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India offers PHL lessons in moving up the global outsourcing value chain

​​​​​During the Asia CEO Forum in Makati City, Ramesh Nair, chief operating officer at Jones Lang LaSalle (JLL) India, said the issue of relaxing land ownership rules for foreigners was likewise raised in India in 2005 when the South Asian nation -- now known as the leading global sourcing destination -- allowed job-generating foreign direct investments (FDI) for the first time in the property sector.

Since then, India’s real estate sector has attracted nearly $26 billion from private equity funds, Mr. Nair said.

“The government needs to open up these sectors given that China is slowing down,” he said.

“Maybe some of these global funds will be looking at emerging markets. Countries like the Philippines can be a destination for global capital flows,” he added.

The Constitution limits foreign ownership of land to 40%, with a few exceptions.

The Philippines has achieved leadership status in the global outsourcing stage, surpassing India as the voice capital of the world. Business process outsourcing has since then become a significant contributor to the Philippine economy.

However, India is still king in the non-voice sector and for Mr. Nair, one of its advantages is its edge in the higher-value knowledge process outsourcing.

Taking a page out of India’s book, the Philippines must make land available for development at subsidized rates to big-name IT companies to encourage them to move here.

“Government needs to create subsidized real estate. If you can get Google to come and set up a base here, the government should offer them a very good discount on real estate. If you magnet a name like that, word gets around and people will start following,” Mr. Nair said.

As a safety net, foreign control must be given only to big players who will invest in large-scale projects that will generate jobs, he said.

But before allowing foreigners to own land, the government must make sure that it will be easy for these big businesses to start operations. “When these large players come, you need to make sure the ease of doing business is taken care of. What happened in India is these large players came but they did not get their approvals fast and the word started spreading. They came back to New York saying ‘India is a very tough place to do business in.’ The government needs to fix it to before attracting funding form outside,” Mr. Nair said.

Another key challenge for the Philippines in moving up the value chain is the lack of talent, Lizanne H. Tan, JLL Philippines’ head of tenant representation, said in a briefing after the forum.

“For countries like the Philippines and India, this presents an opportunity to actually leapfrog without touching manufacturing and straight into those high-tech sectors...” Mr. Nair said.

“The future... [belongs to those] countries that can provide the technical skill jobs rather than blue-collar-type of jobs.” 

This article was originally published in Business World.