CHAPTER I

INTRODUCTION

The 21st century has been referred to as the age of Information Technology (IT).

Defined as the “collective term for the various technologies involved in processing and

transmitting information, which include computing, multimedia, telecommunications,

microelectronics, and their interdependencies”, IT also “refers to the convergence of various

information-based, broadcast and mass media communication technologies.”(IT21 Action

Agenda for the 21st Century). IT is often used interchangeably with the term information and

communications technology (ICT).

Stewart (Fortune, 1994) wrote that in 1991, companies spent more on IT than on

industrial and farm machines. Indeed, Information Technology (IT) is emerging to be the

largest industry in the 21st century.

The Philippines earned only $349 million in 2001 from IT-enabled services such as

customer contact centers, medical transcription services, animation, shared backroom

financial services, and construction-related engineering and design. However, this is

expected to rise by 373% to $1.6 billion by 2005 (itmatters.com.ph).

Ralf Ellspermann of the Philippine Information Technology Offshore Network

(PITON) said that the telecommunications here is “more cost-efficient than those of India

which is crucial when you have an offshore operation…” (PDI, October 2002). India is

currently the world’s largest producer of IT services and has the world’s most number of IT

manpower.

Ellspermann also said that because of the country’s close cultural affinity with the

United States, the world’s largest market for offshore IT services, the Philippines is now

recognized for its work force which has world-class English proficiency. “It puts the

Philippines apart from China and other countries that may be cheaper to operate in, but

maybe not in the long run…” He further cited the Filipinos’ high level of service orientation

and caring nature, which are added values for the country’s call center industry.

In the 2002 Cities Competitiveness Study of the Asian Institute of Management

(AIM), Dumaguete was top in the Quality of Human Resources category among small cities.

The City now has four large universities, an “anomaly” for a small city with just a little over

a hundred thousand population.

The local DTI identified education, together with IT, as the main engine of growth in

Dumaguete City (University Town Development Program of DTI Negros Oriental). This

thrust of the local DTI is borne out of the need to develop local economic factors that would

create more value and viable industries in the global context.

The City of Dumaguete has recently been promoted by the national government,

particularly the country’s Board of Investments (BOI), as one of the country’s IT investment

destinations. The BusinessWorld reported that the Subic and Clark in Central Luzon, Cebu

and Dumaguete City in the Visayas, have been identified by the BOI as potential hubs for

call center operations because of the abundant supply of quality human resources, good

schools and developed telecommunication facilities in these areas (BusinessWorld October 2,

2003).

This is starting to be realized. Last year, 2004, saw the birth of an IT industry here in

the province of Negros Oriental, with the start of operations of SPI Technologies, a 5 billion

pesos American business process outsourcing (BPO) firm, in its technology park in Sacsac,

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Bacong, seven (7) kilometers from downtown Dumaguete. Some other IT companies in and

around the City of Dumaguete expanded or started operations last year.

To date, there are at least three (3) IT service companies operating in Dumaguete City

and its environs, one is in the process of hiring employees for its operations which will start

this year, while another 2 to 3 IT companies, most probably in the call center business, are

expected to be added to the existing IT locators in the province of Negros Oriental,

specifically in the Dumaguete City area. If plans do not miscarry, a major IT Park will also

rise up in the coming months.

RATIONALE

The Philippines has finally enjoyed a sustainable development in the last few years.

This is brought about by the stable political climate and the absence of major calamities. The

agriculture sector has performed very well, while other sectors of the economy such as

manufacturing and the services sector has contributed greatly to the improving economic

picture. The need of large corporations in highly industrialized countries to save on labor cost

and to earn more profits is driving the fast growth of the information technology (IT) sector

globally. Thus, this industry has contributed greatly to the sustainable development that the

country has enjoyed. This is brought about by the phenomenal growth of the callcenter

industry, one of the “sunshine industries” under the business process outsourcing sector, in

itself a branch of the IT-enabled services.

The Visayan region has enjoyed relative peace and order, and is growing very fast in

the last few years. A large part of the growth in the region is brought about by the fast growth

of tourism, IT, and other economic sectors in neighboring Cebu province. Bohol has been

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very successful in its tourism promotion efforts. Bacolod and Iloilo has been rivals in

catching up investments in the Western Visayas region, and both have been very successful

in attracting businesses and visitors.

Dumaguete City and the province of Oriental Negros are endowed with natural and

human resources, and is the source of power in the Visayas region. It has also enjoyed a

better peace and order condition compared to its neighbors, and is blessed with a mild

climate the whole year round as it is out of the typhoon belt. Despite these very positive

attributes of Dumaguete City and its environs, it has not enjoyed fast economic growth

similar to what its neighbors are enjoying.

But this may soon change. IT companies are starting to locate in Dumaguete City and

its environs because of the presence of high-capacity fiber optic network in the area, in

addition to the abundance of high quality human resources.

The proliferation of the IT industry in Dumaguete City and its environs would

promote the flourishing of an environment-friendly industry in the area with well-paid

workers. It would be very beneficial as it would increase the income of both the local

governments and residents of the area. The researcher has always thought of coming up with

a study that has a great economic impact to his society. This is the reason why the researcher

is encouraged to do this study.

REVIEW OF RELATED LITERATURE

The world has been transformed several times since the dawn of history. Human

civilization has undergone several revolutions. We passed through the agricultural and

industrial ages in the past two centuries. Toffler detailed that we have entered the information

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age in the 1950s when white-collar workers in America numbered more than the blue-collar

workers (Toffler, 1981).

The agricultural age lasted until the late 1800s. During this era, society was

concerned with land acquisition and food production. At this time, lands and estates owners

were the major power wielders.

The industrial age came in the late 1800s and lasted until the 1960s. Technological

advances occurred very rapidly during this age. Mechanization and mass production

characterized the era. Capitalists, or those owning equipment and machineries were the major

power wielders.

Information Technology (IT) brought about the information age. During this age,

human society is becoming more knowledge-driven. People do not anymore build things

with their hands, but with their minds. Education is very important because today’s business

environment needs people who can work with, manipulate and assimilate information and

knowledge. Today’s employee in business, therefore, is called a knowledge worker (Haag

and Keen, 1996).

Computers, telecommunications, software and related services comprise the bulk of

the worldwide IT industry. IT and the electronics businesses are the fastest growing

industries in the world, and are the largest non-agricultural economic activities in recent

times.

Haag and Keen (1996) stated that in the United States, companies invested over $1

trillion in IT in the last twelve years. Since 1990, American spending on high-tech equipment

has accounted for over 35 percent of US’s economic growth. More people have been

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working in the IT industry than in the automobile industry. And exports of IT and related

services was more than double than that of aircraft, the previous biggest US export.

In the Philippines, IT is far from being the major economic driver. But the country

has gained headway in its goal to become the knowledge center and e-services hub in Asia.

The IT21 Philippine Agenda for the 21st Century states that the country in the 21st

century shall have found its niche among major knowledge centers in the world and become

the leading provider of knowledge-based products and services in the Asia and the Pacific

(IT21 Action Agenda for the 21st Century).

The documents of the Internet Strategy of the Philippines, or the ISP.COM, states that

in the early part of the 21st century, e-commerce worldwide will be valued at hundreds of

billions of dollars and Internet use will grow tenfold every five years. Both business-to-

commerce (B2C) and business-to-business (B2B) commerce, meanwhile, would be in the

vicinity of over a trillion dollars by 2004. To take advantage of this very great opportunity,

the government formulated the ISP.COM to develop an environment conducive to e-

commerce growth, and for the country to be able to attract investments in e-commerce

(ISP.COM: The Internet Strategy of the Philippines).

The “Electronic Commerce Act of the Republic of the Philippines” states that the

State recognizes the vital role of information and communications technology (ICT) towards

nation building, and will thus create an environment conducive to the development of ICT

products and services (Electronic Commerce Act of the Philippines, 2002).

Republic Act 9239, otherwise known as the “Optical Media Act of the Philippines”,

was passed in February 2004. It regulates the mastering, manufacture, replication,

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importation and exportation of optical media in all forms (Optical Media Act of the

Philippines, 2004).

Republic Act No. 8293 otherwise known as “The Intellectual Property Code of 1997”

took effect on January 1, 1998. Under the code, provisions on trademark, the rights to a

mark, which includes trademarks and service marks, are acquired by registration (Intellectual

Property Code of the Philippines, 1997).

The Medium Term Philippine Development Plan of President Gloria Macapagal

Arroyo states that her administration, together with the private sector, shall develop the local

ICT industry as an engine of economic growth and an instrument for poverty reduction. ICT

shall bridge the digital divide among regions and communities in the country, narrow the gap

between rich and poor, and shall be utilized to pursue accessible and democratic governance.

Among the e-services provided by the country to local and multinational companies are

customer contact (call) centers, medical transcription, animation, business process

outsourcing, software development services, and construction-related engineering and

design. The end result is the development of the country into becoming the e-services hub of

Asia (Medium Term Philippine Development Plan, 2002 of President Gloria Arroyo).

Gartner Dataquest projects that almost fifty percent of Fortune 1000 global

corporations will outsource their IT operations to external service providers (ESPs). It further

states that in the United States, financial firms lead the switch to outsourcing. In 2002,

Dataquest estimates that financial firms worldwide spent US $41.3 billion for business

process outsourcing (BPO). That was a 9.3 percent increase over BPO spending in 2001

(www2.cio.com).

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The callcentres.net states that the call center industries in India, Philippines and

China are the “most exciting” in the Asia-Pacific region. The Philippine call center industry

is expected to grow at a rate of 100% in the near term. Outsourcing industry here, on the

other hand, is also growing explosively due to high demand especially from companies in the

United States and Great Britain. Philippine call centers are among the cheapest to operate.

English proficiency of Filipinos, on the other hand, is among the best in the whole world

(www.callcentres.net) .

The Philippine IT Information Network (PITON) website states that the Philippines

has the highest growth potential in call center services in the next few years to come. This is

because of the Filipinos’ familiarity with Western business practices and accounting and

legal systems of the United States. The expenditure for offshore outsourcing is expected to

grow more than triple at the current US $5.6 billion to US $17.6 billion in 2005 (www.piton-

global.com).

The 2001 DTI Annual Report listed IT and IT-enabled services first among DTI’s ten

priority revenue streams. These revenue streams are economic sectors chosen for their

competitiveness and growth potential in the coming years (2001 DTI Annual Report). The

call center industry in the Philippines is expected to overtake India’s in 2008 as it is expected

to earn $3.6 billion against the latter’s $3.3-3.4 billion three years from now (PDI, February

18, 2005).

The local DTI document entitled “Negros Oriental: Unitown Development Thru ICT”

states that the main driver of the local economy of Dumaguete are the schools and

universities inside the city. The city is therefore known as a center of intellectual

development and excellence, and thus, is a “people-processing zone (PPZ)”, as compared to

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Cebu which has export processing zones (EPZs). The document details that the DTI shall

mold the province, from its traditional role of supplier of quality workforce for the nation,

into a place which can generate ICT investments in the long term (Negros Oriental: Unitown

Development Thru ICT formulated by the Negros Oriental Department of Trade and

Industry).

The thrust of the local DTI is borne out of the need to develop local economic factors

that would create more value and viable industries in the global context. A niche, which

became the unique selling proposition (USP) for the province of Negros Oriental was

identified, taking into account the province’s strengths, opportunities and threats. The higher

education industry was seen as the most relevant because of the following factors: global

trend for ICT and knowledge workers, the magnitude of contribution of the sector to the local

economy, and prospects that it presents to the entire province in terms of investments and job

generation.

The presence of high quality telecommunications is one of the very important factors

that would help the flourishing of the IT sector in an area. Dumaguete City and its environs

are surrounded with high capacity fiber optics network with a capacity of 320 gigabits per

second (Gbps). This capacity would translate to 4.5 million high quality data and voice lines

– a capacity which can accommodate five million call center agents. The telecommunications

requirement of the IT hub being developed in Dumaguete City and its environs are being

provided by PLDT, Globe, Eastern Telecommunications, Bayantel, and Telecphil-the

consortium of major telecommunications companies in the Philippines.

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The investment climate of the province would also affect the success of the thrust of

the DTI to generate investments in the ICT sector. In her thesis, Tejero (1997) found out,

among others, that

1. The investment climate in Negros Oriental, as assessed by local investors, is only

moderately attractive.

2. Most investors prefer to invest in the City of Dumaguete, the capital of Negros

Oriental.

3. Some of the problems disclosed by the investors which can hamper the generation of

investments in the province include poor infrastructure and telecommunications

systems, presence of red tape, high cost of power, unsystematic processing of

business permits, high taxes and poor direction towards generating more investments.

Tejero’s thesis, however, discounts the fact that the whole of Negros Oriental has been

included as one of the country’s economic zones or ecozones identified under “The Special

Economic Zone Act of 1995.” Under the law, investment incentives are given to ecozone

developers or operators. Furthermore, should an investor decide to set up an IT Park in the

province, they are entitled to incentives enumerated in the “Guidelines for the Establishment

and Operation of IT Parks”.

The following sections serve as models for the discussion in this thesis.

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Silicon Valley: The World’s Foremost IT Zone. Formerly called the “Valley of Heart’s

Delight” when fruit orchards predominated, Silicon Valley radiates outward from Stanford

University to the adjacent cities of Palo Alto and Menlo Park; northwest to Redwood City

and San Carlos; southeast to Los Altos, Mountain View, Sunnyvale, Cupertino, Santa Clara,

Campbell and San Jose, and is gradually expanding to Alviso, Milpitas and Morgan Hill. It

is contained by the San Francisco Bay on the east, Santa Cruz Mountains on the west and the

Coast Range to the southeast.

Semiconductor chips, made of silicon, are the principal product of the local high-tech

industries. Approximately 2000 electronics and information technology companies, along

with numerous service and supplier firms, are clustered in the area. The valley contains the

densest concentration of innovative industry that exists anywhere in the world, including

companies that are leaders in such fast-expanding fields as computers, semiconductors,

lasers, fiber optics, robotics, medical instrumentation, magnetic recording, and educational

and consumer electronics. Some are branches or subsidiaries of bigger corporations that felt

obliged to establish research facilities in the area, even though their headquarters may be

located elsewhere. Most of the new industry is home grown, however (Tajnai, 2001).

Bangalore: The Silicon Valley of India. Situated at an altitude of 920 meters above sea

level, Bangalore is the principal administrative, cultural, commercial and industrial center of

the state of Karnataka. The city, which is spread over an area of 2190 square kilometers,

enjoys a pleasant climate throughout the year. Its tree-lined streets and abundant greenery

have led its being called the 'Garden City' of India. However, since local entrepreneurs and

the technology giant Texas Instruments discovered its potential as a high-tech city in the

early 1980s, Bangalore has seen a major technology boom. It is now home to more than 250

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high-tech companies, including homegrown giants like Wipro and Infosys. Consequently,

Bangalore is now called the 'Silicon Valley' of India.

Bangalore poses many advantages for IT companies, some of which are readily

available world class IT infrastructure, abundance of specialized human resources, pleasant

and comfortable climatic conditions, cosmopolitan environment, and high concentration of

IT companies and quality research and development institutions.

As of March 2001, there are 64 telephone exchanges and 60,000 Internet connections

in Bangalore. The Software Technology Parks of India (STPI) in Bangalore was started by

the Ministry of Information Technology (formerly known as Department of Electronics). It

has a microwave network with 140 radios providing services to about 400 customer projects.

Nortel, one of the major telecommunications equipment supplier in the world, has

located its hub in STPI - Bangalore since 1997. Frame Relay, asynchronous transfer mode

(ATM), integrated services digital networks (ISDN), very small aperture terminals (VSAT),

fiber optics, microwave, and a host of other technologies, are being used in the STPI.

The entire STPI system is run on intranet-based process, meeting ISO 9001 standards.

On the Internet, STPI maintains a very healthy quality of service and has touched 100

customers as of April 30, 2000. Today STPI counts among the premier and oldest ISPs in

India.

The bandwidth operated from STPI - Bangalore is about 28 Mbps and it is likely to

increase to about 48 Mbps shortly. They have 18 carriers to multiple countries across the

world.

A unique thing about STPI - Bangalore is the presence of a large Earth Station facility

and VSAT Hub of ERNET. This VSAT network is connecting 125 education and research

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institutions across the country. This is the only facility in the country which has an

International Connectivity co-located with the International Gateway.

STPI - Bangalore is in the process of acquiring large amount of bandwidth capacity

between Bangalore and Mumbai to carry services using optical fiber media and STPI is also

developing redundancy using multiple satellite options (www.bangaloreit.com).

Eastwood Dreams. Eastwood City, located in Libis, Quezon City, is a sprawling 15-hectare

complex that boasts of being the first IT ecozone in the country. Accorded special status by

the Philippine Economic Zone Authority (PEZA), it has attracted major players in the IT

industry, both local and international. One third of the space is dedicated to office space for

the technology-oriented companies that bestow on it the title of IT ecozone. This area is

made up of Citibank Square, Eastwood Corporate Plaza, IBM Plaza, Cyber One,

Technoplaza One, and a couple more planned buildings. Over 6,000 people work in

Eastwood, and it truly is a city that never sleeps, as it is the base of operations of several call

centers.

Another third of Eastwood City is dedicated to restaurants and shopping centers. City

Walk takes up the bulk of this space, followed by the Home and Lifestyle Center and some

sections of Technoplaza One and CyberOne.

Finally, the condominium row takes up the last third. These are upscale living

accommodations provided by Eastwood Lafayette, Eastwood Excelsior, Grand Eastwood

Palazzo, One Orchard Road, and Olympic Heights.

The developers of Eastwood City made great pains to woo anchor tenants, big names

like IBM, Citibank, Canon, and Trend Micro. Just like you need well-known brand names in

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a mall, so goes for an IT park as well. They lend credibility to the project and attract other

companies into the area.

Eastwood City also capitalized on the call center boom. In a way it was a matter of

being in the right place at the right time. With DTI heavily pushing for call centers early on,

Eastwood became one of the attractive location options (www.sketches.kom.ph).

Metro Cebu: An Emerging IT Hub of Southeast Asia. Ready-to-use IT facilities were put

up in Cebu to attract foreign investors. One of these is the 24-hectare Asiatown IT Park built

by Ayala Corporation. As an IT special economic zone, companies located there are granted

tax holidays. It was provided with world-class infrastructure and facilities, including high-

speed Internet access and offices for rent. Some of the companies that have located in the

Park are NEC, Globe and Tsuneishi.

There are a total of 17 Internet service providers (ISPs) operating in Metro Cebu.

Most of them are small and have to compete with the large telecommunication giants such as

Globe and PLDT, and with nationally operating ISPs as Sky Internet and Mosaic

Communications.

Complaints about quality of Internet services are widespread. This includes slow

speed, inability to dial in, and very poor after-sales service. Broadband Internet is one of the

latest Internet technologies. Broadband refers to telecommunication that provides multiple

channels of data over a single communications medium, typically using some form of

frequency or wave division multiplexing. This includes, for example, digital subscriber line

(DSL), cable modem or satellite. It is targeted for business users, and is relatively expensive.

Recent developments to improve the broadband infrastructure in the Philippines is the

Philippine Research, Education and Government Information Network (PREGINET), which

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links the academe, research, and government institutions through a nationwide broadband

network (Vermeulen and van Wijk, April 2003).

Comparative Advantages and Disadvantages of Dumaguete City vis-à-vis Other IT Hubs in Asia

Bangalore, India* Dumaguete City**No. of locators About 1,000 At least 4Max. network capacity (bandwidth) 40 Gbps 320 GbpsTranslated to 64 telephone exchanges 4.5 million high

quality data and voice lines

Technologies available -Frame Relay-ATM-ISDN-VSAT-Fiber optics-Microwave

Data technologies-Leased line-Frame Relay -ATM-MPLS IP VPNVoice technologies-Direct line-Trunk lines-ISDN-E1R2

Metro Cebu/Manila Dumaguete CityBig city environment Small town appealHigh cost of living Lower cost of livingHigh operating cost – high office rental, high labor cost

Low operating cost – low office rental, lower labor cost

Pollution, traffic, more stress Less pollution, less traffic, less stressPeace and order condition unpredictable Stable peace and order conditionPower supply concentrated in these metropolitan areas because of heavy economic activities

Source of power supply in the Visayas, distributed because of lesser economic activities

High concentration of IT industries Infant IT industry; needs more IT locatorsHigh concentration of human resources Lower concentration of human resources,

but quality is highLow hiring rate for call center industry Has one of the highest hiring rate in the

Philippines for call centerMany industries, IT industry will not be guaranteed to get those belonging to the “cream of the crop”

Lack of industries, those from the IT industry can readily get top-notch human resources

*as of March 2005. Source: www.bangaloreit.com

**As of June 2004. Source: Innove communications corporate papers

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In summary:

Advantages Compared to Metro Cities

1. High capacity fiber optics network with quadruple redundancy

2. Infant IT industry - there is still room for many IT companies to come in

3. High quality human resources supplied by four universities and four colleges

4. Has one of the highest hiring rate for the call center industry in the Philippines

5. Small town atmosphere -low cost of living

-Low operating cost for locator companies

-Everywhere are just a few minutes ride away

-Less traffic

-Healthy environment (pollution-free)

-Stable peace and order condition

6. Source of power in the Visayas grid

Disadvantages compared to Metro Cities

1. Lower concentration of human resources

2. Transportation infrastructure and real estate are not as developed as metro cities

3. Lesser transportation connectivity to other cities and places

4. Low concentration of IT companies

5. Lower concentration of economic activities

6. Metro areas are given priority when it comes to power supply, even though the

province is the source of power

Sources: interview with local leaders; various local periodicals

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Theoretical Framework

This study is based upon the theory presented by John Naisbitt in his book

“Megatrends” and corroborated by Alvin Toffler in his book “The Third Wave” which states

that the world is now moving from the industrial to the information age. Naisbitt’s book

states that wealth nowadays means information and knowledge while in the past, it was

capital and tangible things. Information workers such as teachers, lawyers, accountants, and

other professionals, now make up the biggest chunk of the American labor force, where

before it was the laborers. The satellite also collapsed the world into becoming a global

village.

Toffler states that more and more workers are now moving away from offices, and

into their homes. This is caused by the skyrocketing costs of real estate properties, parking

spaces, and of maintaining roads and highways (which are already clogged). With

workstations provided with videoconferencing facilities, fax machine, and computers, the

possibility of working away from offices in major urban centers is greatly enhanced. The

reduction of cost of long-distance transmission to near zero per signal also allows “distance-

independent” communication.

Naisbitt further added that cities, states and companies prepared to take advantage of

the great opportunities would be in a position to reap the rewards that this new era brings.

The Philippines is known as one of the world’s greatest producers of knowledge

workers. Every year we export workers to the Middle East, the United States, Europe, and

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many other countries. It is also not uncommon to find Filipino managers in top positions in

multinational corporations around the world. Studies conducted in 1999 and 2000 showed

that the Philippines is number one in the whole world when it comes to quality and

availability of knowledge workers, topping developed countries such as USA and UK

(ISP.COM: The Internet Strategy of the Philippines).

Dumaguete City is among the country’s top producers of quality human resources. It

topped the survey of the Asian Institute of Management (AIM) for competitiveness of small

Philippine cities in the area of availability of quality human resources. That is why the DTI is

promoting this place as a destination for IT investments. The success of this thrust to

generate investments in the IT sector, however, is greatly affected by the general investment

climate of Dumaguete City and the province.

Aside from its abundant human resources, Dumaguete City has a world-class fiber

optics backbone comparable to the best of the world, and even better than those installed in

Bangalore, India. This fiber optic backbone has a capacity of 320 gigabits per second, which

translates to 4.5 million high quality data and voice lines – a capacity which can

accommodate five million call center agents. It also has quadruple redundant connectivity, as

Dumaguete is a landing site for the fiber optic backbone networks of Globe

Telecommunications, as well as Telecphil – the national consortium of telecommunications

providers. In addition, microwave communications supplement the links, assuring that

service businesses need not fear outages caused by a downed cable (Philippine Business

Magazine, 2004).

The AIM “Philippine Cities Competitiveness Ranking Project 2002” ranked metro,

medium and small cities in the Philippines according to seven (7) drivers of competitiveness.

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These drivers are linkages and accessibility, dynamism of local economy, quality of life, cost

competitiveness, infrastructure, responsiveness of local government, and human resources.

“Competitiveness” in the survey has been defined, among others, as

1. The capacity of the city to provide and environment that nurtures the dynamism of its

local enterprises and industries; and

2. General ability of the city to attract investments, entrepreneurs and residents.

Thus, the study is also a good indicator of the general investment climate of the City

of Dumaguete vis-à-vis other cities in the country.

In the AIM study, it was also found out that the city has the highest cost of doing

business among small cities included in the survey. Over all, the city is 9 th among 12 small

cities in the whole Philippines included in the survey.

This study examines the readiness of the City of Dumaguete to take advantage of the

many opportunities that the 21st century – the information age – brings.

For a place to become an IT hub, there are certain conditions or factors that has to be

present prior to the development of its IT industry. These factors are policy environment,

income, telecommunications infrastructure, IT penetration, human resources development,

and openness to IT trade (Vermeulen and van Wijk, April 2003).

Policy environment. A difference in government structure, such as the degree of intervention

by the government, is an important factor for the development of the IT industry in a country.

Income. The higher the income, the higher the IT expenditures.

Telecommunications infrastructure. The better the existing telecommunications

infrastructure, the easier it is to put up IT infrastructures.

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IT penetration. The degree of IT penetration is an important aspect when setting up an IT

industry. It is easier when people are already used to using computers.

Human resources development. Because IT is a knowledge-based industry, human resources

development forms the basis for IT development.

Openness to trade in ICT products. A country supporting the free trade mechanism will have

easier access to IT products than a country that is more reluctant to free trade.

Even if a place satisfies all these factors and is ready for IT investments, getting all

those investments and be successful in promotion would again depend on the aggressiveness

of the leaders. The investment promotion process involves many steps. First of all, the

leaders must have contact with investors who become interested after promotional activities.

Meetings are then arranged with these prospective investors, then inspection of the

investment site by the prospective investor will occur. If satisfied, the investor will then

apply to proper authorities to invest in the place. If approved, the investment will then form

part of the achievement of the goals of the investment promotion center of the area.

These steps are detailed in a diagram on page 24. In the diagram, the assumption is

that out of 10,000 contacts with investors generated after promotional activities, there are

only 10 new investments generated creating 1,000 jobs. It shows that after each step, only ten

percent (10%) of what was generated in the previous step is carried on to the next level of the

investment promotion process. That means that after each step, there is 90% diminish in the

number of the contacts generated from the previous step.

Conceptual framework

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The Dumaguete City IT environment involves several sectors. This includes the

government, academe, business sector, local investors, IT service providers, and others in the

society that do not belong to the previous five sectors. These sectors are the stakeholders of

the Dumaguete City environment, and only with their concerted efforts can the IT industry

here flourish. This study attempts to ascertain whether the government, both local and

national, is implementing policies conducive to the development of the local IT industry, and

whether the respondents perceive them to be seriously supporting the development of the

latter. This study will also find out, through the respondents, if the government is serious in

implementing laws and policies supporting the development of national and local IT

industry.

Human resources are the very basis for the development of an IT industry. Whether

the academe is implementing policies and programs supportive to the needs of the industry is

very vital to the health and competitiveness of the emerging IT industry of Dumaguete City.

The business sector is user of IT services and products. Some of them will be

counterparts of the investors in developing the IT industry here. As a whole, their

cooperation is very vital to the development and health of the emerging IT industry in

Dumaguete.

Local investors provide the funds to put up IT businesses and link them to domestic

and international markets. They can also provide the technologies and logistics needed by the

industry.

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