1. 1 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD MEASUREMENT OF THE BUSINESS PROCESSING OUTSOURCING (BPO) IN THE PHILIPPINE SYSTEM OF NATIONAL ACCOUNTS (PSNA) by Estrella V.Domingo Assistant Secretary General APEC Capacity Building Seminar Workshop on Measurement of International Trade Services Renaissance Makati City Hotel, Makati City, Philippines October 1-3, 2008

2. 2 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD OUTLINE OF PRESENTATION I. Introduction II. Scope and Coverage III. Data and Data Sources IV. Estimation Methodologies V. Issues and Future Direction

3. 3 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD BPO Industries in the Philippines

4. 4 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD BPOs in the Philippines Philippines becoming a rising hub for BPO related services Revenues from IT services, mostly BPOs, reached ~ US$ 2.9 B, growth of ~ 45% Exports amounted to US$ 2 B – about 69% higher than 2005 level

5. 5 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD BPOs in the Philippines Major BPOs in the Philippines: a) contact centers b) software development c) animation/creative services d) data transcription e) back office processing and engineering design

6. 6 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD BPOs in the Philippines

7. 7 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage in the PSNA

8. 8 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage PSNA BPO Industry **Subject to data limitations: Contact Center Non-Contact Center Inbound and outbound Voice operation services for purpose of sales, customer service, technical support, others Back office Medical Transcription Legal Transcription Other Data Transcription Animation Software development Engineering development and digital content

9. 9 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage PSNA BPO is captured under Gross Value Added (GVA) of Private Services (production side) and Exports of Services (expenditure side)

10. 10 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage PSNA GVA of Private Services include services in: a)Education b)Medical and Health c)Recreation d)Hotel and Restaurant e)Personal and Business Includes BPOs

11. 11 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage PSNA Exports of Services covers services - purchases, transactions, etc – provided by the country to non-residents and include: a) transportation (freight) b) insurance c) travel d) government e) miscellaneous services (includes BPOs)

12. 12 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Scope and Coverage PSNA 1994 Philippine System of Industrial Classification (PSIC) provides detailed list of industries classified under Information and Communications Technology (ICT) wherein activities considered as BPOs are listed

13. 13 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data and Data Sources

14. 14 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources From censuses, surveys and administrative data from government regulatory agencies including data from industries’ various associations Bulk of information come from survey of Establishments by the National Statistics Office(NSO)

15. 15 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources Other data sources: a) Bangko Sentral ng Pilipinas (BSP) b) Securities and Exchange Commission (SEC) c) Commission on Information and Communication Technology (CICT) d) Contact Center Association of the Philippines (CCAP) e) Business Process Association of the Philippines (BPAP)

16. 16 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources National Statistics Office (NSO) a) Census of Philippine Business and Industry(CPBI) b) Annual Survey of Philippine Business and Industry (ASPBI) c) Quarterly Survey of Philippine Business and Industry(QSPBI) Latest census/surveys of establishments: 1999 CPBI, 2005 ASPBI, Q2 2008 QSPBI

17. 17 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources CPBI release is two (2) years after reference year for the preliminary release, and three (3) years after reference year for the final results QSPBI covers only large sample establishments. Covers all industries except Agriculture Industry. QSPBI conducted every quarter. Releases are 45 days, 60 days, 90 days after reference quarter

18. 18 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources Input-Output Survey of Establishments (IOSE) > conducted irregularly > latest is 2002 IOSE > Detailed information on: revenue/sales of production, cost of materials and supplies and cost of fuels purchased

19. 19 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources Bangko Sentral ng Pilipinas (BSP) > 2005 Benchmark Survey of IT-enabled Services > 2006 Survey of IT and IT-enabled Services Surveys provide information on: revenue, employment, compensation, foreign direct investments, and export markets of IT-enabled industries

20. 20 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Data Sources Securities and Exchange Commission (SEC) > Financial statements submitted to the agency as mandated by law for purposes of registration and licensing Relevant selected information compiled by SEC are consolidated and published for top 1,000; top 2,000 and Top 5,000 corporations whose rankings are based on Gross Revenues. For data items not published, data are processed directly from available financial statements by industry for top 2,000 corporations

21. 21 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodologies

22. 22 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology In 2003, information to measure contribution of BPOs not yet available Use of existing data on revenue projections by the industry’s key players through BPO associations mostly from BPAP and CCAP As initial estimate, gross output of BPOs was based on actual revenues and projected revenues

23. 23 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD *2004-2005 refers to actual revenues *2006-2007 refers to updated projected revenues

24. 24 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Gross Output (GO) For 2006-2007, GO was estimated thru: Where GO = gross output of BPO industry for year i; i = 2006 and 2007 UP = updated projection of BPO revenues for year i and 2005 AR = adjustment ratio for 2005 AE = actual estimates of BPO revenues for 2005

25. 25 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD

26. 26 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Gross Valued Added (GVA) > indirect approach using GVAR applied to total estimated GO > estimates of GO aggregated to represent total of contact centers and non-contact centers > Financial statements of key BPO players (from SEC) as source of GVAR > As of March 2007, latest available data from financial statements are for 2004

27. 27 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Gross Valued Added (GVA) Where GVA = gross value added of BPO industry for year j; j=2004, 2005, 2006, 2007 k =1(contact centers), 2(non-contact centers) GO = gross output of BPO industry for year j GVAR = gross value added ratio for 2004 culled from consolidated FS FGVA = gross value added for 2004 from consolidated FS FGO = gross output for 2004 from consolidated FS

28. 28 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD

29. 29 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD

30. 30 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Exports of Services > 2005 Survey of IT and IT-enabled Services showed that 96.3% of the total revenues of contact centers and 43.4% of the total revenues of non-contact centers are intended for exports > assumption that informal or unorganized activities of non-contact centers are not captured in banking systems > 60% undercoverage ratio applied to account for underreporting of export transactions of non-contact centers

31. 31 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Formula to estimate undercoverage of BPO from Balance of Payments: Where j=2004, 2005, 2006, 2007 ECC = exports of contact center services for year j ENC = exports of non-contact center services for year j GOCC =gross output of contact centers industry for year j GONC = gross output of non-contact centers industry for year j EBPO = exports of BPO services for year j

32. 32 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimation Methodology Formula for undercoverage of BPO: i=1, 2,…12 WhereBPO Xi = exports of BPO services for month I BPO GOA = annual gross output of BPO industry (from private services sector) 97% and 60% = constants CS = Computer services for month i (from BOP) CIS = Computer and Information Services for month i (from BOP) OBS = Other Business Services for month i (from BOP)

33. 33 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Issues and Future Direction

34. 34 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Limitations of estimates in the PSNA Informal activities are not covered particularly household-based activities, which use intensive IT services Initial estimates of GVA for 2004-2007 are based from available indicator on revenues; estimates for cost not available Use of GVARs from 2004 may no longer be appropriate as industry continues to expand and changes in technology likewise occur

35. 35 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Estimate of informal activities of BPOs to be done separately as component of BPO industry once results of ongoing Informal Sector Survey (by NSO) becomes available Present estimates to be revisited using benchmark information to provide direct estimates of the contribution of the BPO industry Institutional arrangements with SEC must be done to come up with a consolidated data for BPO Future Directions

36. 36 EV Domingo/1 October 2008 NATIONAL STATISTICAL COORDINATION BOARD Thank you! URL: http://www.nscb.gov.ph e-mail: info@nscb.gov.ph