Philippine Communication Centrum Foundation - Observatory-Medium Term Development Plan-NEDA

Technology is the foundation of the country’s future economic development. The Philippines shall use information and communications technology (ICT) to leapfrog into the new economy.

The Philippines enjoys significant comparative advantages in ICT – an English-speaking, highly educated, easily trainable, and skilled workforce with a growing track record of successful ICT work; a basic policy environment that is right for business; government commitment at the highest levels, with strong private sector support in the pursuit of a common ICT agenda; and rising entrepreneurial abilities suitable for a globalizing economy. With its rich human resources and strategic location in Asia and the Pacific, the Philippines has the potentials to fully benefit from an ICT-driven development strategy.

To build on the country’s strengths and gain greater momentum in the nation’s quest for rapid and sustainable development and growth, the Philippines shall further enhance its competitive edge in ICT by: (a) building the physical infrastructure to ensure wider, faster and reliable access at low cost to information and other ICT resources, especially in the underserved rural areas; (b) enhancing the policy and legal environment to promote ICT development and universal access to information and other ICT resources; (c) developing the country’s human potential to enable Filipinos to compete in the digital age; and (d) promoting the use of ICT to streamline business processes and modernize government operations for greater productivity.

POLICY FRAMEWORK

The challenge in the medium term is to disperse ICT capabilities across a broad range of economic activities and income groups. To maximize the benefits of ICT, the policy framework shall focus towards promoting the development of needed ICT skills, improving conditions of access, developing infrastructure and establishing the appropriate policy and legal basis for ICT operations. As a parallel social goal, ICT shall be harnessed to bridge the digital divide among different regions and communities in the country. With abundant human capital, societies can narrow the gap between the rich and poor, given the political will to harness ICT in a democratic, appropriate, and strategic way.

In order to prevent further widening of income disparities across the country, government policies shall have a strong social bias, so that appropriate safety nets for sectors affected by rapid advancement in technology and greater world integration are put in place. ICT shall therefore be developed as an effective instrument for job and wealth creation, as well as for poverty reduction.

Policies shall be pursued to build the country’s capability to become a knowledge center, achieve its selected market niche in software development and data management, and become the e-services hub in Asia. This will include setting up the necessary infrastructure to achieve high-speed interconnectivity at low cost. Human resource development especially in science and mathematics shall support the needs of the ICT sector. Access of regions to basic information and communication services shall be expanded through community e-centers or telecenters, with an Internet-linked computer providing a multifunction resource. Hence, through ICT, Filipinos living anywhere shall at any time have faster and wider access to information necessary for learning and for knowledge creation.

The continuing liberalization and development of the telecommunications sector has given the ICT industry a big boost, bringing increased demand and competition particularly from multinational companies. In addition, the establishment of ICT zones as investment havens for ICT companies wishing to do business in the country, and the opening up of the country’s telecommunications sector has promoted greater competition that encouraged the entry of new players. All these sharply increased investment, raised the number of service providers and users and improved access to telephone services and other modes of communication.

The deregulation of the telecommunication industry that began in 1987 encouraged foreign investors to forge partnerships with local companies. These partnerships have led to greater competition, higher investments, and the introduction and transfer of new technologies. Total investments in telecommunications increased by over 480 percent to P524.7 billion in 1999 from P90.2 billion in 1992 (Figure 4.1).

The current liberalized telecommunications environment has so far resulted in the operation of 11 international gateway facility (IGF) operators (those that can provide international long distance calls), 5 cellular mobile telephone system operators, 15 paging companies, 7 interexchange carrier licensees (those that service other carriers’ traffic using their own networks), and 3 fixed line operators (or those with landline services) in one area. Likewise, the deregulation of the telecommunications industry raised the landline telephone density, defined as the number of telephones per 100 people, from 2.01 in 1995 to 9.12 in 1999 (Table 4.1), but with a slight decrease to 9.05 in 2000 due to the increasing popularity of cellular phones and its ready availability in the consumer market.

Furthermore, the Service Area Scheme (SAS) under the Basic Telephone Program (BTP) mandated by Executive Order (EO) No. 109 in July 1993 required new cellular licensees to install 400,000 local exchange lines and 300,000 local exchange lines to new gateway facilities operators. The targets set under EO 109 were met and even exceeded. Meanwhile, firms with licenses for both cellular and gateway operations are expected to roll out 700,000 lines within three years.

Nonetheless, as of December 2000, only 2.8 million of the total 6.8 million available lines have been subscribed. The slack in demand can be traced to the problem of affordability, particularly among low-income households. Hence, telephone distribution is still uneven throughout the country and highly skewed towards major urban centers.

The pricing regulatory framework for telecommunications has not kept pace with the increasingly competitive environment. The rebalancing and restructuring of rates and tariffs towards cost-reflective pricing is the only way of moving towards fully competitive markets. The National Telecommunications Commission (NTC) is now in the process of developing a cost-based wholesale pricing regime. During the transition period, the revenue sharing scheme between service providers will be converted to access charges. Cross-subsidy to basic telephone service will be quantified and gradually adjusted during the transition period so that it will be aligned with the cost based pricing program.

Cellular mobile phone services

The growth of mobile phone penetration and usage has been phenomenal. The Cellular Mobile Telephone Service Subscriptions (CMTS) reached a subscriber base of 6,454,359 in 2000 from 2,849,880 in 1999 (Figure 4.2). Cellular phone service has penetrated the grassroots level to the point that the Philippines is now the "text (or short messaging service) capital of the world" and is positioning to be the WAP (Wireless Application Protocol) capital of the world as well.

Due to the growing demand for mobile phones and other telecommunications products, capital spending for telecommunications equipment increased to P6.5 billion from P5.2 billion during the first semester of 1999. The impressive growth of wireless communication in the country has led the International Telecommunications Union (ITU) to regard the Philippines as one of the most dynamic mobile markets in the Asia Pacific, and the largest in the Association of Southeast Asian Nations (ASEAN). This kind of growth holds vast opportunity for data applications, and other emerging technologies that can put the Philippines ahead in the global race to build new wireless applications.

To meet the increasing public demand for more efficient, faster and more up-to-date telecommunications facilities, the following three backbone networks are now being implemented: (a) the National Digital Transmission Network, a fiber optic network that will run from La Union through Western Visayas to Davao City; (b) the Domestic Fiber Optic Network that will provide national digital coverage; and (c) a network that will link Manila and Cebu.

Despite these developments, the following challenges continue to face the ICT sector: (a) inadequate ICT infrastructure (telephone lines and networking equipment) to support interconnectivity and wider public access; (b) high cost of basic telecommunication services; (c) low PC penetration rate; (d) inadequate legal framework for convergence and competition policy; and (e) the privatization of existing public telecommunications facilities.

Personal computer (PC) penetration and Internet access

The PC penetration ratio, defined as market size as a percentage of gross domestic product (GDP), is 0.5 for the Philippines. It is better than Indonesia (0.4) and is at par with China (0.5), India (0.5) and Thailand (0.6). However, it falls way behind Hong Kong (1.2), Malaysia (1.3), Korea (1.6) and Singapore (1.9).

The tremendous increase of Internet Service Providers (ISPs) in the Philippines paved the way for the impressive growth in the number of Internet users in the country, which was recorded at 1.5 million in 2000. This figure surpassed earlier projection of 521,135 Internet users for the year and the 1.1 million users in 1999. In view of this growing demand, many local ISPs began expanding their services to include not only access but also content provision. Their facilities have also been upgraded by setting up more points of presence or value-added resellers in most major urban areas. International Data Corporation (IDC) estimates Internet-related revenue in the country at $146.8 million in 2000 from $52.9 million in 1999, and projects revenue growth of $417.8 million in 2001.

Growth in Internet hosts, defined as the number of computers with active Internet Protocol Addresses (IPAs) connected to the Internet, has been rapid in many countries, including the Philippines. Total Internet hosts per 10,000 people in the Philippines in 1999 reached 1.2, greater than Indonesia’s 0.8 and India with 0.1 (Table 4.2)

Several Internet exchanges have been established in the country, such as the Philippine Internet Exchange (PhIX), the Globe Internet Exchange (GIX), the Broadband Internet Exchange, the PHNET Common Routing Exchange (PHNET CORE) and the Philippine Internet Business Exchange (PhilBX).

Interconnection and universal access

The policy of universal access or enabling user access to telecommunications no matter where the location is or what facility/system is being used, facilitates investment. Thus, an easily accessible system of interconnected telecommunications networks made possible by wire, radio or satellite linkages, is a requisite for universal access.

The Philippines is connected to several up-to-date high capacity fiber optic submarine cable systems in the Asia Pacific and Southeast Asian region with onward connection to North America, Middle East and Western Europe. Satellite systems are also available from the regional and international operators. With the big capacity cable, i.e., US-Japan, US-China and the forthcoming Pacific Crossing systems, there is even a projected oversupply in the Pacific Region. The limited capacity of the spur link to the Philippines will be resolved by the forthcoming installation of APCN 2, C2C and Global Crossing.

The cost of international leased lines to the US has been declining significantly due to an oversupply situation across the Pacific and the deployment of bigger capacity cables. Domestic leased line rates will similarly go down but at a slower rate because domestic demand cannot justify the installation of the latest high capacity systems, and the distances between terminals (major trading centers) are relatively short.

While the decline of the cost of the bandwidth in the new fiber optic system across the Pacific has been rapid, the price in the Philippines may not go down as fast as in other developed countries. This is due to small bandwidth requirements of many small users, the averaging of the cost of investment over a long service period of several old and new fiber optic systems, and the cost of capital in the Philippines that is much higher by several percentage points than developed countries.

To promote wider public access to telecommunications facilities including the Internet especially at the community level, the Department of Science and Technology (DOST), through the Philippine Council for Health Research and Development (PCHRD), established Multipurpose Community Telecenters (MCTs) in four barangays in Mindanao with existing public calling offices (PCOs). Each MCT is equipped with a computer and a modem. This project, which can be a model to other major community centers and barangays, may be considered a major empowerment tool in order for people to have direct access to basic telecommunication services and to information through the Internet.

There are several domestic broadband backbone networks already operating in the Philippines with terminals in major regional centers and cities using fiber optic systems and microwave radios. The Manila-Cebu segment, one of the two nationwide fiber optic systems which operate at 2.5 Giga bytes per second (Gbps) each, is being expanded to 12.5 Gbps with additional 10 Gbps by third quarter of 2001. For hard-to-reach areas, regional satellite systems are being deployed.

While the country has sufficient capacity in the domestic broadband network with international connectivity, there is still a need for more access points, both in the urban and rural areas, to provide the population with equal access to the global economy.

The multiservice provider environment in IT zones operates independently of each other without restoral capability. The investment in extending a fiber optic system with restoral capability can be justified in the later stage of the development of processing zones if there are sufficient bandwidth requirements. It may be noted, however, that the foreign locators or those involved in global operations are always looking for restoral capability of the telecommunication system in case of network failure. Thus, it is necessary to have a distributed integrated network with restoral capability.

Convergence of technologies

The merging of IT, telecommunications, cable television (CATV) and broadcast media offers great potentials for speeding up access to the Internet, especially among households. Moreover, convergence has a significant impact on raising the competitiveness of many domestic firms, including the small and medium enterprises (SMEs). Technology advances and convergence now make it possible for CATV networks to be used for two-way communication and Internet access.

The existing cable infrastructure in the Philippines set up by independent CATV operators now covers most of the towns and cities, even remote municipalities, of the country. If interconnected, these CATV networks have the potential of providing high-speed two-way telecommunication in most areas of the country.

Conversion of the existing CATV networks, however, requires large capital infusion, which the local industry is unable to provide. Furthermore, existing constitutional and legal prohibitions also bar foreign ownership of CATV, which is considered part of broadcast media. Other countries, which do not have these constitutional or legal prohibitions, are now moving ahead and taking advantage of new developments in technology, converting their CATV networks into high-speed broadband networks. There is therefore the urgent need for the Philippines to immediately review its current regulatory regime to make CATV and technology convergence useful for national advancement and development.

The development of IT zones paved the way for the expansion of ICT development in the country. These ICT parks, which offers competitive financial and tax incentives for ICT businesses, serve as prime locations for software, multimedia and other content development, hardware design, prototype production and incubation, computer-based support services, research and development (R&D) services, and other back-office operations.

Over the last five years, the rapid development of economic zones scattered all over the country and the growth in the number of ICT-based manufacturing firms in these estates contributed to the increase in investments in ICT. As of the first quarter of 2001, the IT sector has already registered P6.352 billion worth of investments mostly in the areas of IT services, information service provider, operation of international call centers, data conversion, application services, IT outsourcing, IT consulting, data conversion/medical transcription, design, development and implementation of e-solutions, application software and telecommunication services.

The Board of Investments (BOI) has approved 22 ICT projects with investments valued at P8.2 billion while the Philippine Economic Export Zone (PEZA) approved 11 ICT projects with an estimated cost of P1.2 billion. A total of 83 BOI-approved projects with estimated project cost of P31.3 billion in 2000 from P10.3 billion in 1999 are expected to generate 11,938 jobs. Notably, 77.8 percent of these BOI-registered projects with total investments of P24.1 billion will be located in the regions, implying rising job opportunities in the countryside. Registered projects at the PEZA, amounting to P19.8 billion in 2000 from P16.5 billion in 1999 are expected to generate 21,328 jobs. Locator investments reached P74 billion in 2000 from P30.8 billion in 1999, while exports generated from the 68 operating economic zones totaled $20.025 billion in 2000 from $15.807 billion in 1999. Moreover, 78,345 additional jobs were created in 2000, which is 12.7 percent higher than the 617,690 total employment in 1999, bringing the total zone employment to 696,035 workers as of December 31, 2000.

Back office operations

The Philippines is fast becoming the location of choice for back office operations or shared services. America Online (AOL) established its technical and billing support at the Clark Special Economic Zone in Pampanga. Likewise, companies like Citibank and Caltex, which have shared-service centers in the country handling finance and accounting transactions of their respective groups in Asia, have established international call centers in the country’s business districts and ICT zones, making the Philippines as the emerging "e-services hub of Asia."

Meanwhile, the Philippine Long Distance Telephone Company (PLDT) has set up an Internet Data Center (IDC) that offers services to SMEs. In addition, Ayala Corporation and Internet Initiative Japan Inc. (IIJ) joined forces to develop AyalaPort, which will build its own IDC to offer Internet connectivity, server hosting and housing, and systems integration services.

ICT-based and ICT-related industries

The total number of establishments primarily engaged in ICT-based and ICT-related activities in 2000 reached 31,392 with a total employment of 505,864. The biggest number of ICT-based and ICT-related establishments can be found doing wholesale and retail trade (45.6%), followed by renting and business activities (35.4%), education (7.9%), telecommunications (7.7%), manufacturing (1.4%) and other community, social and personal services (2.5%). The bulk of employment, however, is distributed quite differently to manufacturing (34.0%), education (25.5%), wholesale and retail (15.1%), telecommunications (12.3%), renting and business activities (9.8%) and other community, social and personal services (3.4%).

The electronics industry is the Philippines’ top export earner with total receipts of $27.2 billion as of December 2000, accounting for 71.3 percent of total exports. The industry grew by 7.0 percent in 2000 with semiconductor and microcircuit products accounting for 70 percent of the country’s ICT and electronics exports.

The Philippine electronics industry is still highly concentrated in semiconductors (Table 4.3). Other countries in the region, on the other hand, have diversified their ICT and electronics industry to two or three segments. For instance, Malaysia, Singapore and Thailand are into semiconductors and computer hardware; Indonesia in telecommunication equipment, computer hardware and other ICT products; while Hong Kong benefits from a fairly distributed ICT products and electronic manufacturing sector.

Human Resource Development

The Asian Computer Directory noted that the Philippines is the second highest among Asian countries in the number of training facilities for computer programming and other computer-related courses. In addition, the Philippines topped US, India, Australia and all other countries in availability of qualified engineers, skilled ICT workers and competent senior managers based on a recent study conducted by META Group, a leading US-based IT research and consulting firm on the technological vitality of 47 nations based on digital economy indicators. The Philippines also garnered the highest net enrollment in public and private higher education institutions for persons 17-34 years old.

In terms of employment, most companies, with the growing reliance on networks, need people with expertise on Internet; web programming and development; network engineering and administration; and data communications. However, the declining numbers of qualified entrants into the sector, the continuing exodus of ICT professionals and workers for higher paying jobs in the US and other countries, and the eroding of the country’s comparative advantage in English, coupled with declining scores in mathematics and science, are major concerns to government and the ICT industry. As such, immediate solutions will be found through interventions at the tertiary and technical levels by: (a) increasing the training of ICT professionals and ICT-enabled workers; (b) giving high priority to education and training in ICT (including the promotion of ICT literacy among the population); (c) giving greater emphasis to mathematics, science, and English in basic education; and (d) increasing provision of ICT laboratory and R&D facilities in key learning centers.

Education and training

The growing importance of ICT in education can be seen in the various computerization programs initiated by government agencies and institutions. In 1996, the Department of Education Culture and Sports (DECS) Computerization Program was implemented to facilitate learning and enhance performance through the provision of computers. Under the DECS-State Universities and Colleges (SUCs) Computerization Program, a total of 159 schools and 166 public high schools were given computers in 1999 and 2000 respectively, bringing the total number of recipients to 986 since 1996.

Moreover, the secondary education curriculum or the Philippine Secondary Schools Learning Competencies of Technology and Home Economic Program, offered computer education as one of the components of the Technology and Home Economics (THE) module. The integration of ICT in the school curriculum will enable secondary students to acquaint themselves with technology and to prepare themselves for easy assimilation in the new economy.

Because of the growing popularity of ICT courses in the country, enrollment has been on the rise as computer schools and training centers continue to grow. As of March 2000, there were around 600 public and private educational institutions offering ICT-related degree programs (such as B.S. Computer Science and B.S. Information Technology). Data from the Commission on Higher Education (CHED) show that the number of graduates in ICT for the School Year 1999–2000 is approximately 31,000; mathematics graduates, 4,000; and engineering and technology graduates, 31,000.

Moreover, other agencies and institutions have initiated programs to accelerate ICT education in the country. The DOST has accelerated its mass ICT education program in the primary and secondary levels by deploying 11 mobile IT classrooms (MITC) through the President’s Social Fund. The Department of Trade and Industry’s Personal Computers for Public High Schools Project, initially supported by a P600 million Japanese grant, aims to initially bring 20,000 computers to public high schools all over the country.

In addition, the Virtual Center for Technology Innovation (VCTI) in Information Technology of the DOST’s Comprehensive Program to Enhance Technology Enterprises (COMPETE) seeks to set up a manpower development and R&D foundation that will pursue, among others, the training and certification of at least 10,000 ICT professionals by 2004; support for technology transfer and adaptation; and the promotion of high-value ICT products and services. Under the VCTI-IT project is the Partner Institution Program, which seeks to prepare and equip tertiary ICT students with the necessary skills and expertise to make them globally competitive. As of March 2001, there were more than 30 schools and training centers that applied for the program.

Various nongovernment organizations (NGOs) are also active in nonformal ICT adult education for disadvantaged basic sectors of society. The Government Technology Education Center (GTEC) located at the Polytechnic University of the Philippines (PUP) was established to train and certify government professionals for the Microsoft Office User Specialist’s Program in accordance with the government’s goal of developing its workforce’s ICT capability and skills.

Research and development

R&D is a crucial area requiring more attention and resources to promote creation and innovation, as well as to develop the country’s strategic value-added industries and services. The government has been undertaking a number of initiatives to supplement R&D needs in the country. These include: (a) the VCTI in Microelectronics Design, which aims to build the capability of local electronic companies, and research and academic institutions in microelectronics design through technical training and equipment certification programs, will target the "up-integrating" of the local industries by focusing on the manufacture of more intricate, complete, and original electronic product design; (b) Data Acquisition Project of the DOST using airborne radar technology, in cooperation with the National Aeronautics and Space Administration (NASA) of the United States (US); (c) "Bluetooth" Wireless Technology Research Project of the DOST-ASTI, which is currently being explored for local development and application; and (d) other parallel projects such as the Reduced Instruction Set Computer (RISC) Microprocessor, Radio Frequency (RF) Microelectronics and Advanced Networking Research.

In addition, the Philippines, through the DOST Advanced Science and Technology Institute (DOST-ASTI) entered into a partnership program with the Asian Internet Interconnection Initiatives (AIII) of Japan. The AIII aims to allow participating countries to keep abreast with newly emerging communication technologies. The partnership also enables local research and academic institutions to participate in networking research and experimentation being conducted through the AIII network in Japan. Other activities to be pursued over the AIII network include the setting up of a disaster management system, a virtual library network and distance learning and teleconferencing sessions in rice research, telemedicine and telelearning.

As the primary ICT R&D arm of the DOST, the ASTI has been proposed to be reorganized and expanded to be called Research Center for Information and Communications Technology (RCICT). Draft legislation has also been submitted to Congress to establish an ICT Innovation Fund, which will support research, technology transfer, and other advanced science and technology fields outlined in the National Science and Technology Agenda.

The following are the issues that government should address relative to R&D: (a) low turn-out of quality graduates in the sciences and engineering; (b) poor performance of Filipino pupils and students in international science and math competitions; (c) lack of ICT laboratory and R&D facilities in schools and key learning centers; and (d) ICT manpower drain.

E-Commerce and Business Development Support

With the passage of the E-Commerce Act (ECA) on June 14, 2000, the Philippines can now take part in the global stage of major ICT players and can look forward to the benefits of an economy based not only on land and capital but also on talent, ingenuity and skill. The ECA provides the enabling environment, legal and regulatory framework governing commercial as well as noncommercial transactions through the Internet. It will further accelerate the promotion and implementation of e-commerce in the country and opens vast opportunities for global trade and economic growth. The private sector and the government are expected to work together to build better information infrastructures.

The emerging trend of e-commerce and Internet use in the country has spawned electronic banking or e-banking as well. E-banking carries the potential to provide clients with greater access to diverse financial products and services, which can boost efficiency and growth by reducing information and transaction costs. This ongoing revolution in the banking industry is expected to alter the mode and nature of financial transactions for the new economy.

Access to low-cost capital is an important enabling factor for investment in ICT in general, and e-services in particular. Fiscal incentives are likewise indispensable in fostering foreign partnerships for expansion and growth. While other factors such as broadband services, convergence, availability of human resources are more crucial determinants of competitiveness, the government cannot afford to overlook the appropriate provision of fiscal incentives and financing because of their impact on the costs. Moreover, since the country’s ICT sector consists mainly of SMEs whose resources are limited, the best way to strengthen them is to broaden their access to appropriate financing.

To provide the enabling financial infrastructure for ICT, the Philippines must consider that its domestic economy is characterized by capital constraints due to its low savings rate. Government also does not have the resources to commit towards providing for private sector investment. Thus, an environment that maximizes the role of foreign and private providers of funds would prove feasible in facilitating investment in ICT services. Government would do well to simply coordinate private and foreign initiatives towards the development of efficient markets for financing ICT investment.

Finally, a cornerstone of policy pertaining to the ICT sector, as demonstrated by the success of other countries, should be the coordinated promotion of local companies and industry to the global market.

The Philippines recognizes the vital role of ICT in the continued revitalization of the Philippine economy, the competitiveness of the local industries, the improvement in governance and the achievement of national development goals. The adoption of the National Information Technology Plan for the 21st century, or IT21, concretizes government’s commitment to harness ICT in national development. IT21 serves as an overall framework for the development of ICT and knowledge-based industries. It pursues the promotion of developing communication and information infrastructures, improvement of the productivity and efficiency in all sectors of the economy, and supports the development of a viable and robust ICT industry in the country.

Likewise, the promulgation and launching of the Philippine Intranet, or RPWeb, provided the needed impetus for the early realization of the Philippine Information Infrastructure, or PII, as the overall network that would integrate the electronic links of the government and private sectors. The RPWeb serves as the country’s Intranet to achieve interconnectivity and greater efficiencies in electronic information and data interchange among government, academe, and the industry and business sectors.

Furthermore, the government envisions an electronic bureaucracy that will provide the public fast and easy access to government information and services, anywhere and anytime, through the adoption of the Government Information Systems Plan (GISP), known as "Philippine Government Online", pursuant to EO 265 in July 2000. In addition, the adoption of the Internet Strategy of the Philippines (ISP.COM), which embodies a comprehensive Internet strategy, will develop an environment conducive for investment and growth of ICT in the country.

As of December 2000, there were 232 government agencies connected to the Internet, 115 of which feature their programs and activities in their own websites and 212 information system plans have been evaluated and endorsed by the National Computer Center (NCC) to the Department of Budget and Management (DBM). An increasing number of LGUs also started using ICT, especially for revenue-generating operations like the issuance of business permits and licenses, tax administration, collection of realproperty tax, and operation of the Civil Registry System. Some of the government ICT projects that are currently in progress are: the Computerization of the Land Titling System of the Land Registration Authority (LRA); the Civil Registry System Information Technology (CRS-IT) Project (NSO); the Phil-Jobnet (DOLE); the National Crime Information System (NCC); the Information Technology Modernization Project of the Land Transportation Office (LTO); the Machine Readable Passports and Visas (MRP/V) Project (DFA); and the Electronic Imports Licensing System (EILS) Project (DA, BOC, Philexport and PCCI).

Government spending in ICT is rising, but the amount is not enough for the magnitude of the ICT improvements required. The total government budget for 2000 as reflected in the Government Appropriations Act (GAA) is about P665 billion. Of this amount, about P1 million or 0.15 percent is earmarked for ICT expenses. In the last five years, about P7 billion worth of ICT investments was made by the national government. Microcomputers constituted 99 percent of all computer systems used in the national government with an average 142 personal computers (PCs) per national government agency. Almost half of all PCs in the public sector are found in government-owned and -controlled corporations (GOCCs).

Institutional strengthening for the ICT sector

The Information Technology and Electronic Commerce Council (ITECC) was created on July 12, 2000 through EO 264 through the merger of the National Information Technology Council (NITC) and the Electronic Commerce Promotion Council (ECPC). This aims to ensure a streamlined and focused formulation and implementation of ICT and e-commerce policies, to enable the country to move faster and keep pace with rapid developments in technology and compete in the global digital economy.

In the absence of a department responsible for overseeing ICT development initiatives, the ITECC, a joint public-private sector council now chaired by the President and responsible for policy making and coordination of national ICT plans, has been coordinating with key agencies in line with specific components of the national ICT strategy.

There are, however, some issues that need to be addressed in order to further develop ICT in the country: (a) weak institutions involved in shepherding ICT development; (b) lack of clear investment policy and framework; (c) lack of standards, benchmarks, policies and guidelines in government and business to ensure interoperability, interconnectivity and compatibility among information and communications systems; (d) low Intellectual Property Rights (IPR) protection; and (e) low level of understanding of Internet governance both on the global (i.e. International Classification of Assigned Names and Numbers) and local level (i.e. domain name administration).

TARGETS AND STRATEGIES

In the medium term, the Philippines aims to become a knowledge center and to achieve its selected market niche in software development and data management, and become the e-services hub in Asia. As such, companies located in the Philippines will be able to extend world-class ICT-related services and ICT-enabled services to clients worldwide, including ICT project management, application systems development, applications services provision and hosting, web development and management, database design and development, computer networking and data communications, software development, ICT facilities operations/ management, and other services directly tied to the ICT industry. Examples of ICT-enabled services are business process outsourcing, call centers, animation, engineering and design, human resource services, etc. There are also ICT support activities such as research and development of ICT products, training of ICT workers, and establishing incubators for ICT projects, all which are considered vital for the long-term goal of promoting ICT in the Philippines.

In addition to software development and data management, the Philippines is developing its potential in e-commerce and in web content development. To gain international reputation and recognition, these identified niches have to be enhanced through higher levels of creativity and commitment.

Over the next three to four years, the Philippines will endeavor to gain greater momentum for ICT to achieve its selected market niches. The following targets shall be pursued:

1. Provide high-speed, broadband transmission services in all cities and identified growth centers and priority areas;

2. Develop the local telephone network and install telecenters in all municipalities. Extend local exchange telephone service to at least 80 percent of the 1,602 municipalities/cities;

3. Make available cellular mobile telephone service to 100 percent coverage of major highways and corridors connecting provincial capitals and cities;

4. Provide Public Telephone service, singularly or in clusters, to 35,000 unserved barangays;

5. Increase the telephone density to 12.73 in 2004 to meet the growing demand for telephone and other value-added services;

6. Graduates of ICT related courses to reach 36,000, engineering and technology graduates at 37,000, and mathematics graduates at 5,000;

7. Tertiary enrollment for ICT shall be at around 255,000 by 2003-2004, engineering and technology at 500,000; and mathematics at 15,000; and

8. Increase of public high schools with computing and networking facilities from 30 percent to 80 percent

To achieve these targets, the following strategies shall be pursued:

Building the physical infrastructure to ensure wider, faster and reliable access at low cost to information and other ICT resources

The availability of telecommunications facilities within and across the country widely varies, with high densities occurring in large highly urbanized cities. That is why there is a need to support interconnectivity among local networks including the regional and global networks, and wider public access to information and services through: (a) promotion of universal access by the public to a minimum set of communications and information services through the establishment of operational telecenters in all municipalities, and public payphones in clusters of barangays; and (b) provision of broadband services in cities, identified growth centers, and priority areas. Most importantly, interconnection must ensure that no single player or interest controls access to facilities, information and services.

Greater private sector involvement in telecommunication infrastructure development shall be encouraged and collaboration between and among government, private sector and civil society shall be strengthened.

Moreover, the following shall be undertaken:

1. Provision of telecommunication facilities and services in the country, e.g., replication of the Multi-Purpose Telecenter (MPT) in strategic municipalities, barangays, and various forms of locally-controlled community access centers to become one-stop shops offering a range of online services from communication services, auxiliary services such as, cybercafe, and automated teller machine (ATM) services to other services pertinent to electronic commerce transactions and explore the concept of sharing ICT resources among community-based centers to bridge the information gap between the urban and rural areas;

2. Strengthen telecommunications infrastructure support — more robust network with internally accepted grade of service — in Export Processing Zone and/or IT Zone;

3. Determine the optimal broadband infrastructure for e-services through independent research to consider a single electronic network for the entire country, serving government, industry, educational and R&D institutions, and the general public and encourage private sector and civil society involvement in building this to ensure seamless interconnection among the different telecommunications carriers, Internet and data communication providers;

4. Restructure telecommunications tariffs to cost-reflective pricing: GMA Phone Program, continue deregulation of retail pricing and at the same time, provide the consumer several pricing options depending on usage requirements similar to the presently available cellular phone plans;

5. Initiate the passage of a comprehensive convergence law that will allow the convergence of telecommunication, broadcast and the broadband facilities of cable television for two-way communication to allow faster, wider and more affordable public access to ICT and the Internet, ensure that benefits of the information society are eventually availed of by the majority of Filipinos and foster competition in the provision of ICT related services, and the promotion of the consumer’s welfare;

6. Review, update and revise (simplify) procedures for the licensing, allocation and assignment of frequencies, bidding and monitoring; and

7. Develop incentives for the establishment of Public Calling Offices (PCOs) in unserved areas and telecenters in all municipalities.

Enhancing the policy and legal environment

For ICT to flourish in the country, the government, in close cooperation and consultation with business, industry and civil society, shall ensure that the policy and legal environment will be primarily market-driven and characterized by private initiative and innovation. For this purpose, the government shall encourage industry self-regulation and support private sector efforts toward this end. Whenever government action, intervention, or regulation is necessary, broad-based consultations shall be conducted as part of the government policy-making process.

The private sector must collaborate more closely among themselves and with other stakeholders to advocate for needed policy, legal and institutional reforms for business to become more efficient and globally competitive. Government, on the other hand, shall provide an efficient and effective business climate and the services needed for ICT to develop and thrive. Toward this end, the government shall:

1. Push for the legislation for stronger protection against computer fraud, software piracy, other forms of violations against privacy and Intellectual Property Rights (IPR) and other cyber-related fraudulent activities, including acquisition of a domain name over the Internet;

2. Strengthen the Intellectual Property Office and embark on capacity building programs for local enforcement agencies, public prosecutors and judiciary in Intellectual Property Protection (IPP), how it is applied and enforced in the global economy;

3. Craft policies and enforcement mechanisms for data protection and network security;

4. Encourage the selling and buying of products and services across the Internet with minimal or no government intervention or regulation;

5. Work out a legal framework applying consistent principles across national and international borders with clear results regardless of the country where a particular buyer or seller resides; and

6. Ensure competition, prevent fraud, foster transparency, facilitate the speedy and fair resolution of disputes, and prevent monopolistic and predatory practices of a few.

Developing the country’s human capital to enable Filipinos to compete in the digital age

The demand for technology-savvy "knowledge workers" has increased as ICT continues to penetrate and transform the organization of markets and the workplace. To prepare the country’s human resources for the digital economy, the country’s educational system from basic to higher levels of education must be able to adapt, both the content and the method of training that will develop the ability of higher order of cognitive skills, such as: abstracting, planning, critical thinking and problem solving.

Human resource development in the ICT sector can be improved by:

1. Focus on specific skills training and vendor-specific education through technical schools;

2. Develop industry-academe linkages to enhance the skills of tertiary level students and train them in real world work experiences (through on-the-job-training or internship, job placement programs, work-study or exchange programs). These partnerships must also include teacher training in the use of IT tools and support the ongoing role of civil society in nonformal adult ICT education;

3. Preliminary review/updating of policies that constrain ICT education development:

a) The Masterplan for Basic Education 1996-2005;

b) Public Education Act of 1998 to incorporate ICT subjects in the curriculum of public elementary and secondary schools;

c) RA 7836 (Philippine Teachers Professionalization Act of 1994);

d) DECS procurement policies, e.g. financing development of virtual libraries and/or multimedia learning centers from budget for textbooks; and

e) CHED Memorandum Order 60 (CMO 60) for determining proper policies and standards for ICT education at the tertiary level;

4. Set up standards for ICT education and ICT educational institutions, including the review and harmonization of certification systems and accreditation programs; and

5. Deploy computing and networking facilities to secondary schools and pursue the PCs for Public High Schools Project.

1. Restructure the school curriculum by giving greater emphasis to the teaching of science and mathematics and English at the primary and secondary levels;

2. Increase national spending on primary and secondary education to improve basic education and facilities, and updating the competencies of educational and training institutions with ICT-based tools and programs with priority on equipping science high schools with computer and science labs, and building virtual libraries and multimedia learning centers in primary and secondary schools to improve learning and in invest in training teachers in the use of ICT-based tools;

3. Promote e-learning to establish high-quality distance education and learning through ICT and on the development of Centers for Excellence in ICT in each region to instill enthusiasm for new and emerging technologies;

4. Promote activities in ICT R&D and technology transfer including innovations to nurture local expertise in various fields of ICT and provide ICT laboratory and R&D facilities in schools and key learning centers for research and quest for new knowledge and development of new ICT products and services; and

5. Develop and promote a national IT culture among citizens, starting with all government officials and employees including the replication of pilot projects to improve ICT applications.

Promoting the development of business to make them more competitive in the global arena and responsive to local needs (providing the enabling business support infrastructure)

To enable the growth of a healthy, socially responsive and internationally competitive business sector, especially among the SMEs, ICT shall be promoted as a major productivity and efficiency tool to make local businesses more competitive.

As the primary engine of growth, the private sector shall be relied upon to play the leading role in pushing ICT development forward. As the private sector is spurred by government actions, it will seek its global competitive niches, particularly in software development and e-services. Industry must seize local and overseas market opportunities in developing strategic partnerships for major ICT development initiatives, while collaborating more closely among themselves and with other stakeholders in ICT in the country.

If and when government intervention will be needed, its aim should only be to support healthy competition among the various players and to protect the consumers. The government shall:

1. Continuously enhance the package of fiscal incentives to match those that are being offered by competing investment sites abroad. This should include an evaluation of the existing tax regime and proposing tax policies on:

a) stock options and capital gains, to encourage entrepreneurs and venture capitalists to invest in e-service companies in the country;

b) income, to ascertain that income earned by IT professionals and employees, net of taxes, is at par with other countries, thus, increasing the number of employment in ICT-related industries, especially in the SMEs and services (e.g. backroom operations, shared services, call centers, ICT zones and cyberparks); and

c) amending the corporation code of the Philippines to allow for the setting up of entities similar to "S" corporations in the United States that enable company earnings to flow through to its investors without the burden of corporate taxes.

2. Promote e-business and e-commerce among SMEs, and rationalize/enhance existing financing schemes (Development Bank of the Philippines, Land Bank of the Philippines, Small Business Guaranty and Finance Corporation) for SMEs. There shall be a moratorium, at least over the next three to four years, on the imposition of taxes and tariffs on commercial transactions over the Internet. However, goods delivered as a result of such transactions shall still be subject to such taxes and tariffs as may be applicable;

3. Plan and set policy to evolve a private sector-led venture capital market for technology firms, as well as increasing the flow of venture capital funds into the sector;

4. Create a one-stop shop and online filing of applications for key government-to-business (G2B) transactions (SEC, DTI-BNRS, BOI, BIR, PEZA) to make it much easier, less costly and less time consuming to set up businesses, and register with all necessary agencies in the shortest possible time; and

5. Promote Philippines’ e-services to the global market by:

a) initiating trade missions abroad and facilitating other private sector-led initiatives; and

b) effectively mobilizing consular and diplomatic representatives abroad to help in marketing the Philippines as an e-services provider.

Making government transactions more accessible, transparent, and cost-effective to business and consumers

For the government to be able to provide the necessary support and services needed by the private sector, it shall streamline business procedures, modernize government operations, and accelerate the computerization of government frontline services and transactions. Moreover, to make government transactions more transparent and accessible to business and consumers, the following shall be pursued:

1. Put a critical mass of strategic government front-end services on-line by 2003, pursuant to Section 27 of the E-Commerce Act and the Government Information Systems Plan (GISP). These should be identified (e.g. government portal) pursuant to clear public sector investment policy for ICT, in view of the numerous contending priorities of the national government for budgetary appropriations. For instance, high-volume G2B services like business licensing and paperless trade; and high-volume government-to-consumer (G2C) services like tax payment and collection; civil, real estate and vehicle registration and drivers’ licensing;

2. Adopt ICT standards and benchmarks for use in government and in business to allow sharing of common data to minimize redundant and inaccurate applications;

3. Increase the level of investment in government ICT efforts such as in R&D of ICT products and services shall be encouraged to increase, among others, the applications for patents;

4. Formulate a comprehensive procurement policy for ICT resources and services, including an outsourcing policy in the implementation of public sector ICT projects, adhering to the principle that the private sector shall be primarily responsible for the production and provision of goods and services, while at the same time promoting healthy competition among all players in the development of these ICT projects;

5. Define the government’s role on the issue of Internet governance; and

6. Initiate the submission of a legislation for the creation of a separate department, consistent with the "scrap-and-build" policy of the government, to integrate all ICT functions and responsibilities, now dispersed among the different departments and agencies of government, and bring the ICT agenda at the highest levels. The creation of this new department will merely entail the "realignment of boxes" and functions among existing departments and agencies. This shall strengthen the regulatory, administrative and management capability of the government, especially in the enforcement of anticompetition and antipiracy policies and laws.