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The Philippines is one of the top locations in the world for Information Technology (IT) and IT-Enabled Services (ITES). ICT business has grown from about USD 1.4 billion in 2004 to USD 4.9 billion in 2007, an almost four-fold increase in industry value over the last five years. At the same time, the Philippines has become a leading destination for IT/ITES investments and a preferred source of IT/ITES services. In spite of these achievements, the Philippines has recently fallen behind other countries. The country’s 2007 ranking in AT Kearney’s Global Services Location Index fell to 8th place from 4th place back in 2004. Even though the Philippines was improving, many other countries simply improved at a faster rate.
AT Kearney evaluated the Philippines on three major criteria, namely - people and skills availability, financial attractiveness, and business environment. In order to improve its future rankings, there is a need to determine how the Philippines can further improve its current position in the three key criteria.
People and Skills Availability
Consultations with industry organizations (Business Process Association/Philippines - BPA/P, Philippine Software Industry Association - PSIA, Animation Council of the Philippines Inc. - ACPI, Game Developers Association of the Philippines - GDAP, among others) shows the following:
- That the 'Brain Drain' of experienced and top quality professionals to countries abroad is impacting on the ability of local companies to retain their top personnel and weakens the companies' ability to provide quality products and services, to sustain the growth of their organization, and to remain competitive versus other companies worldwide. Reversing this Brain Drain could involve programs for keeping the current professionals as well as attracting talented and skilled overseas Filipinos to return.
- That the widening gap between skills required by industry and capabilities among today's graduates, along with the 'Brain Drain', is making it more difficult for local companies to find the best recruits. Currently, initiatives are being taken by organizations such as the Philippine Business for Education (PBEd), and also by the Commission on Higher Education (CHED) and the Technical Education Services and Development Authority (TESDA) for bridging the gap by improving the quality of IT education in the country. A lot more needs to be achieved, however, in bridging the gap further.
- That there is a need to strengthen the research and development institutions in the country, possibly through an improvement in the implementation of existing programs such as the Grant-In-Aid (GIA) program of the Department of Science and Technology (DOST), and the Special Education Programs at the primary and secondary levels.
"Brain drain, and a lack of qualified graduates, threatens to derail
the industry’s growth. We need to implement programs that will
lessen the attractiveness of foreign opportunities, as well as
generate more qualified graduates."
Financial Attractiveness
Despite receiving about US$1 Billion in foreign direct investments (FDIs) in 2005, the Philippines is still dwarfed by India (with US$6.6 Billion) and by China (with US$72.4 Billion). The Philippines was simply not attracting enough investments. Consultations with investor organizations such as ICCP Ventures and Narra Ventures have shown that a lack of appropriate government participation, and a lack of experienced and quality management teams to run and grow IT/ITES businesses are key issues. There is also a need to strengthen the infrastructure of the local capital markets to encourage and energize foreign and local investors to invest in IT/ITES.
There is also a perceived lack of worthwhile projects and businesses to invest in for IT/ITES. This was in spite of confirmations from companies such as Headstrong and HP Philippines that the country can accept high-valued IT/ITES projects and businesses. Currently, the Ayala Foundation has initiated a business incubation program to nurture the start-up of new IT/ITES businesses. Expanding these IT/ITES projects need further attention.
"We need to develop our innovators to become not just technically
savvy, but business savvy as well. More technologists need to be
able to articulate their business plans properly and team up with
experienced managers. Correspondingly, the pool of both angel
and venture capital should be increased. Policies should
encourage technopreneurs and investors to do business here."
Business Environment
Consultations with the PSIA and BPAP has confirmed that strengthening the Philippines' ability to protect Intellectual Property (IP) and personal data will address the global requirement on intellectual property and data privacy protection. This is expected to attract more investments and more business contracts. Many in the IT/ITES sector believe that pushing for the swift approval of pending bills on improving IP protection (Senate Bill 880) and on data protection (Senate Bill 1180) will strengthen the Philippines' position in this criteria.
"Creating and enforcing intellectual property protection laws is
vital to the success and growth of the ICT/ICT enabled services sector."
