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‘Cebu needs infrastructure for growth as BPO destination’

By: Vanessa Claire Lucero July 18,2015 - 11:47 PM

Ookla survey  shows slow  Internet speed in PH, Cebu

Micheal McCullough, managing director of KMC Mag Group Inc., talks about the BPO sector in the Philippines during a property summit in Cebu. (CDN PHOTO/CHRISTIAN MANINGO)

Micheal McCullough, managing director of KMC Mag Group Inc., talks about the BPO sector in the Philippines during a property summit in Cebu. (CDN PHOTO/CHRISTIAN MANINGO)

The lack of infrastructure remains the biggest threat to the growth of the business-process outsourcing or BPO industry in Cebu.

Michael McCullough, KMC Mag Group Inc. managing director, said this during the recent Property Summit Cebu jointly organized by Lamudi Philippines and MediaCom Solutions.

He said  infrastructure in Cebu is still developing and  lacking in several departments, including connectivity between micro districts.

“We’d love to see a central planning body for Metro Cebu, similar to the Metropolitan Manila Development Authority (MMDA) found in Manila,” he said.

He said the lack of connectivity along with a lack of infrastructure to deal with traffic, transportation and communication needs, pose serious obstacles to Metro Cebu’s growth as a BPO destination.

“The government should further improve the ease of doing business in order to remain competitive.  There’s a lot of red tape when you set up a business,” said McCullough.

A separate list released by Ookla, an Internet speed measuring tool and metrics provider, last May showed the Philippines ranking 178th out of 200 countries in terms of Internet download speed with an average speed of 3.6 megabytes per second (mbps).

Ookla also showed Lapu-Lapu City and Cebu City ranking 7th and 8th  in the top 10 cities of the Philippines with average download speeds of 5.25 mbps and 5.07 mbps respectively. The list is topped by Pasay City with 11.03 mbps.

A single mbps has a data transfer rate of 125 kilobytes per second (kbps). Lapu-Lapu and Cebu City’s average data download speed, while slightly higher than the national average, still falls far short of the worldwide standard of 23.3 mbps.

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In the forum, McCullough said these problems are critical with the city emerging as a tech-startup center for young businesses, and as a potential expansion site for bigger enterprises.

McCullough also said in his office market outlook that townships and micro districts will also come online within the next 3-4 years and that rental rates will continue to rise due to growing demand from incoming investors.

Business hubs in Cebu will also likely get more offices, as several big locators are looking to expanding in Cebu.

McCullough cited several businesses, including Telstra, Qualfon, United Health Group and QBE, as some of the BPO players who are actively expanding in Cebu City.

“We’d love to see a central planning body,” he added, noting that the province doesn’t have a central planning body for Metro Cebu, similar to the Metropolitan Manila Development Authority (MMDA) found in Manila.

He said a planning agency can address the slow-paced development of infrastructure, as well as disaster-preparedness and disaster-ready structures, and security.

McCullough said improvements in Cebu’s infrastructural landscape have to be done immediately to decongest the city. “I’d say that traffic is as bad here as it is in Manila. The traffic is going to be a turn-off for foreign investors,” he said.

Another challenge faced by Cebu is the growing competition not only from Manila, but other emerging BPO destinations in the Philippines like Bacolod, Iloilo and Davao.

Despite Cebu’s fast-paced growth and the rising number of businesses coming in, McCullough said it is still seen as a secondary rather than a primary site option for BPOs.

He said people still choose to put up their first offices in Manila, and then consider Cebu for an expansion of that office, rather than move into Cebu directly.

“Cebu used to be kind of a lower-cost destination. The office market is coming up quickly, at almost the same prices as within Metro (Manila). Labor cost has also increased a lot,” he said.

McCullough also said the quality of Cebu’s labor force for the BPO sector is decidedly lacking, which would force businesses to either hire more people outside or relocate completely.

“We actually have a decent amount of graduates but these grads need to be hire-able and employable by the BPO Industry – and right now they’re not,” he said.

McCullough said only 10 percent of the graduates are actually employable after graduating. To raise the percentage, he suggested increasing the quality of the education system in order to prepare students better into joining the work force.

He said this is especially true for higher level BPO services, which offer better paying jobs for employees.

While improvements in transportation are being made such as the second airport passenger terminal in the Mactan Cebu International Airport (MCIA) and the Bus Rapid Transit (BRT) system,

McCullough said more needs to be done.

McCullough said developers should also move towards building 24/7 live-work-play environments, which should cut down on traffic and be more beneficial to the people as a whole since retail, residential and commercial or office spaces will be much closer to each other.

He added that the city should also strengthen its brand as a BPO destination through improving and supporting social and physical infrastructure.

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TAGS: BPO, Internet

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