Thanks in part to booming outsourcing, business process outsourcing (BPO) and call center sectors, the Philippines economy has shown signs of steady improvement but the Philippines recruitment market continues to suffer from a severe brain drain as many Filipino professionals leave to seek better paying jobs overseas.
The Overseas Filipino Diaspora, OFWs and Filipino Returnees
Its been estimated that the overseas Filipino population numbers anywhere from 9.5 million to 12.5+ million or roughly 11% of the total population of the Philippines with many overseas Filipinos being classified as Overseas Filipino Workers (OFWs) who are merely working rather than permanently settled abroad.
Filipinos are the second-largest Asian American group in the United States and are estimated to number at least 4 million or more. The next largest concentration of overseas Filipinos would be in the Middle East (mostly in Saudi Arabia and the United Arab Emirates) where they work as engineers, accountants, construction workers, office workers, medical professionals, restaurant workers and as domestic household staff. Finally, countries such as Malaysia, Canada, Japan, Australia, Spain, the UK, Hong Kong, Singapore, Italy and Taiwan are each estimated to have overseas Filipino populations that number more than 100,000 strong.
With so many Filipinos working abroad, the Philippines economy has long suffered from a brain drain that both the government and the private sector alike have struggled to address. In 2011, it was reported that the University of the Philippines would be implementing a Return Service Program (RSP) at several colleges in UP Manila with the College of Medicine requiring graduates to serve the country for three years after graduation while other colleges will serve for at least two years. However and given that professional salaries are often many times higher abroad, such measures are unlikely to slow the brain drain of low and mid-level Filipino professionals.
On the other hand and at the more senior level, returning to the Philippines can make sense for a Filipino expatriate working abroad. For example: A general rule of thumb for a more senior Filipino manager or professional returning from the United States would be to expect a 30% to 50% pay cut. However and if the returnee is coming from a high cost of living and high tax state like New York or California, the returnee and his or her family should easily enjoy a much higher standard living in the Philippines – even if the salary is much lower.
The Philippines Recruitment Market
Long considered a weak economic performer compared with other Southeast Asian countries, the Philippines economy appears to be on the rebound in part due to renewed optimism with the election of Cory Aquino’s son as President and booming outsourcing, business process outsourcing (BPO) and call center industries. In fact, President Aquino has set a target of $25 billion in revenues from the business process outsourcing (BPO) sector by the time he steps down in 2016 while the industry itself is expected to create 1.3 million additional direct jobs and 3.2 million indirect jobs by then. In addition and despite uncertainties about the state of the global economy, the latest Business Processing Association of the Philippines (BPA/P) quarterly surveys of IT-BPO and shared services executives continue to reveal a sustained and high level of near term optimism for the Philippine outsourcing sector.
Meanwhile and after a high profile Intel plant closing, the Philippine electronics export and electronics manufacturing sectors appears to be showing renewed signs of vigor as coastal China becomes more expensive for electronics companies to operate in. This revival of the Philippines’ electronics sector is largely being led by Texas Instruments which as committed to invest another $1.7 billion in the country over a decade long period.
The Philippines mining industry could also be a future bright spot for the Philippine economy and recruitment market as the country is richly endowed with mineral resources. However, the Philippine mining industry also faces severe shortages of skilled technical and mining talent as most experienced Filipino mining professionals have long sense migrated abroad.
Finally, the Philippines appears to be beginning a serious effort to improve its infrastructure, which should benefit the Philippines recruitment market and the Philippine economy as a whole by directly and indirectly creating more jobs.
Working in The Philippines
Foreign expatriates coming to work in the Philippines should obtain a Pre-arranged Employment Visa under Section 9 (g) of the Immigration Act from the Philippines embassy or consulate with jurisdiction over the foreign expatriate’s place of residence. The prospective employer in the Philippines will also need to receive permission from the Philippines Department of Labor and Employment (DOLE) before the application is turned over to the Philippines’ Bureau of Immigration for processing. In addition, the Philippines Department of Labor and Employment (DOLE) is responsible for issuing an Alien Employment Permit (AEP) to foreign expatriates working in the Philippines.
On the other hand, Filipino returnees, Filipino overseas workers, former citizens of the Philippines and their immediate family members should explore visa options under the Balikbayan program as well as dual citizenship options. Former Filipinos and foreign expatriates who intend to retire in the Philippines should also explore Special Resident Retiree’s Visa (SRRV) options administered by the Philippine Retirement Authority (PRA). For further information about Philippine work permits, Balikbayan visas or general visas for the Philippines, visit the website of the Philippines’ Bureau of Immigration.
As for taxes in the Philippines, income of residents in the Philippines is taxed progressively up to 32% while foreign expatriates occupying managerial and highly technical positions at RHQs, ROHQs, multinational companies, offshore business units and petroleum service contractors/subcontractors are taxed at 15% on their gross income. In addition, resident citizens of the Philippines are taxed on all of their net income derived from sources within and worldwide while resident aliens and nonresidents pay taxes only on Philippine source income in the same manner as resident citizens pay on income sourced within the country. For further information about the Philippines’ tax rates or Philippine taxes in general, visit taxrates.cc, KPMG’s Taxation of International Executives page for the Philippines or the website of the Bureau of Internal Revenue (BIR) of the Philippines.