Chapter 1

ICT Developments and Challenges

The success stories of many Asian countries may be attributed in large part to their adoption of policies and strategies that focused on the use and exploitation of information and communications technology (ICT). These include: strong government commitment and support for ICT development in the form of policy incentives; increasing levels of investment in ICT research and development projects; liberalized and accelerated investments in key infrastructure and telecommunications facilities; increasing manpower development and skills training, particularly in engineering and ICT.

A. ICT Facilities in the Philippines

Telecommunications The liberalization of the telecommunications industry opened the doors for more players in the sector, which resulted in a dramatic rise in the country’s telecommunications facilities and services.

Starting 1992, cellular mobile telephone services (CMTS) were offered by public carriers with approved franchises on either regional or national coverage. In 1997, the cellular phone density was at 18.78 phones per 1,000 persons, or about 53 users for every cell phone.

Figures 1-1 and 1-2 show that about 5.4 million land-based telephone lines were installed from 1993 to 1997 with the implementation of the Service Area Scheme of the DOTC’s Basic Telephone Program. Telephone density increased nearly 10 times from 1992 to 1998.

Three new alternative backbone networks are now being built to meet the increasing demand of the public for faster, more efficient, and more modern telecommunications facilities: the National Digital Transmission Network, a fiber optic network to run from La Union through Western Visayas to Davao City; the Domestic Fiber Optic

Network which will provide nationwide digital coverage; and a network that will link Manila and Cebu.

Through the Municipal Telephone Program, the government, as of September 1997, had put up 867 Public Calling Offices (PCOs) in municipalities nationwide, on top of the 427 set up by the private sector. Still, about 700 municipalities had no telephones as of 1998.

In August 1997, the Mabuhay Philippines Satellite Corporation launched the first satellite communications link connecting Metro Manila hub stations with all regions in the country. A second satellite is being built by the Philippine Aguila Satellite Inc., a consortium of private telecommunications operators.

Personal Computers Market The personal computers market increased tremendously with average annual sales estimated at 350,000 units. About 20% of total sales is bought for home use, the rest for office and business use (Velasco, UAP/CRC 1999).

Internet Service Providers From 19 in 1995, Internet service providers rose to about 160 in 1997. Other services using the Internet also expanded.

Some new services using the Internet

The Internet aXess card launched by WebQuest which provides telephone services over the Internet;

The first Philippine Internet Exchange (PhiX) established by PLDT, interconnects Infocom, Iphil, Mozcom, Virtualink and Worldtel which allows service providers to exchange local Internet traffic within the Philippines without having to connect to the host servers overseas.

As of end 1997, Internet subscribers numbered 50,000 to 75,000 while an additional 150,000 to 225,000 nonsubscribers have access to the Internet through schools, offices, and cyber cafes (Velasco, UAP/CRC 1999).

Software Service Providers A UNIDO study (1997) showed that local software providers are small, with very limited capital and capacity to develop products that will satisfy government’s sophisticated requirements. Government needs to address this through policies and

strategies that will stimulate capital formation and encourage partnerships between local software and solution providers and government. The situation also calls for a government study on the possibility and implications of opening up the procurement of huge ICT projects to global competition.

B. International Comparisons

Asian ICT Facilities Despite improvements in telecommunications, the Philippines falls behind its Asia-Pacific neighbors. Based on data from OECD’s 1999 World Development Indicators, the Philippines ranks second from the bottom in terms of ICT facilities among Asian countries, only better than Indonesia (Figs. 1-3, 1-4 and 1-5). Hong Kong and Singapore had ICT facilities comparable to those of Japan and the United States, which are the world leaders. Malaysia, South Korea and Thailand are likewise gaining more ground in improving their ICT facilities.

ICT Market The Asian ICT markets grew at an average of 20.44% from 1987 to 1994, outstripping the growth in the region’s gross domestic product (Fig. 1.6). The Philippine ICT market is growing at a pace more than twice its GDP growth. The rapid growth in the ICT market in the region resulted in its increasing share in the world market from 1.7% to 2.8% during the period.

Key ICT Initiatives in Asian countries

Malaysia’s 2020 Vision and Multimedia Super Corridor launched in August 1996

South Korea’s program to build an information highway between 1996 and 2010

Telecommunications and information industries as among the top ten priority industries in Singapore’s Manufacturing 2000

The Philippines’ IT21 and provision of tax holidays and other incentives to locators in IT parks, a few of which have already been proclaimed: the Eastwood Cyber Park in Quezon City; the Northgate Cyber Zone in Alabang; and the Fort Bonifacio-Silicon Alley IT Park in Fort Bonifacio, near Makati City. The first Software Development Park has also been established at the Subic Economic Zone. And the Ayala Group has announced the proposed development of an IT park in Cebu.

The Science Park and Teletech Park in Singapore

The Technet and Industrial Technology Centre in Hong Kong

Kuli High Tech Park in Malaysia

Hong Kong’s plans to develop a HK$13 billion high-technology business park called the "Cyberport" in a bid to attract investments from information services companies. Hong Kong aims to position itself as a major hub for electronic commerce and information technology.

Singapore One, a high-speed, broad band network aimed at delivering interactive multimedia content to homes, offices and schools. Singapore plans to build its version of Silicon Valley where high-technology educational institutes, research and development firms, and venture capitalists will be encouraged to set up shop.

Contributing to this expansion are the successive multi-annual plans and information highway projects of these countries, including the development of science and technology parks and industrial estates with an ICT focus. Side by side with the initiatives of Thailand, Malaysia, South Korea, Hong Kong and Singapore, the Philippines has adopted a national ICT plan for the 21st century and gives ICT projects high priority in its investment plans. It would be noted however, that with ICT penetration ratio (market size as a percentage of GDP) as benchmark, the Philippines (with a ratio of 0.5) falls way behind such Asian countries as Hong Kong (1.2), Malaysia (1.3), Singapore (1.9), and Korea (1.6). The Philippines is at par with Thailand (0.6), China (0.5) and India (0.5), but slightly better than Indonesia (0.4).

Government Computerization Initiatives

in Selected Asian Countries

Computerization efforts in the public sector of some Asian countries were anchored on strong government leadership and action as well as intensive and extensive private sector participation. For example:

Singapore’s public sector computerization was a key component of its National Information Technology Plan of 1980, which enunciated a national policy on ICT. One of the objectives of the plan was to computerize the ministries and departments of government to improve productivity and stimulate the computerization of the entire country. The program was implemented with strong central direction carried out through the Committee on National Computerization. The committee, made up of members from government agencies with intensive involvement in ICT and the academe, was the top-level policymaking body for information technology in the government.

Malaysia embarked on an aggressive ICT development strategy in an effort to be globally competitive. It established the

MSC, which features among other things, the development of Electronic Government as one of its flagship applications. This program is intended to improve government’s internal operations and services to the public. The operationalization of the Electronic Governance program is seen as the catalyst to the development of the Multimedia Super Corridor and the influx of investments in the sector.

C. ICT Developments in the Philippine Government

Government Computerization Initiatives Computerization in the Philippine government pre-dates similar efforts by our Asian neighbors, having started as early as 1969 with the so called "evangelization" on the fundamental uses of computers by then Executive Secretary Alejandro Melchor. On 12 June 1971, the National Computer Center (NCC) was established through Executive Order 322. The NCC assumed a pioneering role in the establishment of computerization capacities in the government. Its interventions were direct and total and included systems conceptualization, design and development, implementation, and manpower training. Its role has since expanded to being the government’s

regulatory arm in the areas of ICT training certification and procurement and service provider to ICT resource management for the public sector. While the Philippine government was an early starter, its development speed was so slow it was overtaken by the faster government ICT development programs of other Asian nations. Nevertheless, there has been tremendous effort to catch up. In 1994, government adopted the National Information Technology Plan 2000 or NITP2000 and created the National Information Technology Council as the central policy body on ICT matters in the country. The council was also tasked with coordinating the NITP2000’s implementation. For the first time, government developed a comprehensive plan and mapped out strategies for the development of the ICT industry as well as the development of ICT in the public sector. In February 1998, government launched IT21, which outlines the country’s action agenda for ICT for the 21st century. One of the plan’s goals is for government to harness the use of ICT in improving its overall capacity and efficiency and thus enable local and national governments to be strategic partners in development. The plan promotes best practice ICT in governance and encourages the outsourcing of government ICT projects to stimulate industry growth. The government formulated the Philippine Information Infrastructure (PII), which will provide the telecommunications systems and facility services, value-added network and communications services, and information or content management and applications services. The setting up of the RPWEB through Administrative Order No. 332 provided the needed impetus for the realization of the PII. The RPWEB will serve as the country’s Intranet to achieve interconnectivity and greater efficiencies in electronic information and data interchange among government, academe, and the industry and business sectors. A most significant development is the recent signing of the E-Commerce Law. The Law, which defines the Philippine government’s policies on electronic transactions and provides the legal framework for the country’s participation in e-commerce, opens vast opportunities for global trade and economic growth. Three ICT parks offering competitive financial and tax incentives for ICT business are now being developed in three strategic sites: the Eastwood Cyber Park in Quezon City; the Northgate Cyber Zone in Alabang; and the Fort Bonifacio-Silicon Alley IT Park in Fort Bonifacio, Taguig. The first Software Development Park has been set up at the Subic Economic Zone, and the Ayala Group is planning to develop an ICT park in Cebu.

Information Systems Applications Most national government offices have automated their clerical functions using word processing and spreadsheets. But while there are a number of transaction processing systems in key government agencies, these systems have limited scope and functionality, are seldom integrated with related systems in other government agencies, and in general, fail to provide timely and accurate decision-making support. Moreover, the actual level of ICT usage or the number of applications in use vary across agencies. There is also limited usage of administrative systems and even more limited usage of executive management systems.

Networking Facilities Because data communications facilities hardly exist, "stand-alone" applications are the prevailing mode. A few operate on local area networks. There is minimal use of workgroup applications and decision-support systems, which generally add value to ICT application because they facilitate communication and information sharing, and could potentially improve the efficiency and efficacy of government agencies. There are no indications of mission-critical systems fully operating on enterprise-wide networks or linked with other information systems of other agencies. Sharing of database or communication network has not been vigorously explored or adopted. Part of the problem could be the compartmentalized nature of Philippine government offices. Information sharing among government agencies is not encouraged, and ICT planning and procurement are done in isolation, thus preventing the setting up of needed integrated application systems that cut across different agencies. As of 1999, there were only 12 wide area networks (WANs) in various stages of development in the government. The DOF now has four of these networks; DOF, three. The DA, DOLE, DTI and NEDA have one each, and the last is found in the constitutional commissions. A total of 58 agencies are connected through these installations while others employ the Internet for data transfer and communications. Only 130 offices have local area networks (LANs).

Only a small percentage of existing government ICT facilities can meet future computing and communication requirements; hence, the need for massive upgrading and installation of servers and client machines. Data communication facilities are unavailable in many locations. Even reliable voice communication services are nonexistent in some remote parts of the country. Some municipalities and barangays do not have reliable and continuous electric power yet. In many areas, Internet access can be obtained only by connecting to regional urban centers like Naga in Southern Luzon, Iloilo and Cebu in the Visayas, and Davao and Cagayan de Oro in Mindanao.

Support Infrastructure

and Technological Knowhow ICT expertise and knowhow are a vital component of the support infrastructure. Developing and maintaining computerized information and communication systems require a large pool of competent ICT professionals for systems beyond office productivity and clerical applications. But we are experiencing another brain drain in this field, as Filipino ICT professionals get attracted to the high- paying ICT jobs overseas. The situation is aggravated by the comparatively low salaries and limited career opportunities that government offers.

ICT Standards in Government At present, most government agencies are essentially left to themselves to establish or adopt available ICT industry standards. While most internationally recognized standards for hardware, software, and data communication protocols and equipment can be adopted readily or with certain modifications, the establishment of data and application standards is equally important. Having common data and application standards in government is essential for compatibility, for sharing databases, and minimizing redundancy and inaccuracies in common and/or integrated applications. The challenge, therefore, is to ensure interoperability and compatibility among the different information and communication systems of government. The immediate task is to formulate, disseminate and enforce a common set of ICT standards for all government organizations.

ICT Manpower in Government The 1997 NCC survey on the level of computerization in government showed that only 1.5% or 4,120 of the total 282,888 employees in respondent agencies comprise the ICT manpower complement, and about half of these are data encoders and computer operators. The others are programmers, systems analysts, and managers/administrators. But the bulk of government personnel do not use computers. Their numbers vary in proportion among the different departments. Ironically, some departments with extensive public goods production and delivery services have very small proportions of

their people using computers, such as DOH (30%), DENR (20%), DOLE (29%), and DSWD (6%). These data indicate the need for massive training and change management in government agencies to retool the existing manpower pool being tapped for ICT functions. Since the current remuneration package for government personnel is relatively low compared to the prevailing market rates, agencies find it difficult to recruit and maintain qualified ICT personnel. It is also imperative that agency heads be educated on ICT to raise their appreciation level of the importance of ICT in improving workplace processes and for policy formulation and administration. The variety in the size and nature of the ICT staff in different government organizations (e.g., some are bureaus, some are divisions, while others do not exist as formal structures) also partly accounts for the varying levels of computerization efforts in government.

Computerization in LGUs The 1997 NCC survey showed that all of the 42 provinces and 32 cities that responded have at least one microcomputer. There are neither mid-range computers nor mainframes among these local government units (LGUs). The most common applications or information systems at the local level are the payroll system and civil registration systems. Seventeen provinces and 22 cities are connected to the Internet. Computers and information systems at the local level are basically used to automate some clerical tasks and to computerize the data they collect from its clientele. Databases are not yet used to generate critical inputs for policy and planning processes at these levels. Only about 6% of the total 81,678 government personnel in the surveyed local government units use computers, and even a smaller proportion (2.3%) had training on information technology. Less than 1% or only 259 employees comprise the ICT personnel at the local level.

Government Investments in ICT Government spending in ICT is generally on the rise, although not fast enough. Annual current operating expenses for ICT projects or activities are estimated at P650 million. The 1999 budget provided P1.5 billion for ICT activities. The government in the past six years has acquired more than P7 billion worth of ICT assets. The implementation of the various information systems plans of agencies endorsed by NCC will require funding of about P23 billion over the next six years. The current level of investments is still very limited in relation to the magnitude of information technology required to improve government services and institutional efficiencies. These limited investments contributed to the widening information technology gap in the government.

D. Institutional and Policy Issues

An entire range of government institutions influences the dynamics of ICT development in government. A clear, coherent and well-delineated institutional setup for ICT, therefore, is a prerequisite to sound ICT policy formulation and implementation. There are a number of government agencies and bodies whose functions or activities relate to or affect ICT development and management in government. These agencies include the National Information Technology Council (NITC); the Department of Science and Technology (DOST); the Department of Budget and Management (DBM); the Department of Transportation and Communications (DOTC); the Department of Trade and Industry (DTI) -Board of Investments (BOI); the National Economic and Development Authority (NEDA); the National Computer Center (NCC); the National Telecommunications Commission; the Commission on Audit (COA); the Civil Service Commission (CSC). At the policy level, the National Information Technology Council (NITC) was established in 1994 by Executive Order 190 (amended by EO 469 in 1998, and EO 125 in 1999) as the overall policymaking and coordinating body for the development of ICT in the country. The NITC has cabinet-level representation, and NITC decisions are brought directly to the highest levels of policy and decision-making in government, but problems continue to persist. These problems include the following:

1. Inability of the principal members to participate in most meetings of the council and the tendency of sending representatives who would often have no sufficient authority or mandate to commit the agency on key issues, thus delaying action thereon;

2. Lack of a mechanism to ensure consistency of decisions at the Cabinet/NITC level, at the oversight agency level, and at the executive/project execution level;

3. Lack of a full-time technical secretariat to perform substantive functions/activities for the council such as the (a) preparation of technical/background papers for the use of the council members for a more informed discussion of issues; (b) conduct of needed follow up on council decisions; and (c) coordination, at the technical and program level, of the various ICT efforts, particularly in government.

Other related issues are: 1. Need for representation in the NITC of other key ICT players or sectors, which include the banking sector, ICT professionals, represented by the Philippine

Computer Society; the software developers and producers, represented by the Philippine Software Association; and the computer manufacturers and distributors, represented by the Computer Manufacturers, Dealers and Distributors Association of the Philippines (COMDDAP) and the IT Association of the Philippines ITAP). Related to this is the issue of whether oversight constitutional bodies like COA and the CSC should also be represented in the NITC.

2. Need to generate specific action ideas and specific projects from members, particularly those from the private sector, that would clearly define their contribution as council members toward achieving the NITC’s goals and objectives; and

3. Need to address key issues, especially those that continue to hamper the more rapid growth and wider application of ICT in the country (e.g., high telecommunications cost and limited access in many areas of the country; limited bandwidth for faster access to electronic databases and the Internet; interconnection and convergence issues).

Other policy gaps occur mainly because the scope of functions of oversight agencies has not been clearly defined and functional relationships have not been clearly delineated. Classifying ICT resources for funding and procurement, for example, should be resolved whether it is a NCC responsibility or part of the auditing functions of COA. Clearly such function is not within the purview of auditing. Some gaps have been addressed to a large extent by the issuance of EO 125, which clarified and strengthened the NITC and NCC and delineated their respective functions. The effectiveness of these new arrangements in addressing existing weaknesses and gaps in policies, particularly those concerned with public sector ICT development, remains to be seen. Institutional and policy issues pose major challenges for further reform, as follows:

1. Government must clearly articulate the vision of ICT development in the public sector, and its role in achieving socioeconomic development goals and in pursuing more efficient, effective and responsive governance.

2. Government must define and establish ICT development priorities, particularly those relating to financing and investment. In doing so, it must resolve funding problems for existing ISP projects not included in the GISP versus GISP projects, especially in the light of limited resources.

3. There is a need to formulate technology, security, interoperability, functionality and other relevant standards and benchmarks, as well as guidelines, for the implementation of the GISP.

4. A comprehensive procurement policy for the GISP needs to be formulated to address a wide array of issues and concerns which include the following:

a. A comprehensive procurement policy for ICT resources and services should be formulated. Such policy, which should adhere to the principle of relegating to the private sector the production and provision of goods and services, should simplify procedures for procurement and contracting/outsourcing of services.

b. The government needs to define an outsourcing policy that will ensure that it gets the best service for the least value. Toward this end, government should identify policies that stimulate competition, upgrade the capacities of local industry, and explore the potential of opening the government ICT market to international players.

5. Finally, government needs to establish clear rules, regulations and guidelines for the sharing among government agencies of ICT resources to improve utilization efficiency.

E. Network Infrastructure and Telecommunications Issues

The telecommunications and network infrastructure—consisting of basic telephone lines and networking equipment like servers, routers, hubs, modems and computers—must be available, accessible, affordable, reliable, and of good quality. The presence of these fetures is crucial to the implementation of an electronic governance (and electronic commerce) strategy. For government, business and industry, as well as for the public, telecommunications are essential to the rapid growth of ICT. Hence, government must provide the necessary policy environment that will ensure the following:

1. Level-playing field for all players to allow credible competition to flourish;

2. Transparent and clear rules to encourage innovation and therefore satisfy consumer demands on quality, affordability, and product variety;

3. Workable public-private sector scheme to encourage private investments to flow, thus enhancing the quality of services; and

4. Legislated institutional reforms that will allow the regulatory body to have sufficient autonomy, free from any political interference, in the exercise of its functions.

F. Financing Issues The key issues related to the financing of ICT projects in government are: 1. Need for a clear budget policy and framework. There is at present no clearly articulated budget policy for ICT in government. Hence, individual agency budget requests submitted to DBM and Congress on a yearly basis are evaluated independently of each other with no integrating ICT budget plan or framework. The need for an ICT budget framework is especially necessary in view of the numerous contending priorities of the

National Government for budgetary appropriation. This budget policy will help guide the agencies, the DBM, Cabinet and Congress in allocating and prioritizing budget requests for ICT development in government.

2. Need to sustain allocation of resources. There is clearly a need to sustain support to government ICT efforts to ensure the continued viability of these projects. Such support will give a clear signal of the government’s commitment to the continued development of ICT. More importantly, it will give a certain degree of permanence to the cash flow for ICT contracts, most of which are multi-year in gestation and multi-year in delivery. As a result of the government’s allocation, private business may be encouraged to go into the ICT industry, and hopefully at least match the government’s level of expenditure, thereby creating some degree of multiplier effect. A government funding commitment will also allow a more rational prioritization of projects as identified in the Implementation Program of GISP.

3. Need to mobilize Official Development Assistance (ODA) and other resources. The government should actively pursue creative ways to generate the needed resources for government ICT projects. This may include the synchronization of the allocation of ODA and other resources for ICT projects in government. Likewise, it should develop mechanisms for tapping new sources of funding for local

government computerization activities to further spread out the benefits of ICT to the regions and communities.

G. Government Development Objectives and Governance Reform Initiatives

The government is in the midst of an administrative reform program to enhance overall government efficiency and effectiveness, while ensuring wider and speedier public access to government information and services. Reforms are being pursued particularly in government procurement, financial management, manpower development and personnel welfare, organizational effectiveness, and service delivery. The implications of these bold reforms for ICT in government are tremendous.

1. There may be significant formal organizational changes in the executive branch if the reorganization law is passed. As such, the identification of the GISP building blocks should include only systems that are either the fundamental functions of government or those that are clearly valid and should not be abolished nor substantially altered because they fall within the principles and parameters established under the reengineering plans. The first GISP priority systems and building blocks should include the fundamental functions of the government and the steering functions of government in the sectors. Government production and service delivery functions should be supported by ICT that will continue to be useful in the event of privatization or devolution.

2. There are indications for wider decentralization of national government functions and activities. This means that government will delegate more power, authority, responsibility and accountability to their lower units, particularly in the field offices. This is consistent with the government’s thrust of poverty eradication and serves as a potentially effective way of bringing government closer to the people. Information technology makes possible a sound decentralization with strong oversight management control and monitoring. The GISP should be able to support this effort by establishing the networking requirements between central and local activities of the government.

3. Poverty eradication entails not just the provision of huge funds for the poor but anchoring such programs on a sound knowledge of the

character and extent of poverty in the country. The poverty program of government should therefore be supported by a system of generating, organizing, and processing information useful in the following:

3.1 providing convenient and speedy access to government services and information on opportunities for the poor both in urban and rural areas.

3.2 providing government policymakers and implementors adequate, up-to-date, and accurate information on the status of the poor for sound and responsive policy formulation and for the design of specific interventions.

4. Reform initiatives in government housekeeping functions require the development of information systems that provide standards for agency level systems and a sound consolidation and monitoring facility at the oversight level.

5. With the government thrust to continue empowering local government units within the principles advocated in the devolution program, there is a need to speed up the building of LGU capacity to effectively assume increasing responsibilities. One of the fundamental requirements to improve LGU capacity is the provision of information systems support for core business and regulatory functions, particularly in the areas of regulation and revenue generation.

The foregoing reforms provide inputs in the identification of the priority strategic information systems cutting across institutions and sectors, which will be a key feature of the public ICT framework plan.

H. Public Sector Absorptive Capacity for Electronic Governance

The absorptive capacity for electronic governance in the country has been growing over the past five to six years. This is expected to accelerate further with the passage of Republic Act 8792, or the Electronic Commerce Law, and as larger segments of the population gain wider access to ICT and telecommunications. At the same time, the adoption of a government ICT policy framework for a sustained and more coherent approach, as well as a positive change in the mindsets of policy and decision makers

toward ICT use and investment, are expected to further accelerate public sector absorptive capacity for electronic governance. Computerization efforts in government are generally characterized by a lack of an integrating framework and common platform. Moreover, computerization efforts are mainly limited to office automation and clerical operations, with very few executive decision support and mission-critical systems in place or being developed. For the most part, the latter systems are stand-alone and have very limited application within the agency, much less connectivity with other systems within the same organization or outside. A key challenge is the development of interagency networks that will allow seamless information exchange and resource sharing among agencies that have related functions and those that work for the same sectors.

Source: http://www.neda.gov.ph/ Accessed on 01/05/2005