I intend to devote a column to this topic, so this is as much for my reference as it is for sharing with you, the reader. In November, a speech was delivered which continues to make the e-mail rounds. Over the past few weeks, two other speeches were made that deserve, to my mind, dissemination and discussion. They cover three inter-related topics. The first involves entrepreneurship; the second, how political leaders determine, then advocate, policy; and the third, covers the challenges faced by the country when it comes to education, and in particular, scientific education.
The first speech was delivered by John Gokongwei at the Ad Congress on November 21, 2007.
The second speech was delivered at the11th FOCAP Conference on Prospects for the Philippines by Senator Manuel Roxas II on January 15.
The third speech was delivered today a Jaime V. Ongpin Lecture yesterday by Senator Edgardo Angara (I was supposed to be a reactor, but was ill this morning).
So before I go on to discussing the speeches, here they are.
I. Gokongwei’s speech
Before I begin, I want to say please bear with me, an 81-year-old man who just flew in from San Francisco 36 hours ago and is still suffering from jet lag. However, I hope I will be able to say what you want to hear.
Ladies and gentlemen, good evening. Thank you very much for having me here tonight to open the Ad Congress. I know how important this event is for our marketing and advertising colleagues. My people get very excited and go into a panic, every other year, at this time.
I would like to talk about my life, entrepreneurship, and globalization. I would like to talk about how we can become a great nation.
You may wonder how one is connected to the other, but I promise that, as there is truth in advertising, the connection will come.
Let me begin with a story I have told many times. My own.
I was born to a rich Chinese-Filipino family. I spent my childhood in Cebu where my father owned a chain of movie houses, including the first air-conditioned one outside Manila . I was the eldest of six children and lived in a big house in Cebu ‘s Forbes Park .
A chauffeur drove me to school everyday as I went to San Carlos University , then and still one of the country’s top schools. I topped my classes and had many friends. I would bring them to watch movies for free at my father’s movie houses.
When I was 13, my father died suddenly of complications due to typhoid. Everything I enjoyed vanished instantly. My father’s empire was built on credit. When he died, we lost everything-our big house, our cars, our business-to the banks.
I felt angry at the world for taking away my father, and for taking away all that I enjoyed before. When the free movies disappeared, I also lost half my friends. On the day I had to walk two miles to school for the very first time, I cried to my mother, a widow at 32. But she said: “You should feel lucky. Some people have no shoes to walk to school. What can you do? Your father died with 10 centavos in his pocket.”
So, what can I do? I worked.
My mother sent my siblings to China where living standards were lower. She and I stayed in Cebu to work, and we sent them money regularly. My mother sold her jewelry. When that ran out, we sold roasted peanuts in the backyard of our much-smaller home. When that wasn’t enough, I opened a small stall in a palengke. I chose one among several palengkes a few miles outside the city because there were fewer goods available for the people there. I woke up at five o’clock every morning for the long bicycle ride to the palengke with my basket of goods.
There, I set up a table about three feet by two feet in size. I laid out my goods-soap, candles, and thread-and kept selling until everything was bought. Why these goods? Because these were hard times and this was a poor village, so people wanted and needed the basics-soap to keep them clean, candles to light the night, and thread to sew their clothes.
I was surrounded by other vendors, all of them much older. Many of them could be my grandparents. And they knew the ways of the palengke far more than a boy of 15, especially one who had never worked before.
But being young had its advantages. I did not tire as easily, and I moved more quickly. I was also more aggressive. After each day, I would make about 20 pesos in profit! There was enough to feed my siblings and still enough to pour back into the business. The pesos I made in the palengke were the pesos that went into building the business I have today.
After this experience, I told myself, “If I can compete with people so much older than me, if I can support my whole family at 15, I can do anything!”
Looking back, I wonder, what would have happened if my father had not left my family with nothing? Would I have become the man I am? Who knows?
The important thing to know is that life will always deal us a few bad cards. But we have to play those cards the best we can. And WE can play to win!
This was one lesson I picked up when I was a teenager. It has been my guiding principle ever since. And I have had 66 years to practice self-determination. When I wanted something, the best person to depend on was myself.
And so I continued to work. In 1943, I expanded and began trading goods between Cebu and Manila . From Cebu , I would transport tires on a small boat called a batel. After traveling for five days to Lucena, I would load them into a truck for the six- hour trip to Manila . I would end up sitting on top of my goods so they would not be stolen! In Manila , I would then purchase other goods from the earnings I made from the tires, to sell in Cebu .
Then, when WWII ended, I saw the opportunity for trading goods in post-war Philippines . I was 20 years old. With my brother Henry, I put up Amasia Trading which imported onions, flour, used clothing, old newspapers and magazines, and fruits from the United States . In 1948, my mother and I got my siblings back from China . I also converted a two-story building in Cebu to se rv e as our home, office, and warehouse all at the same time. The whole family began helping out with the business.
In 1957, at age 31, I spotted an opportunity in corn-starch manufacturing. But I was going to compete with Ludo and Luym, the richest group in Cebu and the biggest cornstarch manufacturers. I borrowed money to finance the project. The first bank I approached made me wait for two hours, only to refuse my loan. The second one, China Bank, approved a P500,000-peso clean loan for me. Years later, the banker who extended that loan, Dr. Albino Sycip said that he saw something special in me. Today, I still wonder what that was, but I still thank Dr. Sycip to this day.
Upon launching our first product, Panda corn starch, a price war ensued. After the smoke cleared, Universal Corn Products was still left standing. It is the foundation upon which JG Summit Holdings now stands.
Interestingly, the price war also forced the closure of a third cornstarch company, and one of their chemists was Lucio Tan, who always kids me that I caused him to lose his job. I always reply that if it were not for me, he will not be one of the richest men in the Philippines today.
When my business grew, and it was time for me to bring in more people- my family, the professionals, the consultants, more employees- I knew that I had to be there to teach them what I knew. When dad died at age 34, he did not leave a succession plan. From that, I learned that one must teach people to take over a business at any time. The values of hard work that I learned from my father, I taught to my children. They started doing jobs here and there even when they were still in high school. Six years ago, I announced my retirement and handed the reins to my youngest brother James and only son Lance. But my children tease me because I still go to the office every day and make myself useful. I just hired my first Executive Assistant and moved into a bigger and nicer office.
Building a business to the size of JG Summit was not easy. Many challenges were thrown my way. I could have walked away from them, keeping the business small, but safe. Instead, I chose to fight. But this did not mean I won each time.
By 1976, at age 50, we had built significant businesses in food products anchored by a branded coffee called Blend 45, and agro- industrial products under the Robina Farms brand. That year, I faced one of my biggest challenges, and lost. And my loss was highly publicized, too. But I still believe that this was one of my defining moments.
In that decade, not many business opportunities were available due to the political and economic environment. Many Filipinos were already sending their money out of the country. As a Filipino, I felt that our money must be invested here. I decided to purchase shares in San Miguel, then one of the Philippines ‘ biggest corporations. By 1976, I had acquired enough shares to sit on its board.
The media called me an upstart. “Who is Gokongwei and why is he doing all those terrible things to San Miguel?” ran one headline of the day. In another article, I was described as a pygmy going up against the powers-that- be. The San Miguel board of directors itself even aid for an ad in all the country’s top newspapers telling the public why I should not be on the board. On the day of reckoning, shareholders quickly filled up the auditorium to witness the battle. My brother James and I had prepared for many hours for this debate. We were ne rv ous and excited at the same time.
In the end, I did not get the board seat because of the Supreme Court Ruling. But I was able to prove to others-and to myself-that I was willing to put up a fight. I succeeded because I overcame my fear, and tried. I believe this battle helped define who I am today. In a twist to this story, I was invited to sit on the board of Anscor and San Miguel Hong Kong 5 years later. Lose some, win some.
Since then, I’ve become known as a serious player in the business world, but the challenges haven’t stopped coming.
Let me tell you about the three most recent challenges. In all three, conventional wisdom bet against us. See, we set up businesses against market Goliaths in very high-capital industries: airline, telecoms, and beverage.
Challenge No. 1: In 1996, we decided to start an airline. At the time, the dominant airline in the country was PAL, and if you wanted to travel cheaply, you did not fly. You went by sea or by land.
However, my son Lance and I had a vision for Cebu Pacific: We wanted every Filipino to fly.
Inspired by the low-cost carrier models in the United States , we believed that an airline based on the no-frills concept would work here. No hot meals. No newspaper. Mono-class seating. Operating with a single aircraft type. Faster turn around time. It all worked, thus enabling Cebu Pacific to pass on savings to the consumer.
How did we do this? By sticking to our philosophy of “low cost, great value.”
And we stick to that philosophy to this day. Cebu Pacific offers incentives. Customers can avail themselves of a tiered pricing scheme, with promotional seats for as low a P1. The earlier you book, the cheaper your ticket.
Cebu Pacific also made it convenient for passengers by making online booking available. This year, 1.25 million flights will be booked through our website. This reduced our distribution costs dramatically.
Low cost. Great value.
When we started 11 years ago, Cebu Pacific flew only 360,000 passengers, with 24 daily flights to 3 destinations. This year, we expect to fly more than five million passengers, with over 120 daily flights to 20 local destinations and 12 Asian cities. Today, we are the largest in terms of domestic flights, routes and destinations.
We also have the youngest fleet in the region after acquiring new Airbus 319s and 320s. In January, new ATR planes will arrive. These are smaller planes that can land on smaller air strips like those in Palawan and Caticlan. Now you don’t have to take a two-hour ride by mini-bus to get to the beach.
Largely because of Cebu Pacific, the average Filipino can now afford to fly. In 2005, 1 out of 12 Filipinos flew within a year. In 2012, by continuing to offer low fares, we hope to reduce that ratio to 1 out of 6. We want to see more and more Filipinos see their country and the world!
Challenge No. 2: In 2003, we established Digitel Mobile Philippines, Inc. and developed a brand for the mobile phone business called Sun Cellular. Prior to the launch of the brand, we were actually involved in a transaction to purchase PLDT shares of the majority shareholder.
The question in everyone’s mind was how we could measure up to the two telecom giants. They were entrenched and we were late by eight years! PLDT held the landline monopoly for quite a while, and was first in the mobile phone industry. Globe was a younger company, but it launched digital mobile technology here.
But being a late player had its advantages. We could now build our platform from a broader perspective. We worked with more advanced technologies and intelligent systems not available ten years ago. We chose our suppliers based on the most cost-efficient hardware and software. Being a Johnny-come- lately allowed us to create and launch more innovative products, more quickly.
All these provided us with the opportunity to give the consumers a choice that would rock their world. The concept was simple. We would offer Filipinos to call and text as much as they want for a fixed monthly fee. For P250 a month, they could get in touch with anyone within the Sun network at any time. This means great savings of as much as 2/3 of their regular phone bill! Suddenly, we gained traction. Within one year of its introduction, Sun hit one million customers.
Once again, the paradigm shifts – this time in the telecom industry. Sun’s 24/7 Call and Text unlimited changed the landscape of mobile- phone usage.
Today, we have over 4 million subscribers and 2000 cell sites around the archipelago. In a country where 97% of the market is pre-paid, we believe we have hit on the right strategy.
Sun Cellular is a Johnny-come- lately, but it’s doing all right. It is a third player, but a significant one, in an industry where Cassandras believed a third player would perish. And as we have done in the realm of air travel, so have we done in the telecom world: We have changed the marketplace.
In the end, it is all about making life better for the consumer by giving them choices.
Challenge No. 3: In 2004, we launched C2, the green tea drink that would change the face of the local beverage industry — then, a playground of cola companies. Iced tea was just a sugary brown drink se rv ed bottomless in restaurants. For many years, hardly was there any significant product innovation in the beverage business.
Admittedly, we had little experience in this area. Universal Robina Corporation is the leader in snack foods but our only background in beverage was instant coffee. Moreover, we would be entering the playground of huge multinationals. We decided to play anyway.
It all began when I was in China in 2003 and noticed the immense popularity of bottled iced tea. I thought that this product would have huge potential here. We knew that the Philippines was not a traditional tea-drinking country since more familiar to consumers were colas in returnable glass bottles. But precisely, this made the market ready for a different kind of beverage. One that refreshes yet gives the health benefits of green tea. We positioned it as a “spa” in a bottle. A drink that cools and cleans.thus, C2 was born.
C2 immediately caught on with consumers. When we launched C2 in 2004, we sold 100,000 bottles in the first month. Three years later, Filipinos drink around 30 million bottles of C2 per month. Indeed, C2 is in a good place.
With Cebu Pacific, Sun Cellular, and C2, the JG Summit team took control of its destiny. And we did so in industries where old giants had set the rules of the game. It’s not that we did not fear the giants. We knew we could have been crushed at the word go. So we just made sure we came prepared with great products and great strategies. We ended up changing the rules of the game instead.
There goes the principle of self-determination, again. I tell you, it works for individuals as it does for companies. And as I firmly believe, it works for nations.
I have always wondered, like many of us, why we Filipinos have not lived up to our potential. We have proven we can. Manny Pacquiao and Efren Bata Reyes in sports. Lea Salonga and the UP Madrigal Singers in performing arts. Monique Lhuillier and Rafe Totenco in fashion. And these are just the names made famous by the media. There are many more who may not be celebrities but who have gained respect on the world stage.
But to be a truly great nation, we must also excel as entrepreneurs before the world. We must create Filipino brands for the global market place.
If we want to be philosophical, we can say that, with a world-class brand, we create pride for our nation. If we want to be practical, we can say that, with brands that succeed in the world, we create more jobs for our people, right here.
Then, we are able to take part in what’s really important-giving our people a big opportunity to raise their standards of living, giving them a real chance to improve their lives.
We can do it. Our neighbors have done it. So can we. In the last 54 years, Korea worked hard to rebuild itself after a world war and a civil war destroyed it. From an agricultural economy in 1945, it shifted to light industry, consumer products, and heavy industry in the ’80s. At the turn of the 21st century, the Korean government focused on making Korea the world’s leading IT nation. It did this by grabbing market share in key sectors like semiconductors, robotics, and biotechnology.
Today, one remarkable Korean brand has made it to the list of Top 100 Global Brands: Samsung. Less then a decade ago, Samsung meant nothing to consumers. By focusing on quality, design, and innovation, Samsung improved its products and its image. Today, it has surpassed the Japanese brand Sony. Now another Korean brand, LG Collins, is following in the footsteps of Samsung. It has also broken into the Top 100 Global Brands list.
What about China ? Who would have thought that only 30 years after opening itself up to a market economy, China would become the world’s fourth largest economy? Goods made in China are still thought of as cheap. Yet many brands around the world outsource their manufacturing to this country. China ‘s own brands-like Lenovo, Haier, Chery QQ, and Huawei-are fast gaining ground as well. I have no doubt they will be the next big electronics, technology and car brands in the world.
Lee Kwan Yu’s book “From Third World to First” captures Singapore’s aspiration to join the First World . According to the book, Singapore was a trading post that the British developed as a nodal point in its maritime empire. The racial riots there made its officials determined to build a “multiracial society that would give equality to all citizens, regardless of race, language or religion.”
When Singapore was asked to leave the Malaysian Federation of States in 1965, Lee Kwan Yew developed strategies that he executed with single-mindedness despite their being unpopular. He and his cabinet started to build a nation by establishing the basics: building infrastructure, establishing an army, WEEDING OUT CORRUPTION,providin g mass housing, building a financial center. Forty short years after, Singapore has been transformed into the richest South East Asian country today, with a per capita income of US$32,000.
These days, Singapore is transforming itself once more. This time it wants to be the creative hub in Asia , maybe even the world. More and more, it is attracting the best minds from all over the world in filmmaking, biotechnology, media, and finance. Meantime, Singaporeans have also created world-class brands: Banyan Tree in the hospitality industry, Singapore Airlines in the Airline industry and Singapore Telecoms in the telco industry.
I often wonder: Why can’t the Philippines , or a Filipino, do this?
Fifty years after independence, we have yet to create a truly global brand. We cannot say the Philippines is too small because it has 86 million people. Switzerland , with 9 million people, created Nestle. Sweden , also with 9 million people, created Ericsson. Finland, even smaller with five million people, created Nokia. All three are major global brands, among others.
Yes, our country is well-known for its labor, as we continue to export people around the world. And after India , we are grabbing a bigger chunk of the pie in the call-center and business-process- outsourcing industries. But by and large, the Philippines has no big industrial base, and Filipinos do not create world-class products.
We should not be afraid to try-even if we are laughed at. Japan, laughed at for its cars, produced Toyota . Korea , for its electronics, produced Samsung. Meanwhile, the Philippines ‘ biggest companies 50 years ago-majority of which are multinational corporations such as Coca- Cola, Procter and Gamble, and Unilever Philippines , for example-are still the biggest companies today. There are very few big, local challengers.
But already, hats off to Filipino entrepreneurs making strides to globalize their brands.
Goldilocks has had much success in the Unites States and Canada , where half of its customers are non-Filipinos. Coffee-chain Figaro may be a small player in the coffee world today, but it is making the leap to the big time. Two Filipinas, Bea Valdez and Tina Ocampo, are now selling their Philippine-made jewelry and bags all over the world. Their labels are now at Barney’s and Bergdorf’s in the U.S. and in many other high-end shops in Asia , Europe , and the Middle East .
When we started our own foray outside the Philippines 30 years ago, it wasn’t a walk in the park. We set up a small factory in Hong Kong to manufacture Jack and Jill potato chips there. Today, we are all over Asia . We have the number-one-potato- chips brand in Malaysia and Singapore . We are the leading biscuit manufacturer in Thailand , and a significant player in the candy market in Indonesia . Our Aces cereal brand is a market leader in many parts of China . C2 is now doing very well in Vietnam , selling over 3 million bottles a month there, after only 6 months in the market. Soon, we will launch C2 in other South East Asian markets.
I am 81 today. But I do not forget the little boy that I was in the palengke in Cebu . I still believe in family. I still want to make good. I still don’t mind going up against those older and better than me. I still believe hard work will not fail me. And I still believe in people willing to think the same way.
Through the years, the market place has expanded: between cities, between countries, between continents. I want to urge you all here to think bigger. Why se rv e 86 million when you can sell to four billion Asians? And that’s just to start you off. Because there is still the world beyond Asia . When you go back to your offices, think of ways to sell and market your products and se rv ices to the world. Create world-class brands.
You can if you really tried. I did. As a boy, I sold peanuts from my backyard. Today, I sell snacks to the world.
I want to see other Filipinos do the same.
Thank you and good evening once again.
II. Roxas’s speech
First of all I’d like to thank the FOCAP for giving me this opportunity to be with you this morning. It’s the start of the year, we’ve just turned over our calendar, opened up brand new agenda books, and it’s a good time for us to contemplate what lies ahead not just in the succeeding year but in the midterm as well. I hope that good stories, more than enough of it, will actually come out from this little talk of ours.
Which is not to say that many other interesting stories have not come about in the Philippines over the last several weeks. Who would have thought that a tank would be out at the Manila Peninsula Hotel only a few weeks ago? Or that Barack Obama would upset Hillary in Iowa, or for that matter that Hillary would have a nice comeback in New Hampshire just a few days after?
Today’s theme is ‘Prospects for the Philippines,’ and I’m going to be careful about my words, particularly about the future, especially when addressing journalists, who, by the nature of their jobs and by duty, have to hold me to every one of these words.
So instead of crystal ball gazing, let me engage instead in a little bit of human intuition, walk through what I see are the drivers, and what the terrain will be like for us in the country over the next several years.
I ask you: What word comes to mind when thinking about the Philippines? As a hint, I’d like to tell you about a story that my counterpart Trade Minister from Russia told me about his country. He expressed it to me in the Russian language, which I forget now, but the essence of his story was that the Russians never miss an opportunity to miss an opportunity. And that same sentiment filled me when I contemplated our state as it were.
The Filipino word for it is: Sayang. I think it’s a word that best describes our country’s condition. Its closest translation is the English “What a waste,” a word that connotes regret, forlornness, over what could be and might have been. As is always the case with language, the meanings and meaningfulness can so easily be lost in the translation. ‘Sayang’ is the word in Filipino that so captures the sentiment of the average person on the street.
When we see a people blessed by character and a spirit of excellence who have not been able to rise to their full potential, we say… Sayang.
When we hold the grandest of visions, yet fail in the end… Sayang.
As the first colonial people to regain our freedom, we had a headstart in the race for development among the new nations.
At Independence, thanks to a comparatively benign American colonialism, our individual incomes were among the highest in Southeast Asia.
Then, after having led our neighbors in GDP growth in the post-Independence period, we soon started to lag behind.
Thailand passed us by in 1981. Now the average Thai has per capita income twice that of the average Filipino. Malaysians have per capita four times that of Filipinos. Singaporeans almost 20 times more than the average Filipino. Indonesia and Vietnam are breathing down our necks.
The day-to-day erosion of the people’s trust in our institutions is that in an increasingly dysfunctional political system — this, to me, is the most worrisome source of Sayang in our society today.
I am certain that many Filipinos agree with me about this, particularly this expanding cavity in our very souls, this sense of loss that all of us are feeling today… Sayang.
The latest surveys show public satisfaction for all top four government institutions significantly declining compared to the previous quarter.
From a net positive 32 rating in September, the Senate has declined 13 points, to a positive-19 as of year-end.
The House of Representatives’ net satisfaction score fell from positive 18 to only positive 3.
The Supreme Court dropped from positive 24 in September to a neutral net positive 5 in December. This is more glaring, given the fact that it has enjoyed double-digit positive approval ratings over the past four quarters.
The Cabinet went from a neutral net positive 1 to a negative 9, a steep plunge that reflects the President’s own negative trust ratings.
In light of the people’s mistrust of governmental institutions, the media has become a more trusted repository of people’s grievances and yearnings. But media cannot be government. To see the truth and to tell it like it is; these are noble duties, but the duties of government extend far beyond that.
The administration has very concrete and immediate opportunities to arrest this trend of mistrust and disillusionment.
How difficult would it be to appoint credible, qualified and eminent persons to the Comelec, the Civil Service Commission, or to the position of Chief of Staff of the Armed Forces of the Philippines? All these can be done in the next two months.
If not, maling-mali and sobrang Sayang!
A silver lining though is that business continues to exist and in some instances thrives in what is its own parallel universe.
Having jumpstarted its development when I was DTI secretary in 2000, I am happy to note that the BPO sector is scaling new heights. We have Oca Sanez here, who is now the president of BPAP, who recently arrived from the private sector pursuant to a plan to put together an entirely private-sector funded, retaining McKinsey to write up the industry’s new five-year development plan.
A stronger peso and a shrinking pool of qualified workers could slow down the pace of growth in this sector. In spite of this, though, we continue to hope that this will remain a shining star of the Philippine economy.
From mere contact center and customer support services, it is poised to move up the value chain and increase specialization. We are seeing wave upon wave of offshore services opening shop: from stock brokerage, to animation and design, to content development. The opportunities and possibilities are boundless.
The service sector will continue to lead the way in terms of opportunity and employment particularly as tourism arrivals increase and as the OFW remittances likewise remain steady.
It is the government’s job to ensure that these opportunities are not wasted — ensuring an educated and motivated work force, delivering a focused promotion effort, providing a level playing field, dispensing timely, competent and above-board regulation are some of what government has to do in order that these potentialities are not squandered.
Kung hindi … Sayang!
Mining will continue to draw in foreign investors. As of September last year, investments in this sector reached more than $150 million, multiples of what it was for the entire 2006.
Demand and prices of metals in the world market is currently being driven by the appetite of China and other industrializing states.
We must take advantage of this, as our country is one of the most endowed in mineral resources: it is is 3rd in the world in terms of gold reserves, 4th in copper, 5th in nickel and 6th in chromite.
In order for mining to continue to be a viable and acceptable enterprise, though, the local community’s trust must be ensured.
And it is the government’s job to ensure that trust: To guarantee that all environmental and health safeguards are in place, that the community is included and not estranged, that concerns are taken into consideration and not simply compensated; and that any windfall is not taken at the expense of environmental degradation.
Kung hindi … Sayang!
Agriculture has, and will continue to come to life as prices for basic foodstuffs have risen.
For once, the stars are aligned for the agriculture sector. The China dynamic that has driven up prices for minerals also is increasingly felt for food items. Government should realize this and invest heavily in agricultural modernization now! By being proactive, we can convert this China driven demand into real opportunities for greater productivity and incomes in the countryside.
Kung hindi … Sayang!
For sure, we’ve come a long way over these last 20 years since we brought down the authoritarian Marcos regime. But, given the enormity of our economic problems, what we’ve been able to do has been very little indeed.
For instance, Philippine competitiveness is still falling. Last year, our country ranked 49th out of 61 surveyed by the Swiss Institute for Management Development, whose local partner is the AIM (Asian Institute of Management).
In the World Bank Group’s most recent yearly survey of “ease in doing business,” the Philippines’ ranking slipped by five notches–from 121st in 2005 to 126th out of 175 countries in 2006.
In the same survey, countries in our neighborhood, Thailand ranked 18th, Malaysia 25th, Taiwan 47th. Even Vietnam is ranked 104th. Sayang!.
As result of these and so many Sayangs, many Filipinos have begun to lose hope in our country’s future.
Even well established professionals are migrating. A senior executive executive quit a major TV network the other day to move to Canada, he explained, “for the sake of the children.”
Everyday, nearly three thousand citizens leave the country to work abroad. More than a hundred Filipinos per hour are packing up and leaving to secure a brighter future for their families. They prefer two-year job contracts elsewhere than to face unemployment and underemployment here at home.
Young Filipinos have learned to plan their lives around self-contained exit plans as migrant workers, call center agents, telemarketers, freelance tutors, teachers, professionals, and self-made entrepreneurs.
Development and nation building is all about hope; “take that hope away and the smart ones use their energies not to build their nation but to escape from it”.
This “escaping the default destiny” is apparent in other societal engagements as well. The concept of collective empowerment through trade unions, sector-based movements, and cooperatives is on the wane.
Social networks thrive on the Internet, offering quick virtual escape and tenuous online alliances.
Technology has made it easier for new values and old principles to be dispersed and dispensed with: all this at lightning speed.
In the end, we see an empowered individual in an environment of declining political awareness and civic spiritedness, having dispersed interests and opinions, and a dissolved sense of belonging.
For sure, the government can do a lot more than it is doing right now. If it were performing as it should be, we would not be experiencing this much distrust and jadedness from the citizenry.
With the declining trust in our institutions, we see the phenomenon of individuals empowering themselves through their own initiative.
While I am proud of our people and their resilience and dogged determination to create opportunities for themselves, I am greatly saddened that they can only find these opportunities abroad.
What kind of a country have we become that we cannot even offer a future for our people, that Filipinos must move away to find decent futures for their children?
As for myself, I love this country: I’m here for life; and I intend to do all I can to try and help fix this situation.
Our people’s estrangement from politics has made it easier for government –as the most organized and powerful entity — to do as it wishes, having long abandoned the need to have public opinion on its side.
And when Government no longer cares about public opinion, it begins to test the limits of abuse and malfeasance.
Jonas Burgos, son of one of the country’s staunchest defenders of democracy and free speech, has been missing for more than a hundred days. Scores of other activists, labor leaders, judges, and media men have either disappeared or been killed.
Corruption persists in almost all levels of the bureaucracy, as bribery becomes a tool to get foreign loans and local projects signed, and all these sealed and delivered even without public bidding.
Smuggling–from onions to guns, from clothes to hot cars–continues to undermine the viability of legitimate growers, planters, manufacturers, and factory-owners in our country.
Our country has become very polarized. We are in a sort of stasis — a deadlock of forces that has forced our institutions and citizenry to work at less than maximum. Institutions and individuals have managed to exist for far too long with or without each other’s support and approval — and the leadership that is supposed to connect the dots and ensure a web of trust is weighed down by compromise and patronage.
The truth is we have become incrementalists! A little bit here and a little bit over there. We seem unable to get ourselves out of this “minimizing” dynamic.
No wonder we have fallen into a rut, unable to pull ourselves out of our misery. We want change… but not too much. We want order and more security… but not too much… better tax collection… but not too much… more traffic management and open sidewalks… but not too much… and so on and so forth. The result: We grow… but not too much; we get by… but not by too much.
Yet this is not a God-given condition, but a man-made social system that has brought us to where we are today.
During these next 10, 15 years, our country must complete our modernization — or forever remain an economic and political backwater in East Asia.
For our country, industrialization must become the basic mode of economic modernization. And when I say industrialization, I say not so much in its traditional sense of manufacturing and basic industry but rather in its more modern sense of economic units acting with scale and being a part of the global supply chain. Even agriculture must “indusrialize” or “modernize” its systems and processes, if it is to contribute significantly to Philippine development.
Just to give an indication, about half or our GDP comes from services, about 30% comes from industry, and only about 15% comes from agriculture. But if one were to take a profileof the source of income, half our people take their income principally from agriculture.
We need this kind of economic modernization to be outward-looking and globally competitive. Our end-goal should be the modernization of our country — of the economy, of our politics, of the whole national society.
We must stop being incrementalists, and invest real money to solve real problems. We can no longer afford to flit from one preoccupation to another. It never really completes any task; but in the process it wastes a great deal of energy, time, and money.
The single biggest challenge before us is the fraying of our society brought about by mass poverty. We cannot allow the masses of Filipino to continue passing down to their children only an inheritance of poverty.
Until now, roughly one in every five Filipino families lives in absolute poverty. The World Bank defines “absolute poverty” as subsisting on the equivalent of one dollar a day. At P40, that’s equivalent to one small hamburger.
My approach is two-fold: first, relief, and then second, a massive and focused investment in our people through education and health.
For relief, I recently offered one concrete and simple proposal.
I have, for the past several days, turned up the volume on a very specific issue: suspending the EVAT on oil.
I believe that the time has come for a fair and urgent step to give our people a break from high oil prices during these extraordinary times of high oil prices. As the citizenry tightens its belt, is it not only appropriate for the government to tighten its belt in turn?
I have proposed a moratorium on the 12% EVAT on oil during this extraordinary time of extremely high oil prices. This will result in P4 per liter savings for consumers of diesel, and more than P65 per tank of LPG (11kg).
The executive branch was quick to reject this proposal. Which is not at all surprising; how can they accept it, when the government has chosen to rely on oil revenue collections, an easy get, rather than closing the loopholes and performing more effectively by running after bigtime tax evaders and smugglers?
Let me put things in perspective:
When we imposed the EVAT, oil was at $30 a barrel, and the government annual deficit was in excess of P250 billion a year, and today is remarkable reversed. Government is in budget equality, and oil is at $100 per barrel.
By cutting EVAT on oil from 12% to zero, though, we put the money back in people’s pockets. They get to have more money to spend on other needs, and we stimulate consumption; in this way we never really “lose” the revenue.
Re-circulating the money by having the consumer spend as he answers the concern regarding his own needs. The money will be spent either way — by the government, or through the individual.
I am not compromising my belief in market economics and a disciplined fiscal policy in serving the Filipino’s self-interest. The important thing is that we give the citizens a choice on how to spend their hard-earned cash at a time they need it most.
This is a reasonable and compassionate approach in light of contemporary economic conditions. The unprecedented global rise in energy prices is driving both the rethinking and practical modification of economic policy around the world. Why should we be any different?
China is advocating the imposition of strict price controls on energy and our neighbor Thailand has reduced some levies on fuel sales. Their energy minister is even advocating further excise tax reductions on oil products. Many other governments around both the developed and developing world are taking similar formal and informal actions to mitigate the high energy prices.
I specifically referred to China and Thailand because both nations have historically fueled their robust economic success by refusing to be the captive of an absolutist economic policy. Both nations pick and choose, modify and negotiate their economic path with as much flexibility as the interest and wellbeing of their citizens requires.
Here, sadly, our government refuses to look at the big picture and deliver the goods for the common welfare. Why are we so afraid of fighting for our own needs?
As for the massive, focused investment in our people, I have also filed a bill stipulating that a People’s Fund be created out of all EVAT revenues; this is so we can fully fund and thus solve our education and health crises.
Socially, the Filipino nation faces both nutritional and educational disasters. Six out of 10 children are malnourished to some degree. Less than half of all Grade 1 pupils ever get to finish high school.
We must recognize the gravity of the national crisis and our people’s imperative need to cure the infirmities that have so weakened both our state and our economy.
At this point, I just want to diggress a little bit and bring to your attention a book that I was just finishing, ‘The Bottom Billion’ by Paul Collier a researcher for the World Bank. In it, one of his theses has to do with the wage productivity gap, and he accounts for the massive investments in East Asia in the ’80s as a result of the wage productivity gap as between the industrialized world and the industrializing world, the East Asian economies.
As for the Philippines, our wages are what they are, they are a fact of life. And so the only way the Philippines can make up, the only way the Philippines can be a part of this movement in capital is by improved productivity. The only way we can improve productivity is by investing in the people, hence education and health.
We must stabilize and strengthen the institutions and mechanisms of the Philippine State, to make them more efficient instruments of the national purpose.
At the same time, we must reject coups and mob violence as ways of removing elected governments from office.
We must reaffirm that it is through democratic politics–through conciliation and compromise–that the business of the State is best carried out, and that civil order maintained, and the national purpose served.
2008 could be 2007 all over again, unless the administration breaks the mold and decides to use its remaining time in power to build a real legacy and a real nation. If not, Sayang.
Sayang, because dapat sulitin at hindi sayangin ang galing ng Pilipino. The excellence of the Filipino should be utilized to its full potential. It should not be allowed to go to waste.
I believe that the Filipino was made for better things and deserves better than what they are getting.
I believe that for the Filipino to excel, in the same way that millions of OFWs do in fact excel in other countries, he needs a stable political environment where there is discipline, a purpose, and a meritocracy.
I believe the fate of nations is not pre-ordained. I reject the perception that the Philippines will never rise to its fullest potential.
I believe the behavior of government pales in comparison to the behavior of the Global Filipino: disciplined, punctual, competent, honest, compassionate, and patriotic.
I believe our problems are real and urgent, and we have to face them now as a country in the same way that the rest of the world has.
For this I believe. If we are to succeed in 2008, and beyond, the status quo in the Philippines today — this perception of Sayang–is simply unacceptable. If we are to rise as a nation, it cannot be business as usual; we must build from past regrets and begin to work with our eyes set on the future. Then, and only then, can real, meaningful change happen.
III. Angara’s speech
The world today is one of increasingly borderless exchange of goods, capital, and labor. More countries than ever–and from a broader spectrum of development–are active participants in the global economy. This has brought about rapid technological change and competition among nations.
Intense global competition has driven the more able producers and entrepreneurs to expand and grow rich — and the less able to be swept away.
Today, knowledge is the most important factor in economic development. It is not low-wage, unskilled labor that drives a country’s economic growth. The true key to prosperity in today’s world is a well-educated, technically-skilled workforce producing high-value added, knowledge-intensive goods and services, employed in private enterprises that have the capacity to find, adapt, and adopt modern, up-to-date technology and sell sophisticated goods and services in global markets.
But while a few of the world’s richest countries produce the majority of scientific and technological innovation and therefore create wealth, most of the developing world struggle to establish science and technology (S&T) as the driving force towards growth.
For the Philippines to strategically engage in the global economy, the Philippines must develop and adapt technologies to respond to local needs. In the process, the country will develop new competitive economic activities to serve not only local but also regional and global markets. All these must increase productivity, wealth and standards of living that lead to economic growth and poverty reduction.
Producing wealth and high value goods and services will require an intensive effort to raise our Science, Technology and Innovation (STI) capacity.
This lecture argues that science, technology, and innovation have the potential to contribute substantially to economic growth and poverty reduction. Basic to the realization of this potential is education. This is fundamental for a knowledge economy based on information technology and a country’s human capital.
This lecture is divided into four parts:
The first part describes the advances in STI around the globe.
The second part looks into other countries’ experiences in applying STI to spur economic growth and ease poverty. It distills the lessons learned from these countries’ experiences.
The third part discusses the state of STI as well as the direction, strategies and efforts currently undertaken in the country.
The fourth part identifies critical gaps in STI readiness and makes recommendations for government, policymakers, universities, research and development (R&D) institutes, and industries.
I. SCIENCE, TECHNOLOGY AND INNOVATION: TRENDS
Scientific and technological innovations developed as early as the 1980s are expected to change, even accelerate, at least until the first two to three decades of the 21st century. Such innovations will continue to fuel economic growth, especially in those countries that have given a high premium to science and technology. Robert Solow, one of the Nobel Prize winners in economics, estimated that more than 50 percent of the economic growth in the US since World War II has derived directly from technological innovation.
Countries that have catalyzed technological innovations have identified prospects in the horizon where they can accelerate and scale up processes that transform ideas to products.
Japan, for instance, identified rapid and intensive technological innovations in the areas of environment; electronics; life sciences; marine and earth science; production and machinery; communication; information; health, medical and welfare; agriculture, forestry and fisheries; and transportation.
South Korea forecasted materials; information, electronics and communication; medical care and health; production; life science; energy; environment and safety; transportation; agriculture, forestry and fisheries; and minerals, water resources, urbanization, construction and civil engineering as areas that will experience great leaps of progress.
In the coming decades, innovations in biotechnology, information, communication and technology (ICT), nanotechnology, and neurotechnology will continue to originate in other countries and fundamentally change the way we all live. Along with biotechnology and ICT, James Canton, a world-renowned futurist, foresees that nanotechnology and neurotechnology will be the four areas of radical innovation. Consequently, they will be the source of a huge chunk of the global wealth in the next five, ten, twenty years. And for developing countries, biotechnology and ICT have the greatest potential for improving the quality of lives and well-being of people.
Biotechnology refers to the use of microorganisms such as bacteria or biological substances such as enzymes, to perform industrial or manufacturing processes.
Biotechnology research focuses on gene manipulation and transfer, DNA typing and cloning and the much-debated genetically modified organisms (GMOs).
Biotechnology in agriculture and food can increase production and productivity and improve the quality of products, and is especially critical now. The World Bank calls for a dynamic agricultural development agenda to lift the close to 1 billion people across the globe from poverty. The Bank support this year to agriculture and rural development will reach US$3.1 billion.
In medicine, biotechnology will enable us to better diagnose diseases, promote the use of gene therapy, stem cell therapy and xenotransplantation to prolong human life.
ICT is an umbrella term that includes any communication device or application, encompassing radio, television, cellular phones, computer and network hardware and software, satellite systems and so on, as well as the various services and applications associated with them, such as videoconferencing and distance learning.
The importance of ICTs lies less in the technology itself than in its ability to create greater access to information and communication in underserved populations.
Leveraging and harnessing the tools of ICT for education and development can result in widened access to knowledge and increase in opportunities and incomes.
Since the 1990s, there has been a steady ICT diffusion. More economies invest in ICT as they move towards a knowledge society. ICT will continue to grow, that by 2020 it will be worth US$7 trillion.
Nanotechnology is the science and technology of devices and materials constructed on extremely small scales, as small as individual atoms and molecules.
Nanotechnology embraces many different fields and specialties, including engineering, chemistry, electronics, and medicine, among others, but all are concerned with ultimately bringing existing technologies down to a very small scale, measured in nanometers.
For a product to be counted as nanotechnology, it is enough for some of the materials to have particles that may be only a few nanometers big — a nanometer is a billionth of a meter or about 100,000th of the thickness of a sheet of paper.
These nanoparticles are incorporated into other materials that bestow on them useful properties. Silver nanoparticles, for instance, are found in food-preparation equipment. Titanium dioxide, ground into nanoparticles, are used in sunscreens and cosmetics. Carbon nanotubes have been embedded in materials like plastics for a long time now.
Nanotechnology has several important applications in agriculture, farming, public health, and the environment. For instance, with nanotechnology, precision farming through computers, global satellite positions systems, and remote sensing devices, determine if crops are growing at maximum efficiency.
Neurotechnology is a set of tools that can influence the human central nervous system, especially the brain. It will be used for therapeutic ends such as cures for Alzheimer’s and will enable people to consciously improve emotional stability, enhance cognitive clarity, and extend sensory experiences.
Results of work in these areas are dramatically changing various dimensions of our lives, individually and collectively. Developed countries have made rapid advancements in the electronics and information field by creatively drawing from the physical sciences and engineering. They are now building on these innovations and working on the wide-ranging and life-changing possibilities of convergence between the life-sciences and engineering.
While these countries have boldly forged ahead in such new, exciting, and dynamic ventures, efforts in the Philippines seem to have stalled on the lower-end side of technology. This is not to belittle such efforts but rather to explore the reasons why the Philippines has not advanced as fast as Malaysia, Singapore, or Thailand and how this country can move ahead.
II. COUNTRY EXPERIENCES IN DEVELOPMENT THROUGH STI
Robert Reich, author of Super Capitalism, argued that technological advances led to innovations that heightened competition and created new sources of wealth.
These technological advances skyrocketed during the US-Soviet arms race, which propelled the two countries to step up public financing of infrastructures, education and research, all in the name of national defense. In the 1970s, the US underwrites 70% of the country’s research, many of which involve defense technology. (Table 1)
These technological discoveries have found their way to commercial markets through defense contractors, universities, and entrepreneurs, and have since then further propelled the US economy. Since the early 1970s, the US GDP tripled in size with productivity increasing by 80% in 2006.
Economic development of this sort, however, requires massive investments in infrastructure, human resources, as well as time. Poor countries do not have enough of these to start with. While they continue to work for economic growth through building their human capabilities and physical infrastructure, poor countries could leapfrog or adopt a new technology directly and skip over earlier, inferior versions of it that came before.
By far, the best-known example is that of mobile phones in the developing world. Fixed-line networks are poor or non-existent in many developing countries, so people have leapfrogged straight to mobile phones instead.
Another known example is the way Grameen Telecom in Bangladesh integrated new technologies in micro-credit lending. It deployed cellular wireless networks so that small-scale entrepreneurs can widely share mobile phones.
Strategies such as these will help a growing number of countries enjoy significant gains in economic productivity associated with a freer flow of information. One recent study of Africa claims that “a one percent increase in mobile penetration rates is associated with 0.5-0.6 percent higher rates of FDI/GDP.”
Technological leapfrogging has become the basis for various countries’ latecomer strategies for catching up with existing industrial leaders.
Harvard economics professor Alexander Gerschenkron, who fashioned the concept of latecomer development in the 1960s, suggested that a less developed economy can tap and use the technologies and practices of an advanced economy, and this in turn will let the developing countries skip several stages of development that the advanced economy had to go through.
Since then, Gerschenkron’s concept has been expanded to include poor and latecomer countries to specifically use ICT to accelerate development, promote growth, and reduce poverty.
One of the most notable catch-up stories is that of South Korea, now known as the “Miracle of Han River”. Starting with virtually nothing after World War II and devastated in the 50s by a deadly war between the North and South, an impoverished South Korea managed to reach its current status as a developed country, with the third largest economy in Asia and the 11th largest in the world in terms of nominal GDP. If the recent Goldman Sachs report gets its predictions right, South Korea could be the 2nd richest country in the world by 2050, next only to the United States.
South Korea achieved its robust economic growth through investing heavily on infrastructure and education, ensuring stability especially in its financial system, and providing support–both through public financing and policy — to research and development.
In particular, South Korea has introduced, internalized and renovated foreign technologies, similar to Gerschenkron’s late comer advantages. The World Bank describes this as stages of imitation, internationalization, and generation.
At present, South Korea, like many other countries and noting that other late comers such as China are a threat to its economy’s competitive advantage, has bolstered its R&D spending. (Table 2) The South Korean government’s R&D spending has more than quadrupled over the last decade, from US$5billion in 1990 to US$24.2 billion in 2004. Currently, R&D public spending is 7% of Korea’s budget.
Another spectacular catch-up story is China. Goldman Sachs in its BRIC prediction foresees that China will emerge as one of the four new dominant economies by 2050. Already, China is ranked second in the world in terms of number of researchers, next only to the United States. Total R&D expenditure has dramatically increased, from $12.5 billion in 1991 to $94 billion in 2004. China’s patent applications are also increasing twofold every two years. China is now the world’s fourth largest economy, and if current trends continue, will soon become the world’s biggest exporter.
A crucial aspect to this growing productivity is the improvement of China’s education system , which raised the skills level of its labor force. Like South Korea, China first relied on importing foreign technology, adapted them to local needs and then later on developed its own indigenous innovation.
According to the Organization for Economic Cooperation and Development (OECD), China has mobilized resources for R&D at an unprecedented scale and speed, and has translated this to the socio-economic progress that China is experiencing for the last ten years. At the crux of its R&D initiatives is China’s National Innovation System (NIS), a conceptual framework for “analyzing technological advances, which consists of innovation actors and their relationships. There were NIS for (a) education involved in linking universities that allowed them to set up their own enterprises (Table 3) with many enterprises involved in S&T. (Table 4); (b) business ; and (c) government. This structural reform led to massive state efforts at developing China’s science and technology system , formally institutionalized by 1985.
Economic reforms and S&T prioritization have encouraged the entry of FDIs, which are now major contributors to China’s R&D and innovation. Since then, more policy reforms designed to facilitate innovation have been implemented.
China is continuously reviewing its innovation policies, and is building an “enterprise-based innovation system,” aimed at developing more indigenous innovation for Chinese enterprises.
Like China, India rose from poverty and is also part of the BRIC prediction of Goldman Sachs. India is now the world’s eleventh richest country, its GDP amounting to US$430 billion. However, India ranks fourth to US, China and Japan in terms of purchasing power parity.
For most of India’s economic history, from the isolation and import-substitution phase of the 1960s to the economic liberalization of the 1980s, one thing remained almost constant: S&T has been a national priority.
Among its strategies to promote S&T are investments in basic and heavy technologies, creation of R&D promotion policies, integration of S&T planning to the overall planning process of government, technology transfers and strengthened linkages between industry, R&D institutions and financial institutions.
In January 2008, India’s Tata car company unveiled the Nano, the world’s cheapest car. It sells for about US$2,500 or P100,000 thus opening a huge potential market for the developing world. This car breaks technological ground. It has a rear-mounted two-cylinder engine, which both saves fuel and creates interior space. Tata said the company was able to keep the cost of the car low by putting the plant in an area that receives tax concessions and having the suppliers set up plants nearby to cut transportation costs.
Similarly rising from Third World to First World status, Singapore boasts of having one of the highest per capita GDP in the world. It first nurtured its small and medium enterprises and actively promoted the transfer of engineering technology. In 1991, it undertook a major policy turn, implementing successive steps towards cultivating STI in the country.
Singapore’s STI policy centered on increasing its number of technically-trained human resource. Its education system is biased towards S&T, with 62% of its university students enrolled in science- and technology-related subjects. Public spending in education has always been a priority, averaging at 22.4 percent of the national government budget.
Massive investments in education was complemented by Singapore’s initiatives in (1) establishing and improving physical technological infrastructure; (2) issuing fiscal incentives for S&T and R&D; (3) promoting techno-entrepreneurship and venture capital; and (4) increasing transfer of engineering technologies from foreign companies to local companies.
In turn, these efforts helped encouraged the 6,000 transnational companies already investing in Singapore to engage in R&D, thereby producing high value-added products and services.
Thailand, considered our closest competitor, has already moved ahead of the Philippines in pushing for a knowledge-based economy. Thailand’s standing has been advancing since it embarked on a National Science and Technology Strategic Plan in 2004.
According to this plan, Thailand aims to achieve economic development by building its capability on four core technologies, namely, information and communications technology, biotechnology, material technology and nanotechnology.
To achieve its objective, Thailand has pursued the following activities: (1) develop clusters to support and improve targeted technologies and industries; (2) promote public awareness and support for S&T (3) produce more S&T skilled human resources; and (4) build infrastructures and establish institutions that stimulate and promote STI.
Since then, Thailand’s indicators have been rising steadily. Already, its R&D expenditure has risen significantly, from 0.12 of GDP in 1996, to 0.5 of GDP in 2006. Patent applications are growing by 276% from .02 per 100,000 population in 1996 to .07 per 100,000 population in 2004.
South Africa follows a similar development model but has a different strategic approach. Foreign aid and financial grants have been shifting from traditional relief and rehabilitation activities to projects at the core of which is building its scientific and technological capacity.
Again, investments are concentrated on public infrastructure and human capital. Adequate infrastructure facilitates a country’s capability to harness science, technology and innovation for economic growth. Increasing a country’s stock of infrastructure by one percent increases the GDP by one percent, or more in some cases.
Combining physical infrastructure and human capital on one hand, and linking with STI capabilities of other countries in the African region on the other hand, is its strategic approach. The South Africa and Mozambique Maputo Corridor, a massive road, rail, ports and telecommunications project, illustrates how linkage with other countries in the region, and between industry and academe, can help build a country’s infrastructure.
Apart from physical infrastructure, an equally important investment made by South Africa and its neighboring countries is education and improvement of its human capital. An attempt to create its own Massachusetts Institute of Technology (MIT) in Africa through the African Institute for Science and Technology (AIST) is in the pipeline. AIST will serve as the Silicon Valley of South Africa and the whole African region.
Finally, another example of outstanding economic recovery through human capital development, Ireland rose from the 1973 and 1983 oil crises that devastated its economy to become the 2nd wealthiest country of the world, in terms of per capita income, next only to Japan.
Investment in higher education and R&D is a crucial factor to the economic boom of the “Celtic tiger”. This allowed Ireland to use its work force’s brainpower, productivity and flexibility to attract foreign investments.
Lessons learned from other countries’ experiences
Given these sample development models, there are at least five common factors for development underlying their STI efforts, namely:
‘ Governments invested heavily in the provision of basic public goods and services, road and ports, energy and communications, clean water, health and education services which raise the productive potential of firms and people. These investments served as the foundation for technological learning.
‘ Governments nurtured the development of small and medium-sized enterprises. Building these enterprises requires developing local operational, repair and maintenance expertise, and a pool of local technicians;
‘ Governments supported, funded and nurtured higher education institutions, as well as academies of engineering and technological sciences, professional engineering and technological associations, and industrial and trade associations;
‘ Governments established inter-institutional linkages among universities, industries, government agencies, and not-for-profit organizations. Further, they fostered inter-disciplinary collaboration that includes not only the sciences and engineering but also business, law, and ethics; and
‘ Governments adopted good governance: transparency and accountability in the use of public resources, fairness and the rule of law in social and business transactions, a level playing field for investment and competition, and reward for risk takers and entrepreneurs.
III. FILIPINNOVATION: SCIENCE, TECHNOLOGY AND INNOVATION IN THE PHILIPPINES
To assess the Filipinnovation potential, this section examines the state of STI and the present direction, strategies, and efforts in STI in the country.
I The state of STI in the Philippines
For the Philippines to ride the wave of technological breakthroughs and integrate itself into the global trend of innovation, three key issues must be addressed: a) the science and technology system, particularly science and technology education and research and development, is poor; b) the dearth of innovative ideas; and c) the slow or non-commercialization of inventions.
First, the science and technology system remains poor. Two extremely critical and related elements of this system are human resources and research and development.
A. On human resources skilled in science and technology:
Crucial to developing a talented and skilled pool of human resources in science and technology is the quality of basic and higher education that the country provides. It has been said much too often that our educational system has fundamental resource gaps. (Table 5) And such gaps have led to the lower-than-desirable levels of science and technology graduates that the country has.
Of the 430,102 college graduates last year, engineers and technology-related graduates constituted only about 13 % and IT 9.5% while business was about 21.5% and medicine and nursing had 19%.
The graduate level is even worse. Each time the country produces one graduate with a master’s degree, Vietnam produces six, Thailand produces 25 and Singapore produces 200.
This is not the entire picture.
College graduates are a product of the country’s primary and secondary educational systems. A good gauge of how our elementary and high school students are performing can be seen in the National Achievement Test (NAT) scores.
The latest NAT conducted among 1.6 million grade six students in March 2007 shows a mean percentage score (MPS) of 59.9 percent — 5.28 percentage points increase over the MPS of the NAT 2006. The MPS means that for every ten items, a grade six student can correctly answer five items. A breakdown of the MPS, however, shows that the science score of these grade six students is about 51.58 percent.
The MPS for the 2006 NAT of fourth year high school students is 44.33 percent, 2.6 percentage points lower than the 2005 MPS. The science score is 37.98 percent which means that a fourth year high school student can answer only about 4 out of ten items correctly.
In the 2004 High School Readiness Test conducted among our grade six students, only 0.06 percent got a score within the range of 75 to 100, with 75 as the desired cut-off mark for passing. This means that of the 1.2 million grade six pupils who took the test in 2004, only about 8,043 pupils have mastered the basic competencies in Science, English, and Math and are ready to move on to high school.
This is hardly surprising. While other factors explain these poor performances, one critical factor — the quality and number of teachers — egregiously stands out.
There are more non-majors teaching science subjects than teachers with science degrees. For instance, 90 percent of physics teachers are not physics majors and 80 percent of chemistry teachers are not chemistry majors. (Table 6) And of the prospective teachers enrolled in BS Education degrees, only 1.5 percent chose mathematics and science majors.
The Department of Education (DepEd), however, is responding to these gaps by allocating a total of P24.3 billion from 2006 to 2008. The DepEd has increased the budget for the purchase of textbooks, hiring of teachers and construction of classrooms to address resource gaps in public schools.
The lack of classrooms is also managed by holding double shifts where there is excess student population especially in the urban areas, primarily due to in-migration.
Meanwhile, DepEd is in the process of upgrading the quality and increasing the quantity of textbooks per subject each year. Allocation was increased to P2.1 billion for 2007 to replace all English textbooks and the same amount for 2008 to replace all Science textbooks.
These resource gaps have resulted in larger class sizes. The officially approved size of 54 students in a class in 2001 has gone up to 60. High classroom-pupil ratio affects the students’ capacity to learn, as teachers have a harder time teaching a larger class size.
Other countries have smaller class sizes. The latest study of the United Nations Educational, Scientific and Cultural Organization (UNESCO) Institute for Statistics in 2003 cited that the Philippines has a public elementary school average class size of 43.9 students as compared to Malaysia’s 31.7, Thailand’s 22.9, and South Korea’s 34.7. In secondary school, the Philippines has an even higher average with 56.1, while Malaysia’s is 34, Thailand’s is 41.5, and South Korea’s is 35.4.
These are just the basics. Data on ICT tools are worrisome.
As of 2006, there are only 464 personal computers catering to more than 13 million public elementary school students, or a ratio of 1:25,995. In high schools, five million students share among themselves 45,221 computers, or a ratio of 1:111.
Access to basic ICT tools is limited. Only 46 per 1,000 people own a computer. A study on Internet penetration in Asia showed that the Philippines ranked 12th among 14 Asian countries, with a 5.3% penetration rate. Compare these to South Korea with an Internet penetration level of 65.7%, Australia with 65.3%, Japan 58.7%, and Singapore with 55.8%.
The booming economies in Asia invest heavily in S&T education. China, which outnumbers much of the world in producing engineers, turns out 600,000 engineers annually and India has 401,000. When combined, this surpasses tenfold the number of engineering graduates produced by the US. Japanese and Korean engineering graduates increased by 42 percent and 140 percent, respectively, compared to twenty years ago.
B. On research and development in STI:
The budgetary support to R&D in STI has been erratic. In the past, it represented only 0.11% of the Gross Domestic Product (GDP), quite meager compared to Japan with 3.12% and Singapore with 2.15%.
Fortunately, this year, the country’s R&D allocation has been increased to 0.43% of the national budget, or from P2.7 billion to P3.6 billion. This is a paltry sum. Taiwan’s expenditure in R&D increased from US$388 million in 1978 to US$2.4 billion in 1990 to US$14.9 billion in 2004.
In any case, this extra allocation will fund more R&D and scholarships for scientists, engineers, and students. It has trickled down to the Department of Agriculture (DA), better-performing State Universities and Colleges (SUCs), the Commission on Higher Education (CHED) and the University of the Philippines (UP), having received increased budget allocations for R&D. Which is just as well. As it is, the number of scientists and engineers in R&D in the country is only 152 per million population, less than half the ratio recommended by the UN for sustainable development. (Figure 1) It pales in comparison to Singapore, Korea and Malaysia.
This is truly unfortunate.
The Philippines is a major producer of IT-enabled services such as interaction services, animation, finance and accounting, shared services, medical transcription and architectural and engineering services. Further, the Philippines has a large pool of English-speaking and highly trainable graduates. Yet, support for R&D is very weak.
Private firms in the country have minimal R&D expenditures. This shows that foreign firms in the country do not improve on nor use the full capabilities of Science and Technology personnel they employ. In a real sense, technology transfer, as we know it, does not happen in this country.
Second, related to the above is the country’s lack of a culture that nurtures innovation and change. This has kept us in the backside of development.
This lack is reflected not only in the erratic budgetary allocations to STI in education and to R&D, as discussed earlier, but also in the absence of an overall coherent policy framework that would foster and underpin a culture supportive of STI.
In terms of enabling policies, there are laws that have not included inter-institutional linkages or laws that have been made irrelevant because of the current trends in globalization.
RA 8439 or the Magna Carta for Scientists, Engineers, Researchers and other S&T personnel in government, for instance, provides a program of human resources development in science and technology. Yet, the country lacks guidelines, plans, and programs linking the Department of Science and Technology (DOST)’s promotion of innovation with the Department of Trade and Industry (DTI)’s fiscal incentive policies. DTI’s incentive policies, on the other hand, have yet to include tangible support such as tax breaks for local or foreign investors who will bring in new and applicable technologies. And DTI has yet to balance such breaks with the requirement that foreign firms in the country must introduce new technologies.
With the entry of foreign investors and the globalization of the workplace, the labor market has drastically changed and our Labor Code is unable to adapt to these changes. The old standard of working eight hours a day for 40 hours a week has become obsolete. We now have a 24-hour, seven days-a-week schedule mostly employing IT personnel, while others work from home with flexible schedules. More women are also working at night in call centers and BPO companies, hence the prohibition against night work for women no longer makes sense. The Labor Code should be overhauled with a new set of flexible work arrangements and better security of tenure to further encourage new industries and income productivity.
The support for STI and R&D in other countries is almost palpable. Singapore, for instance, offers salaries competitive with the best US schools and Malaysia recently announced its goal to be an education hub with 100,000 foreign students by 2010.
In the US, the government allocated an additional US$5.9 billion in FY 2007 to increase investments in R&D, strengthen education and encourage entrepreneurship. The increase will go to biomedical research, studying the convergence of life sciences and engineering, advanced security technologies and research geared at producing marketable technologies.
The US is also opening up its doors to foreign students specializing in science and math with more lenient visa and immigration policies to attract experts to study, work and stay in the US.
INSEAD business school in France, for instance, allows its students to move between France and Singapore campuses, encouraging continuous exchange of ideas. In June last year, they launched an MBA Program in partnership with China’s Tsinghua University.
Leading universities have also increased math, science, and engineering degree offerings and have opened its doors to the influx of scientists and technologists from around the world.
Third, the commercialization of new products and inventions is almost non-existent. Transforming innovative ideas to products and services is extremely challenging. Universities and research institutions have a central role to play in these processes.
At its simplest, these processes include undertaking basic research. This has been challenged by the lack of skilled human resources as well as funds. Then there are the series of trials and tests, modifications and adaptations, that have to be undertaken, once again supported by unwavering commitments and funds. Further down the line, there needs to be these crucial linkages with industries and businesses. And all these ideally ought to be done in an atmosphere where networking, exchanges, and sharing are the norms.
As it is now in our country, our scientists have little or no incentive to innovate. Networking and exchanges are not easy; funds are always low, if they are available; transaction costs of doing business are exceedingly high; and there might not be a sizeable market for their inventions. Thus, others opt to showcase their innovation in foreign countries. The Philippines has one of the lowest patent applications in the region, explaining our low technological capacity.
Other than the basic scientific research, commercialization requires market research such as feasibility studies as to what invention fills a demand and what people will pay for.
For a largely agricultural country like the Philippines, there’s no question that science and technology in agriculture and fisheries must become priority. Support, especially to small and medium enterprise (SMEs), must be delivered because SMEs create around 90% of jobs and operate in mostly rural areas.
This points up the need to promote techno-entrepreneurs. Technology is not helpful unless we establish a critical mass of people who will put it to use. That way, they will gain meaningful employment and raise incomes.
II Direction, Strategies, and Efforts in STI
Current efforts at promoting STI in the country include government-initiated STI programs, budgetary allocations for agriculture R&D and higher education, and academic networking.
Government programs in STI
The Philippines envisions the country to become a significant S&T player in the region by 2010, and in the world by 2020. The DOST has outlined a development map through the NSTP 2002-2020, which includes a program on R&D, technology transfer, human resource development, S&T promotion, information dissemination, advocacy and linkages.
To improve our human resource capacity, the DOST gives scholarship and training grants in the fields related to the functional activities of the department and its attached agencies. It has also launched the Balik Scientist Program to encourage overseas Filipino scientists and technicians to return to the Philippines and share their expertise.
Another program, the DOST-Japan Society for the Promotion of Science (JSPS) Joint Scientific Cooperation Program , promotes scientific researches and exchanges through exchange of scientists, holding of scientific seminars and conduct of dissertation and degree researches under the joint guidance of Filipino and Japanese advisers.
The DOST’s support to SMEs is channeled through the Small Enterprise Technology Upgrading Program (SET-UP), a nationwide strategy to encourage and assist SMEs to adopt technological innovations to improve their operations and boost productivity. The program encourages technology transfer and technological interventions through better product and HR development, cost minimization, waste management and other operations activities.
The Philippine Research, Education, and Government Information Network (PREGINET) was created in 2007 with the objective of learning from best practices in developed countries. PREGINET is a research and education network for collaborative R&D among government, academe and research institutions. It allows the country to participate and engage in joint projects with research institutions globally
Recently, the government released 200 million pesos for post-baccalaureate engineering and science scholarships, 100 million pesos to be administered by CHED and the other 100 million pesos by DOST.
Other scholarships and infrastructure development programs in engineering have already been approved and appropriated for.
Special support to upland agriculture is given through the creation of a research consortium among six SUCs in the Cordillera Administrative Region (CAR). This research consortium will focus on conserving national agricultural heritage such as the rice terraces, the native textile industry and wood-based arts and crafts; improving the variety of rice and vegetables in the uplands; introducing organic farming; and creating a joint program on fish breeding.
The six CAR institutions include Abra State Institute of Science and Technology, Apayao State College, Benguet State University, Ifugao State College of Agriculture and Forestry, Kalinga-Apayao State College, and Mountain Province State Polytechnic College.
A far more ranging program entitled Engineering Research and Development for Technology Consortium (ERDT) is in place and will become operational. It aims to upgrade the quality of S&T graduates and colleges, increase the number of MS and PhD graduates in S&T and improve R&D infrastructure. (Table 7)
The ERDT Consortium consists of seven universities with the capacity to absorb and produce MS and PhD graduates in engineering and computer science. Apart from UP, other participating universities are De la Salle University, Mapua Insitute of Technology, Ateneo de Manila University, Mindanao State University-Iligan Institute of Technology, University of San Carlos, and Central Luzon State University.
In the 2008 national budget, a bigger amount for R&D has been allocated to key government research agencies such as DOST, DA, CHED and SUCs.
For DOST and DA, the money will be used in the implementation of various agricultural research project and government-academe partnerships.
Additional funds are channeled towards more undergraduate scholarships and student financial assistance. The CHED scholarship programs and the Higher Education Development Fund (HEDF) are restructured for a clearer focus on development and research and a more efficient use of funds.
Some outstanding SUCs were given additional allocation. These include the Mariano Marcos State University, Central Luzon State University, Leyte State University, Aklan State University, University of Southern Philippines, which are notable for their R&D, international linkages and the commercialization of their inventions. (Table 8)
The University of the Philippines 2008 budget contains an allotment of P161 million for scholarships, P200 million for research and development projects through DOST, and P838 million for infrastructure through the UP budget. The UP engineering complex will serve as the national hub for generation and application of new scientific knowledge.
CONCLUSION: WHAT NEEDS TO BE DONE?
In a global economy where knowledge and innovation determine a country’s economic future, the Philippines’ path to development must be based on a strong foundation of new science and technology.
Our country’s development depends on the importance we place on innovation. Developing a culture of innovation requires enabling conditions brought about by the concerted effort of government, policymakers, educational institutions, R&D institutes, the media and industry.
These conditions are continued increases in investments in education, research and development; improvements in science and mathematics education at all levels; and inter-institutional collaboration among universities and research institutes, government, and business.
Upgrade science and mathematics education
Undertaking serious reforms in science and mathematics education is the first step. And it should take place at all levels, starting from basic and secondary up to higher levels of education. Our grade school children should be able to posses much more scientific and mathematical literacy than what they have now. They should be enthusiastic and excited about science and mathematics. And they can be if their teachers are competent and qualified.
The quality of undergraduate science education directly affects both the number of scientists and the capabilities of students who eventually become engineers, researchers and teachers. Improving this level of education is important. But once again — and this lecture emphasizes this strongly — there is an urgent need to strengthen the preparatory science and mathematics that start in primary and secondary education.
Invest in education, research and development
Basic research, generation of new knowledge, and the creation of an educated workforce are essential to innovation and economic growth. Without sufficient investment in education and research and development, innovation is not possible.
There must be advocacy that consistently calls for increases in public and private investments in R&D. This is possible only when government prioritizes innovations in science and technology and ensures that such innovations move from the laboratories to the marketplace. The R&D agenda should focus on helping entrepreneurs utilize and apply technological changes so that even so-called “low tech” activities — like fishing and farming, for example — become more innovative and generate more domestic value added.
Such investments in R&D should support the development needs of the country whose population is estimated to be 100 million in a period of three years. There is a great future in this. There is a compelling need to address issues that have enduring impact on the Filipinos. These include innovative technologies in pharmaceuticals, agriculture, food, forestry, fishing, medicine and public health.
There are exciting prospects in R&D that are happening and that need to be continuously supported. Incubation parks have been established.
The 22-hectare Diliman Science Complex and Technology Incubation Park at the UP Diliman campus hopes to be the Philippines’ version of Stanford University-Silicon Valley and Hsinchu Science Park in Taiwan — a high-technology hub close to a research university.
The Park currently hosts the National Institutes of Natural Science, Geological Sciences, Marine Science, Physics, Molecular Biology and Biotechnology, Biology, Chemistry, Environmental Science and Meteorology, and the Mathematics department.
It will serve as the national center for the generation (R&D) and application (innovation) of new knowledge in the natural and applied sciences, and mathematics. It will enable our PhDs to pursue R&D, and make it possible for us to reinforce the training of our next generation of MS and PhD students in the sciences and engineering. It will also establish linkages with other state and private institutions of higher learning as well as other techno-incubation parks.
Following this lead, we must set up and maintain more regional S&T parks that can provide institutional facilities, including advanced laboratories, and a nurturing environment that will sustain R&D.
Promote Industry-Academe-Government linkages
There is a need to strategically engage foreign and local business enterprises and draw in their capacity to finance R&D investments. Companies like Intel, Nokia and Microsoft are capable of supporting R&D centers, equipping laboratories and must therefore become active components in the overall national S&T effort. And so are local business firms like United Laboratories, JG Summit and San Miguel Corporation.
Likewise, local SMEs, which represent 90 percent of all businesses registered in the country, play a crucial role in the pursuit of R&D. SMEs, accounting for a third of the country’s GDP, should pursue R&D thru active government intervention especially in the areas of agriculture and fisheries production, manufacturing and food processing, and trading and other retail services.
We should improve our capability to transfer technology. Government should help enhance the private sector’s ability to acquire existing technology, improve and adapt it for the particular needs of local enterprises, and incorporate it into local production processes. In other words, government should focus on helping the private sector absorb and utilize technology that is already in use elsewhere in the world.
A yet untapped resource for technology transfer is the overseas Filipinos. Filipino workers overseas — especially those involved in science, technology and engineering — are an excellent conduit for harnessing networks for development and competitiveness.
Apart from the billions of dollars-worth of remittances they bring in to the country, we should focus on the knowledge and expertise they have learned, and try to apply it to our local industries. They can help bridge the technology gap in the country if we provide them enough incentives to practice their profession in the Philippines.
Transform innovative ideas to high-value products and services
One of the most dynamic repercussions of effective inter-institutional linkages is the translation of innovative ideas to high-value products and services. Such linkages drive technological research and development.
With technological R&D, the country will not only be end-users of ICT tools and work as contract assemblers of electronic and semiconductor products but also be creators of systems and chips that run cellular phones or computers, for instance.
Right now, the country’s 30-billion dollar electronics industry consists mostly of assembly, packaging and testing. These activities account for only 5 percent of value added in the global semiconductor industry.
Thus, if we are able to dive deep into the technology and develop systems and chips, for instance, that Nokia, Sony Ericsson, and other technological giants would license from us, we would see our products in every mobile phone and base station that these giants sell and deploy worldwide.
Then, we will be able to secure a larger slice of the global ICT revenue pie. Apart from this, the country will be seen as a significant player in the ICT field.
It is worth noting that while revenues of our ICT companies such as Globe, PLDT and Smart are at record highs, they are still top importers of foreign technology in the form of boxed solutions. On the part of these service providers, there seems to be little impetus to study technology and undertake research in depth with the objective of creating innovation through local development of high value blocks. The bottom line, for them, is already high and the need for R&D is not felt.
This must definitely change or we will continue to be end-users of technology, not its developers. We would all benefit from a Bell Labs — where fundamental advances and breakthroughs in communications and information theory have been discovered, formulated, and translated into useful products that have made — and continue to make — life easier for all of us.
But this is possible only if research and development into fundamental ICT theory and tools is carried out as part of the R&D agenda of inter-institutional linkages. Such an agenda would contribute to the development of cutting-edge hardware and software for the ICT industry and their applications. And these would translate into export winners for the country.
Create an enabling environment through public policy
Public policy must foster an ecosystem that would make our S&T system thrive. STI must be integrated in policies on education, agriculture, health, environment, public works, and trade and industry.
For this reason, the 13th Congress had to establish the Congressional Commission on Science, Technology and Engineering (COMSTE). The Commission is mandated to look into the country’s science, engineering and technology development. Among its tasks is to undertake a thorough review of science education in public and private schools, particularly at the graduate level.
COMSTE has six priority areas — sectors that provide opportunities to improve competitiveness through identification of S&T input, human resources and infrastructure. These six areas are energy and environment; electronics and semiconductors; IT and IT-enable industries; agriculture and food; health sciences; and science education and R&D.
COMSTE intends to respond to our waning competitiveness and build public support for making the wealth-generating fields of science, technology, engineering a national priority.
In the process, COMSTE hopes to revitalize an S&T ecosystem that will generate knowledge and innovation.
Conclusion: creating the future
Our goals are to pour massive investments in upgrading science, mathematics, and engineering education at all levels and to unceasingly foster a culture that vigorously supports research and development in science, technology and innovation. The ultimate aim of all these is to uplift the living standards of Filipinos.
National and local governments, policymakers, educational and research institutions, media, industries, and the private sector have to forge strong and functional partnerships to bolster our competitiveness. No one individual or institution can do this job. Collaboration cannot be dispensed with and all must do their share.
Creating the future through science and technology is exciting but difficult work. It will take vision, leadership, and sustained commitment to achieve our strategic mandate – to create a future where our people can enjoy a better life. That objective is within our reach.
Here is the PDF version of the speech, which includes the notes, links, charts, etc.: