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Missing
the Internet Wave?
By Michael Alan Hamlin
September 6, 1999
Recently, I’ve argued that technology,
Internet-commerce — business-to-business and business-to-consumer
— and infocommunications are Asia’s new engines of growth,
rather than the traditional conglomerates and large domestic corporations
that were in large part the catalysts — and beneficiaries of
— Asia’s first miracle.
There are good reasons to believe
this will be the case for the Philippines, too. Like the rest of
Asia, much of the incubation and development of these sectors took
place beneath the horizon of Asia’s financial crisis. But the
beginning of Asia’s recovery has revealed these sectors to
be well positioned for rapid growth and expansion.
Part of the reason for my optimism
is what U.S.-based Asia analyst Frank Yu calls the Asian development
model. Unlike the U.S. — where the Internet has been a great
toy for consumers — in Asia it is “changing into a more
convenient and accessible model for payment and distribution.”
A recent Merrill Lynch report on Richard Li’s Pacific Century
CyberWorks (PCC) — Merrill initiated coverage with a Buy/Buy
rating — observes that “the Internet in Asia will be less
of a toy and more of a tool.
“That means less interest in
pure entertainment and more emphasis on the Internet as a means
for education, professional advancement, solutions for everyday
life, and so on. It is significant in this respect that among the
content portals with which PCC is working several fall into this
category and deal with subjects such as agriculture, education,
weather, money, and technology.” PCC is also said to be investigating
distance learning opportunities, and the report notes that there
is no purely news content portal in PCC’s Internet strategy.
In meetings our firm has run for
a number of multinational corporations we have likewise found that
value-added content is king. Internet users are looking for value
in terms of enhancing their lifestyles, careers, and economic status.
And they are prepared to pay for it as well. The Philippines has
more ISPs than anywhere else in Asia, and among the highest connection
charges. It’s interesting to note in this respect that the
average monthly revenue per cable subscriber in the Philippines
is 86 percent of the average revenue of Singapore subscribers, and
an eye-popping 500 percent more than the typical subscriber in Malaysia
pays. For the right content, price is no barrier to the Filipino
consumer, it seems.
Private-sector activity in the Philippines
is also encouraging. Trend Micro, a leading Japanese anti-virus
company according to Mr. Yu, has almost 40 percent of its engineers
in the Philippines due to the (lower) costs and the fact that Filipino
engineers speak English and can maintain a 24-hour global virus
crisis desk. AsiaOne, a new Philippine electronic mall and portal
“is looking to do an IPO in the U.S. as the Philippines’
first listed Internet company,” Mr. Yu tells me.
Another reader, Frank Holtz, tells
me of an Internet services firm — Infinite Information, Inc.
— that has 24 programmers out at Sucat and just four marketing
people in the U.S. Most of its clients are U.S.-based, nevertheless,
debunking the notion that to be on the leading edge of technology
one must be in Silicon Valley. What we are seeing with firms like
these is likely how hi-tech clusters really form: in hotbeds of
chaotic entrepreneurial activity fueled by the output of local educational
institutions that are cranking out more computer professionals than
anywhere else in Asia, save Japan and China.
Multinational firms have also bet
on the Philippines as the region’s news business and technology
services provider. AOL, Caltex, and SunLife — among a number
of others — have or are setting up regional and global call
centers and back office support centers.
Well, this all sounds good. But,
there’s another side to this coin, and it’s important
that it be acknowledged and dealt with.
Ironically, the Philippines has traditionally
been late in adopting new technologies compared to the region according
to a recent International Data Corporation survey. Take the market
for enterprise software, for instance, the massive programs that
integrate all business processes to boost efficiency and productivity.
The Asian enterprise software market
for Singapore, Malaysia, Indonesia, the Philippines, and Thailand
in 1998 was US$150.4 million. Although the Philippines was supposed
to be one of the least affected economies in the region, the Philippines’
share of that market was just 9.2 percent. Only Indonesia was lower,
but Indonesia was growing faster before the crisis.
What this means is that as Asian
economies continue to liberalize, Philippine corporations are going
to be at a technical disadvantage, because they don’t have
the tools they need to attain global standards of efficiency and
productivity. Neither will they be able to integrate as efficiently
into international supply chains, or track and interact with customers
as effectively as their competition. Because they don’t have
the information they need about sources of profitability and most-profitable
customers, they won’t be able to plan strategically or as effectively
as the competition either.
High connection costs and significantly
slower growth in Internet usage compared to the region are also
important warning signals. Next year, only Indonesia will have fewer
users. Tiny Singapore will have close to double the number of Philippine
users, and Taiwan will have about 800 times as many users. Meanwhile,
China will have 16 million users by 2003, Japan will have 14 million,
and we’ll have 1.1 million, with about 30 percent of the households
Japan will have.
To some extent, these numbers are
misleading. Based on anecdotal evidence, there are more users per
Internet account in the Philippines than elsewhere in the region,
and Internet cafés are doing well. While users spend a lot
of time chatting, playing, and looking for racy sites, the lack
of research facilities in the Philippines also means these cafés
have become virtual libraries.
But there’s also no arguing
that when the private sector complains about government’s languid
support of information technology, it should also look to itself.
Indeed, technology is one area where Philippine academia has set
the pace for both government and the private sector by developing
new degree and certificate programs, and in many respects, putting
government and enterprise to shame.
This is one lead government and the
traditional private sector should follow. For their own sakes. The
netpreneurs will save the rest of us.
Copyright © 1999 The Events
& Awards Managers of Asia and
Hamlin-Iturralde Corporation. All rights reserved.
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