A tight labor market, perceived government corruption, and the overall negative perception of the Philippines put off most BPO investors though they still consider the country as less risky than India.

This was according to a recent Business Processing Association of the Philippines (BPA/P) and Outsource2Philippines commissioned online survey.

Overall, 81% of the survey respondents maintained that the country’s prospects for growth in Knowledge Process Outsourcing (KPO) and delivery of complex, value-added services are good or very good. However, the tight labor market and other Human Resource-related factors may temper growth.

Some fifty-four percent of respondents said the tight labor market for qualified knowledge workers limit growth potential in KPO services.

Retaining knowledge workers (46%), complex training requirements (34%), high wages required to attract knowledge workers (30%), and inadequate education infrastructure in the Philippines (29%) were also cited as factors that represent obstacles to growth of KPO services.

The tight labor market is also the most significant risk factor associated with doing business in the Philippines in the view of 23% of the respondents.

However, government corruption followed closely with 21% of respondents. Some fifteen percent of respondents cited negative perception of the Philippines as a significant risk factor.

In a similar survey conducted approximately three months earlier, only 11% of respondents cited government corruption as a top priority risk factor for investors in the Philippine BPO industry.

However, when asked to compare the risk level between the Philippines and India , 52% of respondents said doing business in the Philippines is less risky.

Some thirty-eight percent of respondents said risk in the Philippines is equal to that in India. Respondents overall mostly expect to increase their headcount in the Philippines in the next 12 months between six percent and 50%.

The survey also showed that recent severe weather “particularly Typhoons Ondoy and Pepeng” had negligible impact on the industry despite their severity.

A good forty-nine percent of respondents said operations remained normal during Typhoon Ondoy, and 45% resumed normal operations within hours or in three days or less after the typhoon passed over northern Luzon.
Almost all respondents said damage as a result of the storm was non-existent or minor.

The survey, conducted in October, also showed that companies of all sizes are engaged in KPO service delivery in the Philippines.

TeamAsia conducted the online survey between October 13 and November 9, 2009. Response rate was 25% with 160 completed responses received from 630 invitations to participate. Email invitations were sent to company representatives to BPA/P, the Philippine Software Industry Association, and other sector associations. Twenty-four partially completed responses were not included in the results.