Julie Chao > Philippines

Tech Mania in Manila

Life After "Love Bug"

October 25, 2000

MANILA -- When Rey Buzon opens his mouth to speak, it's best to take a deep breath and strap on your seatbelt because it's going to be a fast ride.

"I had three requirements for an apartment: close to the office; close to Starbucks; high-speed Internet line," says the 29-year-old former U.S. Marine, coffee in one hand and gesturing with the other, at his usual rapid-fire tempo.

Buzon thrives on speed. Now he hopes to inject a little of that vitality into the Philippines' high-tech scene, which, despite an abundance of talented engineers and programmers, has been slow to take off.

"That frenzy is not there," said Buzon, a Filipino-American who moved part-time from California's Silicon Valley to Manila earlier this year to run AJOnet Holdings, a venture capital and incubation firm.

With investments in seven local start-ups developing everything from Internet applications to e-commerce Websites, Buzon's dream is that at least one of them will do for Filipino programmers what ICQ, a hugely popular instant messaging program, did for Israeli programmers.

International attention was inadvertently focused on Manila's software community earlier this year when the most damaging computer virus ever released crippled computers worldwide. Now officials are saying the "Love Bug," which cost an estimated US$10 billion globally in lost business and productivity, was a good thing for the Philippines.

"It put us on the map," said Toby Monsod, Philippines Assistant Secretary of Trade and Industry. "It gave us top-of-mind exposure."

Monsod's chief task is to promote the Philippines as the world's next major outsourcing hub, capable of providing not only software services, but accounting, customer support, even computer animation. The people, she says, are the best selling point: hard-working; computer-literate; fluent in English; and willing to work for one-fifth of U.S. salaries.

"Filipinos are inherently very creative," she said. "We're very good at content development."

India and Ireland have already become popular sources of skilled labor as more companies move back-office functions overseas, although she insists they're not competing with India.

"We're trying to work with India to develop links," she said. Indeed, of the 195,000 H-1B visa petitions that Congress recently authorized to allow more foreign tech workers into the United States each of the next three years, India is expected to garner some 40 percent of them.

India will always have an advantage because of its population size, said Teodoro Limcaoco, managing director for Ayala Corp., which owns the Philippines' largest bank and second-largest mobile phone company, and has started aggressively branching into e-commerce.

"They produce more engineers," he said. "But in quality, we're on par. Our cream here is as good as their cream."

The Philippines ranked number one in workforce quality, ahead of the United States and 46 other countries, in an index of high-tech competitiveness released in June by the Meta Group, a Stamford, Conn.-based technology research firm. Indicators of workforce quality included higher education enrollment, qualified engineers and availability of senior management.

However, in the other four categories, including technological innovation and transformation to a digital economy, the Philippines did not rank above 26th.

Several U.S. companies, such as Andersen Consulting and Citibank, have back-office operations in the Philippines. Just north of this congested capital city is an America Online customer service center, where 900 Filipinos working in shifts around the clock answer e-mails and take phone calls from AOL users. Barnes & Noble, the bookseller, is experimenting here in digitizing books.

The Philippines has long been eager to be christened the next Asian tiger. Long ago it attracted the likes of Intel, NEC and Texas Instruments to do chip design and packaging and other manufacturing here. Electronics and semiconductors account for 70 percent of the country's exports.

But it recognizes that in order to sustain long-term economic growth, it needs to move up the technology food chain, from labor-intensive work to high-skill work.

"Other countries will come along -- China, Vietnam -- and offer cheaper labor," said Monsod. "We've got to move up."

Already, not just the Philippines but the rest of southeast Asia is losing foreign investment dollars to China as multinationals anticipate the opening of markets there following the United States' establishing permanent normal trade relations with China and its subsequently joining the World Trade Organization.

Some are skeptical the government's information technology, or IT, campaign can accomplish anything, however.

"This country is mired in bureaucracy and problems," said Alan Robles, a Manila journalist who has reported extensively on the tech industry. "The government is centuries behind in figuring out what is digital technology. Every government dating back to the 80s has said IT will be the centerpiece and they did nothing."

Other obstacles abound, not the least of which is investor confidence, dampened partly by an inordinate amount of bad news out of the Philippines this year:

Aside from the usual list of complaints about third world countries -- poor infrastructure, graft, endless red tape -- the Philippines has had an airplane hijacking, tourist kidnappings, an insider stock trading scandal, a war with Muslim separatists and now a gambling scandal that threatens to bring down the government of President Joseph Estrada.

There is also the "brain drain" resulting from many of the top engineers and programmers believing that the best jobs are abroad. Monsod admits that it is a problem, but hopes it can eventually become an advantage as it is starting to be for India, with overseas workers bringing capital and experience back to their home country.

"We're giving away our doctors, our nurses and now our programmers," said Robles, referring to the large number of Filipino medical personnel working abroad. "But you don't want our politicians."

Despite the negatives, some remain optimistic.

"I think IT is the single brightest spot in the Philippines economy," said Guillermo Luz, executive director of the Makati Business Club, a think-tank and business advocacy group in Manila.

The Philippines was the first country in Asia to pass an e-commerce law in June. It has also passed other key economic reforms to bring capital markets in line with international norms, according to Monsod.

For Buzon, the venture capitalist, politics and bureaucracy are not issues.

"Except for my visa, we don't touch it at all," he said.

With Chikka, one of AJOnet's start-ups, Buzon is trying to create the tech frenzy he feels this place needs. Going wireless, rather than wired, may be the ticket.

The Philippines has an estimated 4 million to 6 million cellular phone users, with the number growing by 300,000 to 400,000 every month in this country of 75 million. Together, they send an estimated 40 million text messages to each other every day -- more than all of Europe.

"Texting," as it's called, is fast becoming the most popular mode of communication here, cheaper than a phone call and used for everything from forwarding political jokes to making a date.

Although the country has close to 200 Internet service providers and Internet cafes sprinkled throughout the archipelago, few can afford computers at home. The number with Internet access is estimated at 1 million.

Chikka is developing technology to allow a user to send a text message from the Web to a cellphone and vice-versa. Buzon envisions the program will be most popular with overseas users.

"You can be in traffic texting your sister in the (United) States who's getting ready to go to bed," he said.

Even to pessimistic industry watchers like Robles, wireless technology has the potential to propel the industry forward.

"Cellphone growth has been stunning," he said. "It gives me hope for IT (development) in the Philippines."