Transcript The Phillippines - School of Business Administration

Republic of the Philippines
Where the East meets the West
Renee Dobson
Arpitha Reddy
Desi Segundo
The Philippines
IT-led Development in the Philippines
IT-led Development
Industrial
Policy
Environmental
Factors
Political, Social
and Economic
Environment
Education & Skills
Technology Policy
Infrastructure
IT Diffusion
Industry
Structure
Indigenous vs. MNC R&D
IT Production
and Use
Economic
Payoffs
Employment,
Productivity and
Economic Growth
Environmental Factors
Social / Political

Population:
84.5 million (July 2003)

Capital City:
Manila (Pop: 10 million)
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People:
Predominantly descendants of Malays, Chinese and
Muslim minorities and a number of Mestizos
(Filipino-Spanish or Filipino-Americans)
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Language:
Filipino. English and Spanish. Also numerous
widely spoken indigenous languages.
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Religion:
82% Roman Catholic, 9% Protestant, 5% Muslim,
3% Buddhist
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Government:
Republic
Environmental Factors
Economic

GDP: $356 billion (2002)
GDP Growth in the 1990’s suffered due to the Asian Financial Crisis & Poor
Weather. Public sector has a debt of double the country’s GDP due to this crisis.

Real Growth Rate :GDP (2002): 4.6%
Real Growth Rate: GNP (2002): 5.2%

Gini Index : 46.2 (1997)
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Percentage below Poverty Line: 40%
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Currency: Philippine Peso

Exchange rate: P 52.30/US $ (May 2003)
USA: 40.8 (1997)
Industry Structure
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Industry: Textiles & Garments, Pharmaceuticals, Chemicals, Wood Products, Food
Processing, Electronics Assembly, Petroleum Refining & Fishing.
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Top 5 Exports (as % of total exports) :
Electronic Components (54.0), Apparel and Clothing Accessories (6.8), Ignition
Wiring Set (1.5), Woodcrafts and Furniture (1.2), Metal Components (1.2)
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Exports partners: (2002)
 US 24.9%,
 Japan 15.0%,
 Netherlands 8.8%,
 Taiwan 7.1%,
 Singapore 7.0%
Industrial Policy
Education / Skills

Philippine education is patterned after the American system, with English as the
medium of instruction. Schools are classified into public (government) or private
(non-government).
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The general pattern of formal education follows four stages: Pre-primary level
(nursery and kindergarten) offered in most private schools; six years of primary
education, followed by four years of secondary education. College education
usually takes four, sometimes five and in some cases as in medical and law schools,
as long as eight years. Graduate schooling is an additional two or more years.
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Computer technology/ literacy is only available in private elementary and high
schools due to cost.
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Most colleges / universities are able to provide computers technology / literacy. In
fact, computer literacy classes have been included in the curriculum.
Industrial Policy
Infrastructure
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Total number of main telecommunication lines increased to 6.98 million in
2001 from 3.3 million in 1996
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Teledensity ratio (# of installed lines per 100 people): 9.9
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Implementation of Service Area Scheme to make sure that all regions have access
to the network.
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Current Domestic Telecom Players:
PLDT (Philippines Long Distance Telephone Company) Islacom, Globe Telecoms,
Smartcom, Digitel, Philcom, Capwire and PT&T, Eastern Telecom (ETPI), Piltel,
Atlas Telecom and BayanTel
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PLDT accounts for 67% of the telephone service in the country
Industrial Policy
Infrastructure
Telephone Density
Growth in Wireline Telephone Density
Index
10
9
8
7
6
5
4
3
2
1
0
8.07
9.08
4.66
1.67 2.01
1.17
1.21
0.91 0.95
19 91
19 93
19 95
Year
19 97
19 99
Industrial Policy
Technology Policy
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In July 1994, President Fidel V. Ramos approved the National Information
Technology Plan.
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The National Information Technology Council (NITC) was constituted to oversee
the implementation of the Plan, now called the IT Action Agenda for the 21st
Century (IT21), the country's blueprint for IT development.
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IT21 was approved on October 28 1997, as the Philippines' guide for IT
development in the country over the next 7-15 years.
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Its overall goal and vision of the country is to transform the Philippines into a
"Knowledge Center in Asia”.1
Industrial Policy
Technology Policy
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The plan sets forth an agenda to:
• Develop the information infrastructure for interconnection and networking
within the country
• Turn the Philippines into an Asian hub of software development and training
• Improve the government's capacity and efficiency in adopting IT to help in
governance of the country and help spur the growth of the Philippine IT
industry
• Develop and adopt IT in education, in both the public and private sector, as
well as training institutions, to create a critical mass of IT professionals and an
IT-literate workforce
• Upgrade available IT resources in the local R&D sector
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IT21 relies on both the government and private industry to play leading roles in
pushing forward IT use and IT production in the country
Industrial Policy
Technology Policy
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The Information Technology Agreement (ITA) was formed to eliminate tariffs on
information technology by the year 2000
• The Philippines has already reduced the duties on selected IT products to 3%.
This began in 1995 and continued until the year 2000.
• A final goal of this agreement is a uniform duty of 5% which will be introduced
by the year 2004.
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Another government initiative, pushes for the interconnection of local Internet
Service Providers into one Internet exchange
• This exchange, called the RPWEB, puts the entire government organization
online.
• On November 7, 1997, the President directed all government agencies down to
the local and field levels to interconnect through the Internet.
IT Diffusion
IT Production / Use
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PLDT (Philippines Long Distance Telephone Company) offers Integrated Voice and
Data Services include Diginet (domestic leased line), Fibernet (international leased
line), DataPac (international and domestic packet switching), PhIX (Philippine
Internet Exchange) and ISDN (Integrated Services Digital Network). The Voice and
Messaging Services include VideoCon (video conferencing) among others.

PLDT is part owner of an existing fiber optic submarine cable systems.

Cables connect the Philippines to the rest of Asia and to the rest of the world via
these 20 gig cables.

A new backbone network has been installed allowing PLDT ability to offer new
services such as Voice over IP, VPN’s and unified messaging.
IT Diffusion
IT Use
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Cellular teledensity has risen to 27% of all telephone subscribers in the country
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A leading adopter of Cellular technology - Text messaging has been available for
the past 5 years and the picture phone for the past 3

Companies: Smart & Globe
IT Diffusion
IT Use & E-commerce

Internet users estimated to be 4.5 million.
(2002)
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Philippines Internet Exchange (PHiX)
allows local ISP’s to access and exchange
local internet transactions w/o accessing
the global internet.

This network solves the problem of
dropped data and also decreases the time
data is sent between Philippine companies.

The number of Philippine ISPs increased
from 19 in 1995 to 88 in 1996, and to over
160 by the end of 1997. The number of
ISPs in the country is now estimated to be
around 190. (1999)
IT Diffusion
IT Use
Software Development

The software and services subsector has been a consistent export winner.

With export revenues reaching US$206 million in 1996, up by 51% from the US$125 million
in 1995, which was a phenomenal increase from the US$66 million in 1994. Target exports by
year 2000 is US$300 million.

Most of the country's software exporters only serve as subcontractors for bigger software
producers in other countries such as the United States.
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Though the IT21 Agenda is making efforts to increase the nation's niche market in software
production, still, many major players are US owned businesses who have decided to move
their software services in the Philippines for the Asia-Pacific region. Some of these players
are:
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Computer Associates Philippines
Linux Philippines Corporation
Microsoft Philippines
Oracle Philippines
Economic Payoffs?
Strengths & Weaknesses
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Strengths
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Well-educated, competent, reliable and
price-competitive labor
English proficiency within the nation
Growing record of successful IT work
Fast-growing telecom infrastructure
Government interest in the industry
A democratic government system fostering
flexibility and creativity
Less regulation than some neighbor
countries
Large investment interest from the foreign
and private sector
Creation of a special IT office complex to
give the IT industry incentives to grow
through tariff-free imports of capital
equipment and simplified tax returns
Quick adopter of new technologies
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Weaknesses
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Power and wealth distribution – Too many
people are either very rich or very poor
Lagging behind in basic infrastructure w/
limited access to networks
Inefficiencies of current ISP’s network –
Too much downtime as PhIX had to be
adopted just to keep local e-commerce
business up and running
A scarcity of middle to high-end IT
professionals
Difficulties marketing the nation and the
industry globally
Capital cost and scarcity of monies
available
A small domestic market
Insufficient IT education
Competition from neighboring countries
such as Malaysia or India which both have
strong IT labor forces & already
established infrastructure more equipped to
handle IT demands
Recommendations
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General:
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Continue to increase teledensity & widen coverage nationwide
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Continue to expand the telecommunications infrastructure across all urban & rural areas
•
Increase computer technology and literacy - People must be taught how to use
computers at an earlier age
•
Increase computer schools, training facilities & computer science & engineering degree
programs within Universities
•
Accelerate the deregulation of government ownership, provision & direct operation of
telecommunications services
Specific:
•
Adoption of the Mondex Card - use it in conjunction w/ a smart chip to eliminate the use
of other cards & information
•
Increase the use of E-Commerce - although still in it’s infancy & very pricey there is a
government initiative to reduce the cost of it
Resources
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CIA – The world factbook http://www.cia.gov/cia/publications/factbook/index.html
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Information Technology Association of Philippines http://www.itaphil.org
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The Official Government Portal of the Philippines www.gov.ph
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Information Technology in the Philippines http://www.american.edu/carmel/bree/
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Gervacio Brondial director of kodaly program California State University