PEZA banks on allyshoring to woo US firms

MANILA, Philippines — The Philippine Economic Zone Authority (PEZA) is banking on the allyshoring or friendshoring trend to sustain the  demand for business services from the United States.

In a Viber message, PEZA director general Tereso Panga acknowledged a recent report by global management consultancy Kearney, which ranked the Philippines as the 12th in terms of attractiveness as an offshore location for business, three spots lower than its 9th ranking in 2021.

“The lowering of the Philippines GSLI (Global Services Location Index) ranking is acknowledged due to nearshoring by some US businesses,” Panga said.

“However, PEZA believes that this is temporary given that there is a renewal and strengthening of ties with the United States under our current administration,” he said.

Panga said the PEZA is looking at allyshoring or friendshoring as a stop gap measure while the new digital hubs are still in the pipeline.

“We are banking on the improved perception of the Philippines as an investment destination of companies from the Western Hemisphere and attract them to re-engage with the Philippines,” Panga said.

“I believe we still remain as a prime destination for the traditional IT-BPM services where we are ranked in the top 10 among choice destination locations.  This is in part due to the high English language proficiency of our workforce as well as the high quality of our IT engineers,” Panga said.

He emphasized that allyshoring has been working for the PEZA even in manufacturing, especially when it concerns the American export producers which remain its second biggest foreign investors, next to Japan.

“This is further bolstered by the increasing trade and investments between our two countries, and where the semiconductor-electronics products produced in the ecozones continue to be our country’s biggest source of export revenues,” Panga said, citing that in 2022, total electronics exports reached  $49.1 billion, with the US being a top destination of these exports.

Based on the GSLI report, Kearney noted that the Philippines’ drop in its ranking was due to the rise of Mexico and Colombia as nearshore capability centers with proximity to the United States.

Panga said these companies that have transferred to Mexico and Columbia are basically targeting the Spanish speaking market in the United States which is not really the Philippines’ core target.

“Instead we are looking at the IBPAP (IT and Business Process Association of the Philippines) to target English speaking countries like Australia and New Zealand as the new markets for their industry given the country’s recent accession into RCEP (Regional Comprehensive Economic Partnership). This will complement our traditional market strengths in the US and EU for services exports,” Panga said.

The IT companies registered with PEZA directly employ around one million Filipinos.