On a recent trip to Hong Kong to drum up investor interest, President Gloria Macapagal Arroyo noted that there were barely 2,000 people in the so-called business process outsourcing industry when she gave her first State of the Nation address in 2001.

“Today, five years later, it is 100 times bigger - we have 200,000 workers there,” she said at a news briefing. “And every B.P.O. company that I meet is looking to double their work force.”

The caveat in the rise of call centers, however, is the deterioration of the Philippines’ main advantage, which is English proficiency. A study conducted by the European Chamber of Commerce in Manila found that 75 percent of the more than 400,000 Filipino students that graduate from college each year have “substandard English skills.”

A survey in June by the Business Processing Association of the Philippines found that English proficiency was among the top three areas that the country should seek to improve, behind only the country’s poor international image and political stability.

“English proficiency is also an urgent impediment to growth,” the group said in the study. “Fifty-one percent of respondents indicated that English proficiency has a ‘very significant impact’ on their organizations’ ability to grow."

The same survey indicated that most call center companies hired only 5 percent to 10 percent of the job applicants they interviewed, mainly because of inadequate English proficiency.

The Philippine Congress responded to those concerns last month by passing a law restoring English as the primary instruction language from high school onward.

Local dialects can be used up to third grade, and from third grade to sixth grade English will be taught separately under the new law.

The Philippines is always referred to as an English-speaking country, with more than 95 percent of the population able to speak or understand it. English, an outgrowth of American colonialism, was the medium of instruction in schools for decades.

Greenlees said “companies seeking cheaper alternatives for basic services have discovered the Philippines. For companies, the country’s appeal, aside from lower costs, include cultural similarities to the United States and employee loyalty.

“With a long history of contact with the United States, including several decades of American colonial rule, Filipinos are more attuned to Western culture than most Asians are. Call center employees not only find it easy to relate to Westerners but are also quick to adapt to a variety of accents. Most call center employees receive intensive training to acquire the accent of the customers they will be talking to.

“I have relatives in California, so I am familiar with the way they speak,” said Jessica Cauilan, 37, a Manila native who works overnight shifts trying to persuade bank customers in the United States to make payments on late credit card bills. Her call center company, IRMC, based in New York, has several such contracts with big consumer credit issuers."

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The call center business is the fastest growing industry in the Philippines, growing last year by 90 percent as revenue reached $1.7 billion. More than 100 centers around the country have created a new class of relatively affluent and independent young Filipinos.

But growth in the industry has put such skilled employees in high demand, driving up competition and labor costs.

In India, the poaching of employees is behind an increase of about 50 percent in labor costs, according to outsourcing companies. They say turnover of staff in some call centers in India has been as high as 200 percent a year.

Filipino companies have turnover rates of 40 percent or lower.

“The longer you have an employee, the higher the quality they are going to deliver,” said Clint Streit, executive vice president for global operations at Convergys, an outsourcing company based in Cincinnati. “From that point, the Philippines has a clear advantage over India.” He added: “Ultimately we have to stem attrition rates in India, otherwise switch to the Philippines.”

Outsourcing company executives say that trend will ensure more call center operations are attracted to the Philippines.

“There are the lowest unit costs, the highest quality and the lowest attrition of any centers in the world,” said Vikas Kapoor, chief executive of IRMC. “It is well placed not only to compete, but to dominate in the sector.”

IRMC started its Philippine operations in February 2005. By early 2007, the company estimates, it will have 1,000 employees. Convergys has hired 9,500 people in the first three years of its operations.

“We will be doubling the size of our business over the next three to five years,” Mr. Streit, of Convergys, said.

Sheryl Lapuz, an IRMC employee with a degree from the University of the Philippines, said the combination of good wages and a modern workplace made it easy for call centers to attract qualified staff. “It’s the ‘in job’ in the country right now,” she said.