The Philippine service sector has come a long way in just over a decade, with its tremendous growth owed in no small part to the business process outsourcing (BPO) industry.

BPOs are now among the big drivers of Philippine economic growth as they generate hundreds of thousands of jobs, foreign investments and foreign exchange revenues.

Today, the Philippines is a leading call center host. A Tholons 2013 survey listed the Philippine region of Metro Manila as the world's third top BPO destination, up from fourth place in 2012 from Tholons, a strategic advisory firm.

The southern city of Cebu, meanwhile, moved up to the eighth place, while five other Philippine cities made it to the lower reaches of this year's top 100 list.

In 2012, the industry reported 18 percent year-on-year growth in revenue to $13 billion while employment jumped 21.8 percent to 780,000 jobs. The industry is presently targeting $25 billion in revenue and 1.3 million workers by the end of 2016.

By 2016, the sector is also expected to account for about 10 percent of the country's GDP and for more than 1 million direct jobs and more than 3 million in indirect employment. It is likewise forecast to remain a major source of foreign exchange, second only to remittances from overseas Filipino workers.

But while the BPO industry is now on a roll, it is not without problems.

In a bulletin in May, leading Philippine law firm SyCip Salazar Hernandez & Gatmaitan noted that BPO industry stakeholders were wary of a number of risk factors in relation to "talent retention and development as well as the relative strength of the local currency that was viewed as exacerbating the issue of rising operating costs".

There were also concerns related to investment incentives and the legal and regulatory framework.

"For instance, some foreign investors are surprised that employees cannot simply be let go and that termination of employment needs to follow a particular procedure, otherwise the dismissal could be considered unlawful," the law firm wrote. "Other new companies offer significant compensation packages at the very start of operations, not realizing that they may not be able to scale these back later on because of the local legal regime's principle of non-diminution of benefits."

Many industry stakeholders, however, remain confident that, despite emerging concerns, the Philippine BPO sector will continue its current growth trajectory in the coming years.

For China Business Weekly