The business process outsourcing (BPO) industry is projecting an annual growth of 40 percent to $ 7 billion this year from the 2006 level of $ 5 billion despite the peso appreciation.

Oscar R. Sañez, chief executive officer of the Business Processing Association of the Philippines (BPAP) said the cost advantage of the country is still significant while a lot of US firms have yet to outsource their non-core business.

Sañez said the Philippines is not the only affected country by the depreciating US dollars, noting that India, a BPO country competitor, is suffering the same constraint as the Indian rupee is also strengthening against the greenback.

Company revenue losses in 2007 reached up to 12 percent as they used the P46 to P47 foreign exchange rate in their financial planning assumption while the peso even breached the P40 level towards the end of the year.

The industry suffered a "very direct hit" because its contracts are mostly with the US clients, thus measure revenue in US dollars. Like an export company, call centers and BPOs spend in pesos because they operate in the Philippines, he explained.

To address this problem, Sañez said the BPO companies at the start of 2008 have started negotiating new and renegotiated contracts based on foreign exchange rate of P38 to P40, which is the banking sector’s projection for 2008.

He said some bigger firms have also availed of hedging facilities offered by banks designed to help them cope with the impact of the rising peso.

To stay in the business, Sañez said, industry players are also exerting more efforts to improve their operational efficiencies by ensuring that their costs are well managed and their productivity is increased.

"With these, we are on track of hitting our $ 13-billion revenue target for 2010. There is no indication that we need to revise," he said.

Despite these survival strategies, Sañez still sought assistance from the government in the form of tax incentives and support for near-hire training.

"We hope that the government continues extending tax incentives to the industry and supporting our recruitment training," Sañez added.