city.

Mr. Von Pfeil fa­cil­i­tated the busi­ness match­ing ac­tiv­ity be­tween Davao start-ups and US com­pa­nies dur­ing the event.

“Amer­i­cans don’t use Pay­pal any­more,” he added, cit­ing at least three lo­cal projects that were de­layed be­cause of the sys­tem.

The eas­i­est way to get paid for out­sourced ser­vices, he said, is through bank trans­fers and credit cards.

Mr. Von Pfeil said US firms are keen on Davao City as their next des­ti­na­tion for busi­ness process out­sourc­ing (BPO), soft­ware de­vel­op­ment, and other tech­nol­ogy-re­lated ser­vices as they rec­og­nize the huge pool of tal­ent avail­able not just for call cen­ter op­er­a­tions.

“Most US com­pa­nies will think about In­dia first and then Ukraine for out­sourc­ing, but now they are look­ing at the Philip­pines, in­clud­ing Davao, as an­other po­ten­tial des­ti­na­tion,” he said.

“Filipino de­vel­op­ers are more ex­pen­sive than In­dian de­vel­op­ers but US com­pa­nies are will­ing to pay more money be­cause of fac­tors like good cus­tomer ser­vice and good grasp of the English lan­guage,” he added.

He also said that young en­trepreneurs of start-up com­pa­nies should tap the “pretty strong ” busi­ness cham­bers in the coun­try for net­work­ing and op­por­tu­ni­ties.


Mean­while, Leechiu Prop­erty Con­sul­tants said the dec­la­ra­tion of mar­tial law has af­fected BPO ex­pan­sion plans in Davao City as well as Ca­gayan de Oro City.

The firm’s chief ex­ec­u­tive of­fi­cer, David T. Leechiu, said the im­pact is largely due to neg­a­tive per­cep­tions and travel re­stric­tions, par­tic­u­larly for BPOs with for­eign ex­ec­u­tives and clients.

“The big is­sue about ML is that if you’re a for­eigner... un­der ML they can­not travel,” said Mr. Leechiu, who is also cur­rently serv­ing his sec­ond term in the In­for­ma­tion Tech­nol­ogy and Busi­ness Pro­cess­ing As­so­ci­a­tion of the Philip­pines’ (IBPAP) Board of Trustees.

“I un­der­stand the gov­ern­ment also need­ing to keep ML in place... but we also need to un­der­stand the cost of that pol­icy. But I have been ap­peal­ing to gov­ern­ment many times to lift mar­tial law at least in Davao City and Ca­gayan de Oro City be­cause that has put a stop to all BPO ex­pan­sions,” he said.

“We saw Davao as the sec­ond largest mar­ket af­ter Cebu and now that dis­ap­peared... they (BPO com­pa­nies) haven’t pulled out, which is very good. (But) They can go so much big­ger here and they want to, but they can­not,” he added.

He said be­tween 2012 and 2017, the BPO sec­tor alone has de­vel­oped from “zero to close to 25,000” seats, but the growth has stopped since.

“There’s one com­pany that ex­panded 500 seats in the first year of ML, but af­ter that no more, un­like in many parts of the Philip­pines,” he said.

ICT-Davao Pres­i­dent Sa­muel R. Matunog, on the other hand, said while meet­ings with po­ten­tial new BPO lo­ca­tors and clients have de­clined sig­nif­i­cantly, com­pa­nies who are al­ready in the city are ac­tu­ally ex­pand­ing.

“I am not aware of a new BPO lo­ca­tor open­ing shop in Davao this year. How­ever, those who are al­ready in Davao are ramp­ing up re­cruit­ment, and in fact, our ma­jor chal­lenge is tal­ent poach­ing and ir­reg­u­lar re­cruit­ment ac­tiv­i­ties,” he said.

None­the­less, the head of the re­gion’s um­brella group for the in­for­ma­tion and com­mu­ni­ca­tion tech­nol­ogy sec­tor, said it would be good if the se­cu­rity sit­u­a­tion can be ad­dressed by gov­ern­ment through “mea­sures short of mar­tial law.”

Pres­i­dent Ro­drigo R. Duterte de­clared mar­tial law in Min­danao on May 23, 2017 dur­ing the siege of Marawi City by Is­lamic State-in­spired ex­trem­ist groups. The dec­la­ra­tion has been ex­tended twice, with the sec­ond end­ing on Dec. 31.

Au­thor­i­ties said last week that Mr. Duterte is await­ing the rec­om­men­da­tion of the mil­i­tary and the po­lice on whether to seek an­other ex­ten­sion from Congress.

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