Dateline: Davao, Philippines
The whole purpose of this site is to encourage you to find the places where you and your money are treated best. When it comes to hiring talent overseas, the Philippines is a commonly mentioned jurisdiction thanks to its huge BPO outsourcing industry.
In fact, the Philippines makes it so easy to set up a business in the BPO industry that you can start a Filipino corporation with less than $125 in paid-up capital.
In the western world, people hurl insults at call center workers, telling them to “get a real job”. Here in the Philippines, outsourced tasks like answering the phone at a call center, is one of the best jobs you can get. Workers in places like Quezon City and Makati in Manila can earn $500 a month and be the envy of their friends.
I shared earlier this year that I expect the market of outsourcing from Japan and South Korea to be the next to take off. There, workers proficient in Japanese and Korean can earn $600 a month or more. When you consider the cost of hiring labor in Japan and Korea – and the fact that there’s much more room for outsourcing growth than in the west – that’s a fantastic bargain.
Outside of the National Capital Region of Manila, prices are much lower. The question, as always, is “do you get what you pay for?”
While I was in Cebu last week, I met with Chris Ducker, who runs one of the largest services for virtual assistants in the Philippines. In the online world, he practically owns the space.
Chris told me most of his business is for “general virtual assistants”; Philippines-based VAs who handle general secretarial and administrative tasks, rather than specialized tasks like website design.
In Cebu, the economic center of central Philippines, such an assistant can be hired for about $400 a month with good English skills. That’s about a 25% discount over Manila.
Here in Davao, it’s not uncommon for people like mall or restaurant workers to earn as little as $100 a month. Many of these people speak relatively good English.
Chris suggested to me that he chose Cebu for its combination of quality living, quality workforce, and value proposition. Most expats entrepreneurs here shun Manila as a too-busy dump – an opinion I find to be the Philippines version of Americans hating New York – but opinions differ on the best place to do business in the Philippines.
Cebu, Chris says, has more universities than almost any other part of the Philippines, leading to an educated workforce with great English skills. In a country of friendly people, Cebuanos are considered to be some of the most friendly.
However, here in Davao, it’s hard to get many jobs without a college degree. Not just “white collar jobs”, but service jobs. Some gas stations prefer workers to have a college degree.
In many parts of the Philippines, employers have plenty of resumes on their desks. In a tribute to the ineffectiveness of government, workers are given five month contracts, the maximum allowed before a much higher level of employee benefits kick in.
That means that a lot of workers change jobs twice a year – and often have periods where they are “looking for work” – because of inefficiencies in the system.
One suggestion Chris Ducker made was that anyone serious about starting an on-the-ground business needs to be… well, on the ground. Setting up shop in the Philippines and taking off isn’t going to grow your business to the 300 employees Chris has.
The good news is that the low cost of hiring staff in the Philippines can help you increase your business productivity, as well.
I had lunch with Davao’s most famous expat, “Mindinao Bob”, over the weekend. Bob shared that many expats in Davao have live-in maids at a slightly above market rate of about 2500 Philippines pesos a month – about $65. While that $65 is basically “mad money” for your maid, the money she could save you in negotiating better deals on produce and other items could more than make up for the cost of housing and feeding her.
Whether your business is online or offline, there are some excellent advantages to hiring staff in the Philippines. And compared to other places in Southeast Asia you might be less prone to move to, living in the Philippines can be very pleasant.
While I believe running a business outside of the increasingly draconian United States is a first step to a greater chance for success, keeping costs low is always an important component of doing business.
While there are a few requirements for running a physical business in the Philippines, the costs are reasonable. How many business ideas have you had that wouldn’t take a chance on – or that just wouldn’t have worked – because of high staff costs?
With middle class Filipinos clamoring for foreign – and especially American – brand goods, there are a ton of ideas you could literally just import and pivot to fit the local consumer. Set up a shop here in Davao and put out an ad to hire workers for $150-200 a month.
Stores here have so many employees around their stores that you can’t go anywhere without being drowned in a symphony of “Hello, sir”s.
The Philippines is also home to a culture of what I call “forced entrepreneurship”. This is where people become entrepreneurs not to create the next Facebook, but because they don’t have the requisite skills to get jobs in the formal economy.
The informal economy is a hallmark of developing countries everywhere, but the Philippines has their own unique spin on it. Sari sari stores – stores based in the front of someone’s small home – are ubiquitous on city streets throughout the country. The working class rely on these stores for 5-peso single cigarettes, single-serve packets of shampoo, and more.
As time goes on, more workers in this informal economy will become educated and seek jobs of the nature we’re discussing. While entrepreneurs in other Asian countries believe their country – most notably Vietnam – will take share in the English-speaking staffing market, I believe the Philippines will continue to be a venerable player for affordable talent, whether it’s business process outsourcing, or local businesses.
Of course, there is entirely different business opportunity in helping Filipinos find work elsewhere. Employment agencies are a dime a dozen here in the Philippines, but many are not specialized. These days, most jobs are in the Middle East. Just the other day, I saw a sign advertising domestic worker jobs in Kuwait that pay $400 a month.
Frankly, I think there is an opportunity for someone with a solid Filipino business partner as well as connections in the west to enter this market. While low-paying maid jobs in the Middle East – where most Overseas Filipino workers go only reluctantly – don’t charge fees for placement, nursing jobs in places like Canada, Europe, and Singapore can earn agency owners a tidy sum.
To compete in that market, you really have to know your stuff and be well-connected. You also can’t own more than 25% of an employment agency as a foreigner.
However, it goes to show that there is more than one angle to build a solid business off of when the fundamentals are solid and the cost of entry is minimal compared to the dying western world.