STRONG ASIAN CURRENCIES SCARE ASIAN BPO FIRMS

I have always argued that the BPO industry should be treated by Asian governments as a part of its export industry. As such, it should be given the full incentives due to exporting companies. With the current strengthening of most Asian currencies, the export market is generally suffering and this situation is very much being felt by BPO firms.

Since most outsourcing contracts are dollar denominated, a boost in the value of the local currencies has resulted in corresponding cost increases and decline in profits.

The Philippines, which earned approximately US$2 Billion in 2007, is becoming a little nervous due to the continuous appreciation of its currency. The Peso, which closed at PhP46.60=US$1.00 last Friday, has been on a constant climb since last year.

The other Asian currencies (Malaysian RmB, Indian Rupee, Chinese Yuan, etc.) have also appreciated despite governments’ attempts to restrain its value.

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"General weakness of the dollar. Despite attempts of most Asian Central Banks to keep their currencies from further strengthening against the dollar, the pace of appreciation seemed to have increased over the past two months. The Indian rupee, which was quite stable from January to March for example, suddenly moved eight percent higher in just two months. This is an exceptional move given that the Reserve Bank of India has been managing its exchange rate closely with the rupee appreciating by only 1.8 percent in 2006 and 3.6 percent in 2005. Likewise, the Malaysian ringgit began accelerating against the dollar in mid-March following announcements of key economic reforms. The Philippine peso, meanwhile, has been on a gradual appreciation since the start of the year primarily due to healthy remittances and capital inflows, and a generally peaceful election period. Finally, the baht is still up 2.3 percent against the dollar despite earlier attempts of capital controls by the Thai government."

Strong peso may dampen foreign investors’ interest in BPO sector

"A strong peso may deter foreign investments from coming into the country as this makes the cost of doing business here more expensive.

International real estate provider CB Richard Ellis warned that the continued strengthening of the peso against the dollar may be a threat to business process outsourcing (BPO) firms in the country.

“If the exchange rate continues to climb, it can potentially be a threat because it makes it expensive to do business here,” CB Richard Ellis general manager Trent M. Frankum said."