PH is top choice for ‘offshoring’
Study notes emergence of competing locations
By Doris C.
Dumlao
Philippine Daily Inquirer
Friday, November 30th, 2012
Employees work on a construction site in Manila on
Sept. 17, 2012. The International Monetary Fund has kept its 2012 growth
projection for the Philippines, but reduced its figure for next year as it sees
a weaker global economy. AFP PHOTO/JAY DIRECTO
THE PHILIPPINES, India and China are the top three global shoring locations
for corporations based on the number of jobs created in shared service centers,
call centers and technical support centers from 2008 to 2011, according to a new
report from global real estate adviser Jones Lang LaSalle.
The Philippines attracted 115 projects during that period, creating more than
72,000 jobs; India attracted 105 projects with 64,370 jobs and China, 56
projects with 25,455 jobs, said the JLL report “Onshore, Nearshore, Offshore:
Still Unsure?” released last week.
The other top locations and the number of jobs created were: 4. United
Kingdom (22,304); 5. United States (18,594); 6. Brazil (13,964); 7. Poland
(13,476); 8. Mexico (11,515); 9. Romania (11,438), and 10. Costa Rica (8,878).
The JLL study said the changing global economic landscape was affecting
corporate strategy and location decision-making. “The threat of recession,
political uncertainty and rise of global emerging nations are causing
international corporations to re-assess their location strategy. Companies are
increasingly selecting from three ‘shoring’ options: onshore, offshore and
near-shore,” it said.
Commenting on the decision companies faced, Ian Mackenzie, head of solutions
development for JLL in Asia Pacific said: “A longer term focus on improving
business productivity, operational efficiency and future scalability is now
driving corporate real estate decision-making, rather than straight cost-savings
in the short term. Corporations are undertaking comprehensive and early initial
business case-and-option analysis” in designing their location strategies.
“For Asia Pacific-based corporations, a growing number are seeking the cost
and productivity benefits associated with shoring, often sticking to offshoring
or near-shoring options within the region. At the same time, in order for
emerging nations such as India, Philippines, China and Malaysia to attract
greater foreign direct investments (FDI), greater transparency is needed as well
as access to quality labor and better location options,” he added.
Lylah Fronda, associate director for markets of JLL Philippines, added: “We
see first-hand that the Philippines continues to be the preferred choice
for offshoring. A highly skilled English-speaking population, coupled with a
responsive real estate market with the right infrastructure creates a perfect
mix for companies that understand the efficiency of going abroad for many
business processes and call center operations.”
As to real estate conditions, the cost of offshoring operations in Manila was
estimated by the study at $222 a square meter a year, more expensive than $187
in Bangalore or even $189 in Kuala Lumpur. But this was cheaper than the $300
in Mexico City, $606 in Sao Paolo or $372 in Buenos Aires.
The overall vacancy rate in the Philippines was estimated at 3.6 percent,
suggesting less choice of office space compared to other typical offshoring
destinations. In Bangalore, for instance, the vacancy rate was estimated at 7.7
percent while in Mexico and Sao Paolo, the rates were 13 percent and 11.9
percent. Buenos Aires’ rate was closer to that of the Philippines at 4.2
percent.
Meanwhile, the study noted that onshoring in mature markets was one trend
that had re-emerged in recent months with a clear increase in strategic analysis
and activity, particularly in the United States.
“Rebalancing within mature economies, as well as weakening currencies and
growing availability of skilled labor, have led to a growth in the
attractiveness of onshore locations. Locating business functions and supply
chains onshore means companies can be closer to their customers, reducing supply
chain complexity and risk and potentially allowing greater responsiveness to
changes in demand,” the study said.
The study said paradoxically, the same logic of being close to the customer
was also driving offshoring activity. “For international companies, particularly
those in the pharmaceutical, and FMCG (fast-moving consumer goods) sector,
seeking to align business functions and supply chains to high-growth emerging
markets, an agile offshore location strategy can be a critical point of entry
into a major market,” the study said.
