Impacts of National Information Technology Environments on Business
Information Technology Financing
The Philippines government, recognizing the importance of Information Technology, is helping to fund IT investments within the country. The government's budget for IT spending is increasing: as of 1997, the national government had an average annual operating budget on Information Technology of P643 million (US$17.9 million). At that time, about P7 billion (US$192 million) worth of IT assets had already been put in place by the national government in the last five years. As of April 1998, the Philippines government's IT budget was expected to increase to P21 billion (US$582 million) over the next five years.1
Most support to Research and Development institutions is being provided by the government (60%) with very minimal contribution from the private sector. However, R&D expenditures have still remained very low. In 1992, R&D expenditures were estimated at P1.5 billion (US$4 million) representing only 0.22 percent of GNP; newly industrializing countries spend 1.5 percent of their GNP on R&D.2
Though local governments are also expected to spend and provide a budget for IT investment, the national government has projected a substantial increase in the annual budget for IT. The government is also encouraging and looking towards the participation of private companies and investments in IT as the developing country cannot take all the weight of the costly upgrades in technology. Despite the Asian economic crisis and currency fluctuation within the Philippines, investor confidence in the country is still high.
The IT sector is still a healthy one in the country, regardless of economic troubles. Major IT projects and investment continue. Within the last year, there has been a definite increase in the number of computerization projects in the government and elsewhere . Much of the government has now moved online, especially with the strong encouragement from the President and the National Information Technology Council (see the IT Action Agenda for the 21st Century (IT21) under Government Policies). In 1998, 73 government agencies were already connected to the Internet, with many of them having an Internet presence through their own web sites.
In the Private Sector
IT companies are continuing to invest in the country to meet their outsourcing needs located in the Philippines. Seagate Technology Inc. opened its US$70 million manufacturing plant in Cebu in the first half of 1999. Another IT vendor, Fujitsu Ltd., will build a US$200 million hard disk media plant in the First Philippine Industrial Park Ecozone in Batangas. James Martin & Co. also plan to invest US$6 million to expand its Global Development Center in the next two years.3
Oracle signed the Philippines on as the first international participant to the US$50 million Oracle Academic Initiative (OAI) where Oracle will extend a US$1.5 million grant to the APEC Foundation to finance the training of young Filipinos in computer software applications.4
Soon after the approval of IT21 Microsoft signed four Memorandum of Understandings with the Philippines President, agreeing to:5
explore the possibility of cooperation in the area of IT core competency and information infrastructure development;
jointly undertake specific projects and activities such as the establishment of interconnected learning centers, as well as to explore such other cooperation possibilities as in the development of advanced software;
provide technical assistance in translating electronic commerce initiatives into technology applications;
provide technical assistance, training and administrative support for the implementation of a software management and review program to sustain the software legalization process in government.
Investments continue to pour in elsewhere as well. Intel has been investing between $300 and $400 million in local manufacturing facilities over the last 2-3 years. Apple Computers opened a full subsidiary in the Philippines. NEC will build a board wiring plant in Laguna, Acer is building additional facilities in Subic, and Cypress Semiconductor is investing $110 million in a new assembly and test plant in the country.
The National Telecommunications Commission (NTC) estimates that total investments in the IT sector over the next three years will reach an amazing P130 billion (US$3.25 billion).6
