MBA Buzz: More Funds in the Philippines

How one of Asia’s fastest growing economies can maintain its pace into the future, by King del Rosario.

Just recently, two out of the three major credit rating agencies, namely Fitch and S&P, have upgraded the Philippines to investment grade. I believe there are three core reasons my country is thriving having posted a first quarter growth rate of 7.8% for 2013. First, the outsourcing boom has increased the number of foreign direct investments resulting in more jobs for Filipinos. This leads to more dispensable income, fuelling a generally cash-based domestic consumption.

Second, the anti-corruption initiatives of the current administration headed by President Aquino have made it very clear that no stones will be left unturned, staying true to his campaign promise, and based on his belief that “There is no poverty if there is no corruption.” Finally, the continuous remittance from Overseas Filipino Workers provides a steady influx of dollar reserves, an increasing percentage of which are now invested in the real estate industry that fuels an economic growth founded on infrastructure and domestic consumption.

However, I still believe there is still a long way to go for the Philippines to cement a solid foundation for a great economy. One necessity for this solid foundation is a resurgence of the manufacturing sector, especially in semiconductors and electronics. This would re-invigorate the country’s exports as well as increasing high-value, high-impact investments in the Philippines.

One of the biggest manufacturing companies in the country, Ayala-owned Integrated Micro-Electronics Incorporated (IMI) has been serving foreign original electronics equipment makers, especially those from Japan. IMI’s specialization begins from product conceptualization to mass manufacturing, so the company needs to ensure that its human capital is highly efficient and competitive in “value creation,” and not only in terms of which country (or company) can support a globalization strategy that is purely focusing on arbitrage.

One of IMI’s strategic initiatives to address this need is to cultivate a culture that drives performance and innovation across all of its 17 sites worldwide. IMI is also heavily investing in manpower training and development programs to develop competencies to ensure optimum job performance and customer satisfaction. In fact IMI consolidated all the training and human resource development programs into the IMI University last 2012.

However, IMI is just one of the several semiconductor and electronics companies in the Philippines and just because IMI can do it on its own, it does not necessarily mean that other Philippine-based manufacturing entities can invest the same level of resources for the improvement of its human capital. After all, the classic notion of managing a technology-driven business is always more focused on driving down costs at the present even though long-term gains can be expected.

Human resource development is a key strategy that IMI and the entire Philippine semiconductor and electronics manufacturing industry needs to focus on. After all, the soft Ss of skills and staff from the McKinsey 7S Framework ensure that all parts of an organization, especially those entrenched in the hard elements of structure, processes, and systems work harmoniously.

The fact is, the Philippine government cannot fully delegate the importance of improving per-employee productivity in an industry as important as semiconductor and electronics manufacturing to private entities like IMI alone. Improving technical skills and human capital as assets in promulgating productivity and competitiveness will be indispensable if the Philippines want to sustain the current growth of the economy.

This is why I believe it is imperative for the Philippine government to give more funds to further improve the existing Capacity and Capability Build-up Programs for the Semiconductor and Electronics Industries. In 2009, a partnership with the Semiconductor and Electronics Industries in the Philippines, Inc. (SEIPI) was implemented by the Technical Education and Skills Development Authority (TESDA) which aims to assist the industry by providing skills upgrading programs during the global financial crisis. However, such measures were purely reactive and the country should recalibrate its push for training and education at a level that is proactive and has a clearer vision of the future.

Unfortunately, existing scholarship programs by the Philippine government pertaining to the requirements of SEIPI covers only the postgraduate studies (masters and doctorate programs) and is executed under the Department of Science and Technology. The void of pre-employment training programs for new entrants for proper skills-matching in this highly specialized industry particularly in the middle level skilled workforce is not fully addressed. Of course, we have competent universities, colleges, and private technical schools in the country, but this again leaves a lot of room for passiveness in the government in an area which other countries are more aggressive.

One option is to start technical training and focus on science and technology at a very young age, perhaps through existing academic institutions such as the Philippine Science High School system, of which yours truly is a proud alumnus. In this era of Bill Gates and Mark Zuckerberg where the world’s economies are moving faster than ever, it is a pivotal time for President Aquino to expand his priorities further in education and push for the improvement of science and technology in the Philippines. The Department of Science and Technology needs more funds in this highly competitive and technology-driven global environment in order to cement a solid foundation for economic growth in the Philippines.