Vol. XXII, No. 94 [ BusinessWorld Online ]
Thursday, December 4, 2008 | MANILA, PHILIPPINES
DEMAND for office spaces by business process outsourcing (BPO) firms will drive construction this quarter, providing much-needed support for economic growth amid increasingly difficult times, the National Economic and Development Authority (NEDA) said yesterday.
But the picture may change momentarily in the first quarter next year as the BPO industry feels the pinch as recession in the US, the sector’s main market, forces companies there to cut back on spending, NEDA director for national planning and policy Dennis M. Arroyo told reporters yesterday.
Mr. Arroyo noted that BPO buildings expected to open this quarter are Glorietta 5, Solaris Tower One, Net Quad and Three World Square, all either in or near the Makati business district.
But he warned that "the BPO sector will be hit because of the crisis. The initial hit will take place in the first quarter of next year."
Demand could revive in the second quarter, as some companies turn to out-sourcing to cut costs. "The bigger the company, the harder it is to maneuver. It will take time for big companies to shift gears and let go of their people, so BPO orders can start coming in April," Mr. Arroyo said.
But Business Processing Association of the Philippines Chief Executive Officer Oscar R. Sañez said his group is moving to deflect any negative impact from the US recession. "Discussions are currently taking place, with companies from Australia, Europe, Singapore and the US that are planning to outsource their services in the country. We expect the demand for new BPO buildings [to remain] in the first two quarters of next year," he said in a telephone interview yesterday.
Mr. Arroyo said that private citizens are opting to invest in real estate as the stock market has become volatile.
He cited that the demand of overseas Filipino workers (OFWs) for houses could also contribute to growth in the construction sector.
"Housing wields a very high multiplier effect of 16.6 times. Every P1 invested in housing can potentially contribute a total of P16 in the economy," he said.
The construction sector grew 21.3% in the third quarter from 17.8% in the same period last year. Public construction grew by 20% from 11.5%, as the national government raised infrastructure spending by 52.7% and local governments by 11.2%. Private construction grew 13.8% from 19.5% in the same periods, spurred by the demand from BPO firms and from OFWs. — Louella D. Desiderio
