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Medium Term Philippine Development Plan (MTPDP)

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Building on the Country's Strengths in Information and
Communication Technology
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.

ASSESSMENT AND CHALLENGES

Infrastructure Development

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.

Telecommunications

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.

Broadband capacity

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.

Robust network
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.

IT Zones

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.

E-Governance

Government online

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.

Targets

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

Strategies

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:

Immediate tasks:

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.

Long-term programs:

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.