Phil Lip Pine National Observatory on the Information Society

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Phillippine National Observatory on the Information Society

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Medium Term Philippine Development Plan (MTPDP)

Building on the Country's Strengths in Information and

Communication Technology

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Technology is the foundation of the countrys future economicdevelopment. The Philippines shall use information and communicationstechnology (ICT) to leapfrog into the new economy.

The Philippines enjoys significant comparative advantages in ICT anEnglish-speaking, highly educated, easily trainable, and skilled workforcewith a growing track record of successful ICT work; a basic policyenvironment that is right for business; government commitment at thehighest levels, with strong private sector support in the pursuit of a

common ICT agenda; and rising entrepreneurial abilities suitable for aglobalizing economy. With its rich human resources and strategic locationin Asia and the Pacific, the Philippines has the potentials to fully benefitfrom an ICT-driven development strategy.

To build on the countrys strengths and gain greater momentum in thenations quest for rapid and sustainable development and growth, thePhilippines shall further enhance its competitive edge in ICT by: (a)building the physical infrastructure to ensure wider, faster and reliableaccess at low cost to information and other ICT resources, especially in theunderserved rural areas; (b) enhancing the policy and legal environment topromote ICT development and universal access to information and otherICT resources; (c) developing the countrys human potential to enableFilipinos to compete in the digital age; and (d) promoting the use of ICT tostreamline business processes and modernize government operations forgreater productivity.

POLICY FRAMEWORK
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The challenge in the medium term is to disperse ICT capabilities across abroad range of economic activities and income groups. To maximize thebenefits 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 legalbasis for ICT operations. As a parallel social goal, ICT shall be harnessedto bridge the digital divide among different regions and communities in thecountry. With abundant human capital, societies can narrow the gapbetween the rich and poor, given the political will to harness ICT in ademocratic, appropriate, and strategic way.

In order to prevent further widening of income disparities across thecountry, government policies shall have a strong social bias, so thatappropriate safety nets for sectors affected by rapid advancement in

technology and greater world integration are put in place. ICT shalltherefore be developed as an effective instrument for job and wealthcreation, as well as for poverty reduction.

Policies shall be pursued to build the countrys capability to become aknowledge center, achieve its selected market niche in softwaredevelopment and data management, and become the e-services hub inAsia. This will include setting up the necessary infrastructure to achievehigh-speed interconnectivity at low cost. Human resource developmentespecially in science and mathematics shall support the needs of the ICTsector. Access of regions to basic information and communication services

shall be expanded through community e-centers or telecenters, with anInternet-linked computer providing a multifunction resource. Hence,through ICT, Filipinos living anywhere shall at any time have faster andwider access to information necessary for learning and for knowledgecreation.

ASSESSMENT AND CHALLENGES

Infrastructure Development

The continuing liberalization and development of the telecommunicationssector has given the ICT industry a big boost, bringing increased demandand competition particularly from multinational companies. In addition,the establishment of ICT zones as investment havens for ICT companieswishing to do business in the country, and the opening up of the countrystelecommunications sector has promoted greater competition thatencouraged the entry of new players. All these sharply increasedinvestment, raised the number of service providers and users and improved


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access to telephone services and other modes of communication.

Telecommunications

The deregulation of the telecommunication industry that began in 1987encouraged 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 intelecommunications increased by over 480 percent to P524.7 billion in1999 from P90.2 billion in 1992 (Figure 4.1).

The current liberalized telecommunications environment has so farresulted in the operation of 11 international gateway facility (IGF)operators (those that can provide international long distance calls), 5cellular mobile telephone system operators, 15 paging companies, 7

interexchange carrier licensees (those that service other carriers trafficusing their own networks), and 3 fixed line operators (or those withlandline services) in one area. Likewise, the deregulation of thetelecommunications industry raised the landline telephone density, definedas the number of telephones per 100 people, from 2.01 in 1995 to 9.12 in1999 (Table 4.1), but with a slight decrease to 9.05 in 2000 due to theincreasing popularity of cellular phones and its ready availability in theconsumer market.

Furthermore, the Service Area Scheme (SAS) under the Basic TelephoneProgram (BTP) mandated by Executive Order (EO) No. 109 in July 1993

required new cellular licensees to install 400,000 local exchange lines and300,000 local exchange lines to new gateway facilities operators. Thetargets set under EO 109 were met and even exceeded. Meanwhile, firmswith licenses for both cellular and gateway operations are expected to rollout 700,000 lines within three years.

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

The pricing regulatory framework for telecommunications has not keptpace with the increasingly competitive environment. The rebalancing andrestructuring of rates and tariffs towards cost-reflective pricing is the onlyway of moving towards fully competitive markets. The NationalTelecommunications Commission (NTC) is now in the process ofdeveloping a cost-based wholesale pricing regime. During the transitionperiod, the revenue sharing scheme between service providers will be


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converted to access charges. Cross-subsidy to basic telephone service willbe quantified and gradually adjusted during the transition period so that itwill 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 asubscriber 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 thatthe Philippines is now the "text (or short messaging service) capital of theworld" 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 telecommunicationsequipment increased to P6.5 billion from P5.2 billion during the firstsemester of 1999. The impressive growth of wireless communication in thecountry has led the International Telecommunications Union (ITU) toregard the Philippines as one of the most dynamic mobile markets in theAsia Pacific, and the largest in the Association of Southeast Asian Nations(ASEAN). This kind of growth holds vast opportunity for dataapplications, and other emerging technologies that can put the Philippinesahead 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 backbonenetworks are now being implemented: (a) the National DigitalTransmission Network, a fiber optic network that will run from La Unionthrough Western Visayas to Davao City; (b) the Domestic Fiber OpticNetwork that will provide national digital coverage; and (c) a network thatwill link Manila and Cebu.

Despite these developments, the following challenges continue to face theICT sector: (a) inadequate ICT infrastructure (telephone lines andnetworking equipment) to support interconnectivity and wider publicaccess; (b) high cost of basic telecommunication services; (c) low PC

penetration rate; (d) inadequate legal framework for convergence andcompetition policy; and (e) the privatization of existing publictelecommunications facilities.

Personal computer (PC) penetration and Internet access

The PC penetration ratio, defined as market size as a percentage of grossdomestic product (GDP), is 0.5 for the Philippines. It is better than


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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 thePhilippines paved the way for the impressive growth in the number ofInternet users in the country, which was recorded at 1.5 million in 2000.This figure surpassed earlier projection of 521,135 Internet users for theyear 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 accessbut also content provision. Their facilities have also been upgraded bysetting up more points of presence or value-added resellers in most majorurban areas. International Data Corporation (IDC) estimates Internet-related revenue in the country at $146.8 million in 2000 from $52.9 millionin 1999, and projects revenue growth of $417.8 million in 2001.

Growth in Internet hosts, defined as the number of computers with activeInternet Protocol Addresses (IPAs) connected to the Internet, has beenrapid in many countries, including the Philippines. Total Internet hosts per10,000 people in the Philippines in 1999 reached 1.2, greater thanIndonesias 0.8 and India with 0.1 (Table 4.2)

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

(PhilBX).

Interconnection and universal access

The policy of universal access or enabling user access totelecommunications no matter where the location is or what facility/systemis being used, facilitates investment. Thus, an easily accessible system ofinterconnected telecommunications networks made possible by wire, radioor 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 regionwith onward connection to North America, Middle East and WesternEurope. Satellite systems are also available from the regional andinternational operators. With the big capacity cable, i.e., US-Japan, US-China and the forthcoming Pacific Crossing systems, there is even aprojected oversupply in the Pacific Region. The limited capacity of thespur link to the Philippines will be resolved by the forthcoming installation


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of APCN 2, C2C and Global Crossing.

The cost of international leased lines to the US has been decliningsignificantly due to an oversupply situation across the Pacific and the

deployment of bigger capacity cables. Domestic leased line rates willsimilarly go down but at a slower rate because domestic demand cannotjustify the installation of the latest high capacity systems, and the distancesbetween terminals (major trading centers) are relatively short.

While the decline of the cost of the bandwidth in the new fiber opticsystem across the Pacific has been rapid, the price in the Philippines maynot go down as fast as in other developed countries. This is due to smallbandwidth requirements of many small users, the averaging of the cost ofinvestment over a long service period of several old and new fiber opticsystems, 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 includingthe Internet especially at the community level, the Department of Scienceand Technology (DOST), through the Philippine Council for HealthResearch and Development (PCHRD), established MultipurposeCommunity Telecenters (MCTs) in four barangays in Mindanao withexisting public calling offices (PCOs). Each MCT is equipped with acomputer and a modem. This project, which can be a model to other majorcommunity centers and barangays, may be considered a majorempowerment tool in order for people to have direct access to basic

telecommunication services and to information through the Internet.

Broadband capacity

There are several domestic broadband backbone networks alreadyoperating in the Philippines with terminals in major regional centers andcities using fiber optic systems and microwave radios. The Manila-Cebusegment, one of the two nationwide fiber optic systems which operate at2.5 Giga bytes per second (Gbps) each, is being expanded to 12.5 Gbpswith 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 broadbandnetwork with international connectivity, there is still a need for moreaccess points, both in the urban and rural areas, to provide the populationwith equal access to the global economy.

Robust network


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The multiservice provider environment in IT zones operates independentlyof each other without restoral capability. The investment in extending afiber optic system with restoral capability can be justified in the later stageof the development of processing zones if there are sufficient bandwidth

requirements. It may be noted, however, that the foreign locators or thoseinvolved in global operations are always looking for restoral capability ofthe telecommunication system in case of network failure. Thus, it isnecessary to have a distributed integrated network with restoral capability.

Convergence of technologies

The merging of IT, telecommunications, cable television (CATV) andbroadcast media offers great potentials for speeding up access to theInternet, especially among households. Moreover, convergence has asignificant impact on raising the competitiveness of many domestic firms,

including the small and medium enterprises (SMEs). Technology advancesand convergence now make it possible for CATV networks to be used fortwo-way communication and Internet access.

The existing cable infrastructure in the Philippines set up by independentCATV operators now covers most of the towns and cities, even remotemunicipalities, of the country. If interconnected, these CATV networkshave the potential of providing high-speed two-way telecommunication inmost 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 foreignownership of CATV, which is considered part of broadcast media. Othercountries, which do not have these constitutional or legal prohibitions, arenow moving ahead and taking advantage of new developments intechnology, converting their CATV networks into high-speed broadbandnetworks. There is therefore the urgent need for the Philippines toimmediately review its current regulatory regime to make CATV andtechnology convergence useful for national advancement anddevelopment.

IT Zones

The development of IT zones paved the way for the expansion of ICTdevelopment in the country. These ICT parks, which offers competitivefinancial and tax incentives for ICT businesses, serve as prime locationsfor 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


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operations.

Over the last five years, the rapid development of economic zonesscattered all over the country and the growth in the number of ICT-based

manufacturing firms in these estates contributed to the increase ininvestments in ICT. As of the first quarter of 2001, the IT sector hasalready registered P6.352 billion worth of investments mostly in the areasof IT services, information service provider, operation of international callcenters, data conversion, application services, IT outsourcing, ITconsulting, data conversion/medical transcription, design, developmentand implementation of e-solutions, application software andtelecommunication services.

The Board of Investments (BOI) has approved 22 ICT projects withinvestments valued at P8.2 billion while the Philippine Economic Export

Zone (PEZA) approved 11 ICT projects with an estimated cost of P1.2billion. A total of 83 BOI-approved projects with estimated project cost ofP31.3 billion in 2000 from P10.3 billion in 1999 are expected to generate11,938 jobs. Notably, 77.8 percent of these BOI-registered projects withtotal investments of P24.1 billion will be located in the regions, implyingrising job opportunities in the countryside. Registered projects at thePEZA, amounting to P19.8 billion in 2000 from P16.5 billion in 1999 areexpected to generate 21,328 jobs. Locator investments reached P74 billionin 2000 from P30.8 billion in 1999, while exports generated from the 68operating economic zones totaled $20.025 billion in 2000 from $15.807billion 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 December31, 2000.

Back office operations

The Philippines is fast becoming the location of choice for back officeoperations or shared services. America Online (AOL) established itstechnical and billing support at the Clark Special Economic Zone inPampanga. Likewise, companies like Citibank and Caltex, which haveshared-service centers in the country handling finance and accounting

transactions of their respective groups in Asia, have establishedinternational call centers in the countrys 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. Inaddition, Ayala Corporation and Internet Initiative Japan Inc. (IIJ) joinedforces to develop AyalaPort, which will build its own IDC to offer Internet


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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 andICT-related activities in 2000 reached 31,392 with a total employment of505,864. The biggest number of ICT-based and ICT-related establishmentscan be found doing wholesale and retail trade (45.6%), followed by rentingand business activities (35.4%), education (7.9%), telecommunications(7.7%), manufacturing (1.4%) and other community, social and personalservices (2.5%). The bulk of employment, however, is distributed quitedifferently to manufacturing (34.0%), education (25.5%), wholesale andretail (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 totalreceipts of $27.2 billion as of December 2000, accounting for 71.3 percentof total exports. The industry grew by 7.0 percent in 2000 withsemiconductor and microcircuit products accounting for 70 percent of thecountrys ICT and electronics exports.

The Philippine electronics industry is still highly concentrated insemiconductors (Table 4.3). Other countries in the region, on the otherhand, have diversified their ICT and electronics industry to two or threesegments. For instance, Malaysia, Singapore and Thailand are intosemiconductors and computer hardware; Indonesia in telecommunication

equipment, computer hardware and other ICT products; while Hong Kongbenefits from a fairly distributed ICT products and electronicmanufacturing sector.

Human Resource Development

The Asian Computer Directory noted that the Philippines is the secondhighest among Asian countries in the number of training facilities forcomputer programming and other computer-related courses. In addition,the Philippines topped US, India, Australia and all other countries inavailability of qualified engineers, skilled ICT workers and competent

senior managers based on a recent study conducted by META Group, aleading US-based IT research and consulting firm on the technologicalvitality of 47 nations based on digital economy indicators. The Philippinesalso garnered the highest net enrollment in public and private highereducation institutions for persons 17-34 years old.

In terms of employment, most companies, with the growing reliance onnetworks, need people with expertise on Internet; web programming and


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development; network engineering and administration; and datacommunications. However, the declining numbers of qualified entrantsinto the sector, the continuing exodus of ICT professionals and workers forhigher paying jobs in the US and other countries, and the eroding of the

countrys comparative advantage in English, coupled with declining scoresin mathematics and science, are major concerns to government and the ICTindustry. As such, immediate solutions will be found through interventionsat the tertiary and technical levels by: (a) increasing the training of ICTprofessionals and ICT-enabled workers; (b) giving high priority toeducation and training in ICT (including the promotion of ICT literacyamong the population); (c) giving greater emphasis to mathematics,science, and English in basic education; and (d) increasing provision ofICT laboratory and R&D facilities in key learning centers.

Education and training

The growing importance of ICT in education can be seen in the variouscomputerization programs initiated by government agencies andinstitutions. In 1996, the Department of Education Culture and Sports(DECS) Computerization Program was implemented to facilitate learningand enhance performance through the provision of computers. Under theDECS-State Universities and Colleges (SUCs) Computerization Program,a total of 159 schools and 166 public high schools were given computers in1999 and 2000 respectively, bringing the total number of recipients to 986since 1996.

Moreover, the secondary education curriculum or the Philippine SecondarySchools Learning Competencies of Technology and Home EconomicProgram, offered computer education as one of the components of theTechnology and Home Economics (THE) module. The integration of ICTin the school curriculum will enable secondary students to acquaintthemselves with technology and to prepare themselves for easyassimilation 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 centerscontinue to grow. As of March 2000, there were around 600 public and

private educational institutions offering ICT-related degree programs (suchas B.S. Computer Science and B.S. Information Technology). Data fromthe Commission on Higher Education (CHED) show that the number ofgraduates in ICT for the School Year 19992000 is approximately 31,000;mathematics graduates, 4,000; and engineering and technology graduates,31,000.

Moreover, other agencies and institutions have initiated programs to


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accelerate ICT education in the country. The DOST has accelerated itsmass ICT education program in the primary and secondary levels bydeploying 11 mobile IT classrooms (MITC) through the Presidents SocialFund. The Department of Trade and Industrys Personal Computers for

Public High Schools Project, initially supported by a P600 millionJapanese grant, aims to initially bring 20,000 computers to public highschools all over the country.

In addition, the Virtual Center for Technology Innovation (VCTI) inInformation Technology of the DOSTs Comprehensive Program toEnhance Technology Enterprises (COMPETE) seeks to set up a manpowerdevelopment and R&D foundation that will pursue, among others, thetraining 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 studentswith the necessary skills and expertise to make them globally competitive.As of March 2001, there were more than 30 schools and training centersthat applied for the program.

Various nongovernment organizations (NGOs) are also active innonformal ICT adult education for disadvantaged basic sectors of society.The Government Technology Education Center (GTEC) located at thePolytechnic University of the Philippines (PUP) was established to trainand certify government professionals for the Microsoft Office UserSpecialists Program in accordance with the governments goal of

developing its workforces ICT capability and skills.

Research and development

R&D is a crucial area requiring more attention and resources to promotecreation and innovation, as well as to develop the countrys strategic value-added industries and services. The government has been undertaking anumber of initiatives to supplement R&D needs in the country. Theseinclude: (a) the VCTI in Microelectronics Design, which aims to build thecapability of local electronic companies, and research and academicinstitutions in microelectronics design through technical training and

equipment certification programs, will target the "up-integrating" of thelocal industries by focusing on the manufacture of more intricate,complete, and original electronic product design; (b) Data AcquisitionProject of the DOST using airborne radar technology, in cooperation withthe National Aeronautics and Space Administration (NASA) of the UnitedStates (US); (c) "Bluetooth" Wireless Technology Research Project of theDOST-ASTI, which is currently being explored for local development andapplication; and (d) other parallel projects such as the Reduced Instruction


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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 programwith the Asian Internet Interconnection Initiatives (AIII) of Japan. TheAIII aims to allow participating countries to keep abreast with newlyemerging communication technologies. The partnership also enables localresearch and academic institutions to participate in networking researchand experimentation being conducted through the AIII network in Japan.Other activities to be pursued over the AIII network include the setting upof a disaster management system, a virtual library network and distancelearning and teleconferencing sessions in rice research, telemedicine andtelelearning.

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

The following are the issues that government should address relative toR&D: (a) low turn-out of quality graduates in the sciences andengineering; (b) poor performance of Filipino pupils and students in

international science and math competitions; (c) lack of ICT laboratory andR&D facilities in schools and key learning centers; and (d) ICT manpowerdrain.

E-Commerce and Business Development Support

With the passage of the E-Commerce Act (ECA) on June 14, 2000, thePhilippines can now take part in the global stage of major ICT players andcan look forward to the benefits of an economy based not only on land andcapital but also on talent, ingenuity and skill. The ECA provides theenabling environment, legal and regulatory framework governing

commercial as well as noncommercial transactions through the Internet. Itwill further accelerate the promotion and implementation of e-commerce inthe country and opens vast opportunities for global trade and economicgrowth. The private sector and the government are expected to worktogether to build better information infrastructures.

The emerging trend of e-commerce and Internet use in the country hasspawned electronic banking or e-banking as well. E-banking carries the


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potential to provide clients with greater access to diverse financial productsand services, which can boost efficiency and growth by reducinginformation and transaction costs. This ongoing revolution in the bankingindustry 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 inICT in general, and e-services in particular. Fiscal incentives are likewiseindispensable in fostering foreign partnerships for expansion and growth.While other factors such as broadband services, convergence, availabilityof human resources are more crucial determinants of competitiveness, thegovernment cannot afford to overlook the appropriate provision of fiscalincentives and financing because of their impact on the costs. Moreover,since the countrys ICT sector consists mainly of SMEs whose resourcesare limited, the best way to strengthen them is to broaden their access to

appropriate financing.

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

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

E-Governance

Government online

The Philippines recognizes the vital role of ICT in the continuedrevitalization of the Philippine economy, the competitiveness of the local

industries, the improvement in governance and the achievement of nationaldevelopment goals. The adoption of the National Information TechnologyPlan for the 21st century, or IT21, concretizes governments commitmentto harness ICT in national development. IT21 serves as an overallframework for the development of ICT and knowledge-based industries. Itpursues the promotion of developing communication and informationinfrastructures, improvement of the productivity and efficiency in allsectors of the economy, and supports the development of a viable and


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robust ICT industry in the country.

Likewise, the promulgation and launching of the Philippine Intranet, orRPWeb, provided the needed impetus for the early realization of the

Philippine Information Infrastructure, or PII, as the overall network thatwould integrate the electronic links of the government and private sectors.The RPWeb serves as the countrys Intranet to achieve interconnectivityand greater efficiencies in electronic information and data interchangeamong government, academe, and the industry and business sectors.

Furthermore, the government envisions an electronic bureaucracy that willprovide the public fast and easy access to government information andservices, anywhere and anytime, through the adoption of the GovernmentInformation Systems Plan (GISP), known as "Philippine GovernmentOnline", pursuant to EO 265 in July 2000. In addition, the adoption of the

Internet Strategy of the Philippines (ISP.COM), which embodies acomprehensive Internet strategy, will develop an environment conducivefor investment and growth of ICT in the country.

As of December 2000, there were 232 government agencies connected tothe Internet, 115 of which feature their programs and activities in their ownwebsites and 212 information system plans have been evaluated andendorsed by the National Computer Center (NCC) to the Department ofBudget and Management (DBM). An increasing number of LGUs alsostarted using ICT, especially for revenue-generating operations like theissuance of business permits and licenses, tax administration, collection of

realproperty tax, and operation of the Civil Registry System. Some of thegovernment ICT projects that are currently in progress are: theComputerization of the Land Titling System of the Land RegistrationAuthority (LRA); the Civil Registry System Information Technology(CRS-IT) Project (NSO); the Phil-Jobnet (DOLE); the National CrimeInformation System (NCC); the Information Technology ModernizationProject of the Land Transportation Office (LTO); the Machine ReadablePassports and Visas (MRP/V) Project (DFA); and the Electronic ImportsLicensing 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 governmentbudget for 2000 as reflected in the Government Appropriations Act (GAA)is about P665 billion. Of this amount, about P1 million or 0.15 percent isearmarked for ICT expenses. In the last five years, about P7 billion worthof ICT investments was made by the national government.Microcomputers constituted 99 percent of all computer systems used in thenational government with an average 142 personal computers (PCs) pernational government agency. Almost half of all PCs in the public sector are


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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 theNational Information Technology Council (NITC) and the ElectronicCommerce Promotion Council (ECPC). This aims to ensure a streamlinedand focused formulation and implementation of ICT and e-commercepolicies, to enable the country to move faster and keep pace with rapiddevelopments in technology and compete in the global digital economy.

In the absence of a department responsible for overseeing ICTdevelopment initiatives, the ITECC, a joint public-private sector councilnow chaired by the President and responsible for policy making and

coordination of national ICT plans, has been coordinating with keyagencies in line with specific components of the national ICT strategy.

There are, however, some issues that need to be addressed in order tofurther develop ICT in the country: (a) weak institutions involved inshepherding ICT development; (b) lack of clear investment policy andframework; (c) lack of standards, benchmarks, policies and guidelines ingovernment and business to ensure interoperability, interconnectivity andcompatibility among information and communications systems; (d) lowIntellectual Property Rights (IPR) protection; and (e) low level ofunderstanding 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 centerand to achieve its selected market niche in software development and datamanagement, and become the e-services hub in Asia. As such, companieslocated in the Philippines will be able to extend world-class ICT-relatedservices and ICT-enabled services to clients worldwide, including ICTproject management, application systems development, applications

services provision and hosting, web development and management,database design and development, computer networking and datacommunications, software development, ICT facilities operations/management, and other services directly tied to the ICT industry.Examples of ICT-enabled services are business process outsourcing, callcenters, animation, engineering and design, human resource services, etc.There are also ICT support activities such as research and development ofICT products, training of ICT workers, and establishing incubators for ICT


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projects, all which are considered vital for the long-term goal of promotingICT 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 nicheshave to be enhanced through higher levels of creativity and commitment.

Targets

Over the next three to four years, the Philippines will endeavor to gaingreater momentum for ICT to achieve its selected market niches. Thefollowing 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 allmunicipalities. Extend local exchange telephone service to at least 80percent of the 1,602 municipalities/cities;

3. Make available cellular mobile telephone service to 100 percentcoverage of major highways and corridors connecting provincial capitalsand 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 growingdemand for telephone and other value-added services;

6. Graduates of ICT related courses to reach 36,000, engineering andtechnology 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 networkingfacilities from 30 percent to 80 percent

Strategies

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

Building the physical infrastructure to ensure wider, faster and reliable


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access at low cost to information and other ICT resources

The availability of telecommunications facilities within and across thecountry widely varies, with high densities occurring in large highly

urbanized cities. That is why there is a need to support interconnectivityamong local networks including the regional and global networks, andwider public access to information and services through: (a) promotion ofuniversal access by the public to a minimum set of communications andinformation services through the establishment of operational telecenters inall municipalities, and public payphones in clusters of barangays; and (b)provision of broadband services in cities, identified growth centers, andpriority areas. Most importantly, interconnection must ensure that nosingle player or interest controls access to facilities, information andservices.

Greater private sector involvement in telecommunication infrastructuredevelopment shall be encouraged and collaboration between and amonggovernment, 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 strategicmunicipalities, barangays, and various forms of locally-controlledcommunity access centers to become one-stop shops offering a range ofonline services from communication services, auxiliary services such as,

cybercafe, and automated teller machine (ATM) services to other servicespertinent to electronic commerce transactions and explore the concept ofsharing ICT resources among community-based centers to bridge theinformation gap between the urban and rural areas;

2. Strengthen telecommunications infrastructure support more robustnetwork with internally accepted grade of service in Export ProcessingZone and/or IT Zone;

3. Determine the optimal broadband infrastructure for e-services throughindependent 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 societyinvolvement in building this to ensure seamless interconnection among thedifferent telecommunications carriers, Internet and data communicationproviders;

4. Restructure telecommunications tariffs to cost-reflective pricing: GMAPhone Program, continue deregulation of retail pricing and at the same


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time, provide the consumer several pricing options depending on usagerequirements 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 broadbandfacilities of cable television for two-way communication to allow faster,wider and more affordable public access to ICT and the Internet, ensurethat benefits of the information society are eventually availed of by themajority of Filipinos and foster competition in the provision of ICT relatedservices, and the promotion of the consumers 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 cooperationand consultation with business, industry and civil society, shall ensure thatthe policy and legal environment will be primarily market-driven andcharacterized by private initiative and innovation. For this purpose, thegovernment shall encourage industry self-regulation and support privatesector 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 andwith other stakeholders to advocate for needed policy, legal andinstitutional reforms for business to become more efficient and globallycompetitive. Government, on the other hand, shall provide an efficient andeffective business climate and the services needed for ICT to develop andthrive. 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 capacitybuilding programs for local enforcement agencies, public prosecutors andjudiciary in Intellectual Property Protection (IPP), how it is applied andenforced in the global economy;


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3. Craft policies and enforcement mechanisms for data protection andnetwork 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 acrossnational and international borders with clear results regardless of thecountry where a particular buyer or seller resides; and

6. Ensure competition, prevent fraud, foster transparency, facilitate thespeedy and fair resolution of disputes, and prevent monopolistic andpredatory practices of a few.

Developing the countrys human capital to enable Filipinos to compete in

the digital age

The demand for technology-savvy "knowledge workers" has increased asICT continues to penetrate and transform the organization of markets andthe workplace. To prepare the countrys human resources for the digitaleconomy, the countrys educational system from basic to higher levels ofeducation must be able to adapt, both the content and the method oftraining 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:

Immediate tasks:

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

2. Develop industry-academe linkages to enhance the skills of tertiary levelstudents and train them in real world work experiences (through on-the-job-training or internship, job placement programs, work-study orexchange programs). These partnerships must also include teacher trainingin 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 educationdevelopment:

a) The Masterplan for Basic Education 1996-2005;

b) Public Education Act of 1998 to incorporate ICT subjects in the


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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 virtuallibraries and/or multimedia learning centers from budget for textbooks;and

e) CHED Memorandum Order 60 (CMO 60) for determining properpolicies 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 andaccreditation programs; and

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

Long-term programs:

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

2. Increase national spending on primary and secondary education toimprove basic education and facilities, and updating the competencies of

educational and training institutions with ICT-based tools and programswith priority on equipping science high schools with computer and sciencelabs, and building virtual libraries and multimedia learning centers inprimary and secondary schools to improve learning and in invest intraining teachers in the use of ICT-based tools;

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

4. Promote activities in ICT R&D and technology transfer includinginnovations to nurture local expertise in various fields of ICT and provideICT laboratory and R&D facilities in schools and key learning centers forresearch and quest for new knowledge and development of new ICTproducts and services; and

5. Develop and promote a national IT culture among citizens, starting withall government officials and employees including the replication of pilot


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projects to improve ICT applications.

Promoting the development of business to make them more competitive inthe global arena and responsive to local needs (providing the enabling

business support infrastructure)

To enable the growth of a healthy, socially responsive and internationallycompetitive business sector, especially among the SMEs, ICT shall bepromoted as a major productivity and efficiency tool to make localbusinesses more competitive.

As the primary engine of growth, the private sector shall be relied upon toplay the leading role in pushing ICT development forward. As the privatesector is spurred by government actions, it will seek its global competitiveniches, particularly in software development and e-services. Industry must

seize local and overseas market opportunities in developing strategicpartnerships for major ICT development initiatives, while collaboratingmore closely among themselves and with other stakeholders in ICT in thecountry.

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

1. Continuously enhance the package of fiscal incentives to match thosethat are being offered by competing investment sites abroad. This should

include an evaluation of the existing tax regime and proposing tax policieson:

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

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

c) amending the corporation code of the Philippines to allow for the settingup of entities similar to "S" corporations in the United States that enablecompany earnings to flow through to its investors without the burden ofcorporate taxes.

2. Promote e-business and e-commerce among SMEs, andrationalize/enhance existing financing schemes (Development Bank of the


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Philippines, Land Bank of the Philippines, Small Business Guaranty andFinance Corporation) for SMEs. There shall be a moratorium, at least overthe next three to four years, on the imposition of taxes and tariffs oncommercial transactions over the Internet. However, goods delivered as a

result of such transactions shall still be subject to such taxes and tariffs asmay be applicable;

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

4. Create a one-stop shop and online filing of applications for keygovernment-to-business (G2B) transactions (SEC, DTI-BNRS, BOI, BIR,PEZA) to make it much easier, less costly and less time consuming to setup 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-ledinitiatives; and

b) effectively mobilizing consular and diplomatic representatives abroad tohelp 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 andservices needed by the private sector, it shall streamline businessprocedures, modernize government operations, and accelerate thecomputerization of government frontline services and transactions.Moreover, to make government transactions more transparent andaccessible to business and consumers, the following shall be pursued:

1. Put a critical mass of strategic government front-end services on-line by2003, 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 forICT, in view of the numerous contending priorities of the nationalgovernment for budgetary appropriations. For instance, high-volume G2Bservices like business licensing and paperless trade; and high-volumegovernment-to-consumer (G2C) services like tax payment and collection;civil, real estate and vehicle registration and drivers licensing;


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

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

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

5. Define the governments role on the issue of Internet governance; and

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

and laws.

Documents

Phil Lip Pine National Observatory on the Information Society