Philippines Faces IT Hurdles

The Philippines may be a global leader in knowledge workers, but this advantage is being offset by the country's lack of computing resources, technological innovation, and entrepreneurship.

These were among the findings of a recent study conducted by the Meta Group Inc., which ranked 47 countries according to its Global New E-Economy Index. The index is a standard measure of a country's technological production and potential, and ranks nations according to five criteria, including their availability of knowledge workers.

In recent weeks, government officials have played up the country's No. 1 rating for its knowledge workers, but have not touched on the study's other findings, including its overall index rating of 26 in a field of 47.

The Meta Group index examines the following criteria or categories:

- Knowledge jobs, or the number of qualified engineers, availability of IT skills, senior managers and higher education students in a given country;- Globalization, defined as the export of goods, direct investment flows abroad, absence of trade barriers, and the export of services;- Economic dynamism, which measures overall productivity, worker motivation, process management, entrepreneurship, corporate financial health and the availability of venture capital;- Movement toward a digital economy, expressed by the number of ISPs (Internet service providers) per 1,000 people, the degree to which e-commerce is being developed; investments in telecommunications as an average percentage of gross domestic product (GDP), computers in use, and computing power; and- Technological innovation, determined by the average number of annual patents and the amount of money and manpower dedicated to research and development.


The U.S. ranks first on the overall index, followed by Japan, Germany, France, Finland, Canada and the U.K. The U.S. ranked first in two of the five "new economy" categories -- globalization and transformation to a digital economy -- and no lower than fourth in the other three measurements.

On the other end of the spectrum, the bottom of the index lists South Africa, Venezuela, Slovenia, Thailand, and Indonesia, marking these countries as the least ready to compete in the new economy.


In the overall index, the Philippines came in just below average on the Global New Economy Index, with an overall ranking of 26th out of the 47 countries surveyed.

"The Philippines excels in meeting the requirements of the ideal work force for the New Economy," wrote Howard A. Rubin, a Meta Group research fellow and creator of the global IT index. "The nation is ranked first in the availability of competent senior management, second in the availability of IT skills, and fourth in the availability of qualified engineers."

Rubin also noted that the Philippines performs well in education, "although not as spectacularly." In its ability to meet the needs of a competitive economy, the Philippine general education system was ranked 15th, and the Philippine university system, 18th. The Philippines also has a net enrollment of 9.6 percent in public and private colleges and universities, the 19th highest among the 47 countries.


The Philippines' rankings in the other four categories are significantly lower, Rubin said.

"In the Transformation to a Digital Economy category, the Philippines is ranked 32nd. The nation has the 37th largest share of worldwide computers in use, and the 39th largest share of worldwide computing power, measured in MIPS (millions of instructions per second). These rankings could be much higher, given the nation's population is the 10th largest," Rubin said.

The Meta Group report also said the Philippines has only 0.21 Internet hosts per 1,000 people, the fifth lowest, and the nation is ranked 32nd in the development of e-commerce.

"Without greater computing resources and the utilization of those resources, it will be difficult for the Philippines to be competitive in the digital New Economy," Rubin said.

On a more positive note, the country invested an average of 1.134 percent of gross domestic product (GDP) in telecommunications from 1995 to 1997, the ninth highest rate of investment.


In terms of economic dynamism and competition, the Philippines ranked 34th in a field of 47. Although the country did well in worker motivation (ranked 16), it rated poorly in entrepreneurship (31st) and availability of venture capital (33rd). These, the study says, are indicative of the country's inability at this time to be a strong and competitive force in the New Economy.

"The nation is simply not highly developed or productive enough to compete with more technologically advanced, highly developed nations in the global market," the Meta Group study said.

The study also had bad news on worker productivity, pointing out that the Philippines' per capita GDP was low in virtually every sector: The nation was fifth to last in productivity in services, sixth to last in labor productivity, and seventh to last in productivity in industry.


Another area where the Philippines does poorly is globalization, ranking 35th among the 47 countries.

"The nation is not (currently) a diverse, robust competitor in the global market," the Meta Group report says. "It comes in eighth to last in export market diversification, with over 55 percent of its export market value dominated by its top three destination countries, and its national credit rating is the seventh lowest, 43 on a scale of 1-100, as assessed by Institutional Investor Magazine in 1998."

The country also ranked low in exports of goods (33rd) and services (24th), other components of globalization, but the Meta Group also took note of encouraging growth in these two areas. Not surprisingly, the Philippines ranked poorly in direct investment flows abroad (39th) and direct investment in stocks abroad (37th).

Despite recent efforts to open up the economy, the Philippines ranked 35th in terms of protectionism. On the other hand, the Meta Group noted, it ranked fourth in openness to foreign influence. "Hopefully, this openness will decrease the national protectionism which is currently detracting from Philippine success in globalization," the study said.


The Philippines also got poor marks for technological innovation, coming in 38th in a field of 47. The country is 44th in total expenditure on R&D, spending $115 million in 1997, and had the full-time work equivalent of 15,600 R&D workers in the same year, putting it in 32nd place. Philippine residents were granted an average of only 12 patents in 1995 and 1996, the fourth lowest and significantly less than first-place Japan's average of 141,243 patents.

"This is an area in which the Philippines needs much work," the Meta Group report said. "To be competitive in the information-based New Economy, the Philippines needs to dedicate more monetary and human resources towards increasing national capacity for technological innovation."


"The Philippines still has a long way to go in becoming the kind of highly developed, technologically advanced nation that can successfully compete in the dynamic and global New Economy," the Meta Group concluded. "The country needs to increase its meager computing resources and utilize them in digitalizing its economy by developing greater Internet usage and electronic commerce. The nation also needs to cultivate a sense of national entrepreneurism, which will enable it to experience the increase and spread of knowledge and innovation, which define growth in the New Economy."


The divide of IT capital along global north-south lines -- between developed and developing countries -- is one of the major findings of the index, said Bruce McConnell, president of McConnell International and a consultant to the United Nations Working Group in Informatics. The so-called digital divide is "the most critical issue facing the world today," said McConnell.

The index revealed four strata of countries along this divide, Rubin said.

However, the index is just the sort of tool that can be used to help narrow the global divide, Rubin said, because governments will now be able to identify their weaknesses and formulate policies that will employ IT to benefit their citizens.

The Meta Group is also working with the Washington, D.C.-based Progressive Policy Institute, which maintains an index based on the same statistics but tracks U.S. states, to help identify disparities within countries, not just between them. The internal digital divide is just as pressing as the international, McConnell said.

Though the index only tracks 47 countries currently, Rubin says the group hopes to add as many as 100 more by the end of 2000, citing a lack of good data as the reason for excluding some countries.

The index, which will be updated in December and then quarterly after that, is currently available, in part, on Rubin's Web site at The complete data and report can be purchased through the Meta Group, which will provide the quarterly updates free to anyone who purchases the report, Rubin said.

-- With notes from Sam Costello, IDG News Service

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