IBPAP warns of job losses, contraction in IT-BPM sector

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The IT and Business Process Association of the Philippines (IBPAP), which is set to hold its first annual membership meeting this year on March 4, is wasting no time in raising the alarm about possible job losses and contraction in the Information Technology-Business Process Management (IT-BPM) sector if a number of key concerns are not addressed by the government.

These concerns include regulatory issues that affect competitiveness and issues that may undermine investor confidence.

Among these are the continued imposition of local taxes, fees and charges by some local government units (LGUs) despite the CREATE MORE provisions granting exemptions to registered business enterprises or RBEs.

They also cited inconsistent business permitting requirements, including requirements for additional local documentation for employees.

Another concern is Bureau of Internal Revenue Memorandum Circular 05-2024, which, as implemented in some areas, subjects certain cross-border services to a 25 percent final withholding tax plus 12 percent value-added tax (VAT).

They also cited large and inconsistent tax assessments that create uncertainty for investors.

Although clarificatory guidance was issued through RMC 38-2024, IBPAP said companies continue to report uneven implementation across BIR revenue district offices.

“These concerns are escalated to global headquarters and influence location decisions,” Celeste Ilagan, chief operating officer of IBPAP, said.

IBPAP estimates that regulatory friction and related cost differentials may increase operating costs by 15 to 20 percent compared with competitor markets.

And there are competitors willing to grab a share of the market that the Philippines currently services, including Vietnam.

The Philippines currently stands No. 2 in providing outsourcing support for the global IT-BPM market, second only to India.

Apart from the regulatory issues, IBPAP also cited the need to address increasing concerns over cybersecurity and legal standing.

IBPAP is also calling for amendments to the Cybercrime Prevention Act of 2012 to grant IT-BPM firms legal standing to directly file cybercrime cases when fraud affects foreign clients.

At present, they pointed out, companies may bear financial liability but lack prosecutorial standing, limiting deterrence and weakening client confidence.

The association is working with lawmakers and relevant agencies to pursue targeted amendments that will strengthen enforcement and reinforce the Philippines’ position as a secure outsourcing destination.

Another concern they highlighted that must be tackled is AI disruption and workforce readiness.

AI, they stressed, is rapidly transforming global services. While AI presents growth opportunities, they explained, it also poses risks to entry-level and voice-based roles without large-scale reskilling.

Projected government-funded AI training programs for 2026, IBPAP noted, may cover approximately 68,000 learners, a small portion of the 1.9 million-strong workforce.

“If there is no talent, there will be no locators,” said Frankie Antolin, IBPAP executive director for talent development and attraction. “We need to embed digital capability across the workforce and accelerate industry-aligned training.”

IBPAP is thus urging a much faster rollout of TESDA and DICT reskilling programs and accelerated approval of enterprise-based training initiatives.

Additionally, the association is urging more nationwide AI literacy programs and targeted support for small and medium enterprises or SMEs and homegrown business process outsourcing firms or BPOs.

IBPAP stressed that the IT-BPM sector supports significant employment outside Metro Manila, including more than 250,000 workers in the Visayas and growing hubs in Mindanao.

IBPAP’s roadmap targets 40 percent of future growth in regional locations.

The association warned that even modest job losses in provincial hubs could significantly impact local economies.

IBPAP welcomed the Senate’s commitment to further consultations and oversight but stressed the need for immediate alignment of LGUs with CREATE MORE provisions and consistent tax implementation by the BIR.

It reiterated its call for targeted amendments to the current cybercrime law.

With regard to reskilling IT-BPM workers, it is urging accelerated, industry-driven AI upskilling programs with strong coordination among the Department of Trade and Industry, the Department of Information and Communications Technology, TESDA, CHED and the private sector.

“This industry helped build a new Filipino middle class,” Ilagan said. “With clear policies and decisive action, the Philippines can remain a global leader in IT-BPM.”

IBPAP welcomed the filing by Sen. Bam Aquino of Senate Resolution 253 and the convening of a public hearing by the Senate Committee on Science and Technology to examine the challenges confronting the IT-BPM industry amid rapid technological advancements, including AI, automation and digital transformation.

Senator Aquino, joined by Sen. Risa Hontiveros, tackled the various problems reported by IBPAP in a prior meeting, which included the growing seriousness and sophistication of cybersecurity threats and cybercrimes committed in IT-BPM companies, declining ease of doing business resulting from ordinances that are not compliant with national law, impractical and burdensome requirements in certain department orders relating to occupational safety and health, increasing cost of doing business due to BIR RMC 05-2024 and the agency’s tax assessment practices, and the slowness in rolling out TESDA funding for upskilling and reskilling programs proposed by IT-BPM players for near-hires and existing workers.

“The IT-BPM sector is a critical driver of national growth,” Ilagan said, adding, “Investor confidence depends on resolving ease of doing business issues and investing aggressively in talent development.”

The IT-BPM industry employs 1.9 million Filipinos, contributes 8.2 percent to gross domestic product or GDP and is projected to generate $42 billion in revenue by the end of this year.

The sector remains on track toward its Roadmap 2028 target of $60 billion in revenues, provided structural constraints are addressed promptly.