market access issues and the development of business services · market access issues and the...
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Market Access Issues and the Development of Business Services
Introduction The Philippines has chosen to pursue liberalization by taking an active
part in the ASEAN Free Trade Area (AFTA), the Asia-Pacific Economic
Cooperation (APEC), and the World Trade Organization (WTO). The intent is to
open up the economy by liberalizing trade and investment policies in order to
attract new job-generating enterprises, to foster competition among the different
industries and to gain access to global markets for the country’s goods and
services.
Of particular interest to the Philippines is the liberalization of trade in
commercial services, which has expanded rapidly over the years. The WTO
estimated global exports of commercial services to have reached US$1.3 trillion
and global imports to have reached US$1.29 trillion in 1997, more than triple the
levels registered in 1985. According to the World Bank, services now account for
close to one-quarter of world trade and three-fifths of foreign direct investment
(FDI) flows (Avila, 1998).
The country has pursued the liberalization of trade in services in
recognition of the substantial role that services play in generating national
income and employment, and in providing links among various commercial
activities. Services likewise play a significant role in the overall trade
performance of the Philippines, contributing more than a third of the country’s
total exports.
Through global agreements like the General Agreement on Trade in
Services (GATS) and regional agreements like the ASEAN Framework
Agreement on Services (AFAS), the Philippines aims “to reap the numerous
benefits liberalization can bring, including improvement of professional services,
transfer of technology, and higher income for professionals” (Tullao, 1998).
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To fully realize the gains from the liberalization of trade in services,
however, certain challenges, such as the resistance of different groups to the
idea and the complex legal barriers in certain service sub-sectors, must be
overcome. Naturally, there is resistance from those who are not prepared for
competition (San Gil, 1999). There is also the need to invest heavily in human
development so that people are ready to face the challenge of globalization and
compete in open markets.
Another major concern is the “inherent conceptual and measurement
problems that make an accurate assessment of the scope and extent of services
trade difficult” (Avila, 1998; Lamberte, 1996; Hoekman, 1995; UNCTAD-WB,
1994) due to the diversity of services. The WTO, for example, lists twelve major
sectors in the services industry, namely: (1) business services, (2)
communication services, (3) construction and related engineering services, (4)
distribution services, (5) educational services, (6) environmental services, (7)
financial services, (8) health related and social services, (9) tourism and travel
related services, (10) recreational, cultural and sporting services, (11) transport
services, and (12) energy services. On the other hand, the Philippines, through
the annual survey of establishments of the National Statistics Office (NSO),
classifying service industries into: (1) construction, (2) finance, real estate,
insurance, and business services (3) community, social, and personal services,
(4) transportation, communication, and storage, and (5) agriculture, fishing, and
forestry.
While this paper will concentrate only on business services, the scope of
the study is still formidable given the number of sub-sectors under the business
services classification. Business services, according to the GATS Services
Sectoral Classification List, includes the following: professional services,
computer and related services, research and development services, real estate
services, rental/leasing services without operators, and other business services
(See Appendix 1). Compounding this situation is the fact that government has not
officially adopted the GATS classification system.
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For this paper, the proponent builds on the baseline information provided
by several recent studies on the liberalization of services by obtaining documents
from various government agencies. A major source of difficulty encountered in
data gathering is the scarcity of updated industry studies for the business
services sector, except for a few available in government agencies like the
National Statistics Office (NSO) and the Department of Trade and Industry (DTI).
To augment these secondary sources, interviews were conducted with
representatives of several professional / industry associations and with officers of
some companies belonging to the business services sector, although not all
possible key informants were available or willing to cooperate at the time of data-
gathering.
Given this background, and taking into consideration the information
gathered from the interviews and various secondary sources, this paper intends
to:
1. describe the state of business services in the country, including the
opportunities and threats faced by the different sub-sectors
2. evaluate the scope of forward and backward linkages of the business
services and their sub-sectors
3. review the regulatory framework and system of incentives concerning
business services in the country
4. review human resource development efforts in the business services
sector, particularly in technology-sensitive areas
5. assess the quality and relevance of the training of local professionals
6. assess the prospects of negotiating mutual recognition agreements
with selected countries
7. identify market access issues in the business service sector
8. present recommendations to promote greater market access, and to
further develop business services in the country
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1. STATE OF BUSINESS SERVICES IN THE PHILIPPINES
1.1. General profile of business services Share in national output. Business services contribute a great deal to
the Philippine economy. Latest published figures from the National Statistics
Office (NSO) reveal that the business services sector contributed at least P113.7
billion to the national economy in 1994 compared to only P48.9 billion in 1991, a
133 per cent increase over a four-year period. Significantly, the share of
business services to gross domestic product (GDP) increased from only 3.92
percent in 1991 to 6.72 per cent in 1994 for an average of 4.80 per cent.
Meanwhile its share to gross national product (GNP) rose from only 3.90 per cent
in 1991 to 6.55 percent in 1994 for an average of 4.71 per cent.
Table 1. Gross revenues / sales of business services (values in thousand pesos), 1991-1994 Industry description 1991 1992 1993 1994 Professional business services 4,945,270 9,693,161 6,238,633 7,967,279 Advertising services 1,748,943 1,943,759 4,359,612 4,318,177 Machinery and equipment renting & leasing services
988,579 1,175,292 760,208 1,062,379
Business services, n.e.c. 13,026,572 12,488,439 19,522,032 19,861,443 Real estate services 16,944,900 13,746,328 20,092,504 61,974,172 Private medical, dental, and other health services
9,103,079 12,050,115 14,341,879 15,584,561
Sanitary and similar services 747,427 889,743 1,004,025 1,183,487 Research and scientific institutions 156,206 163,588 175,627 224,423 Photographic studios including commercial photography and related services
1,277,913 1,195,080 1,376,900 1,535,391
Total 48,938,889 53,345,505 67,871,419 113,711,312 GDP (in million pesos) 1,248,011 1,351,559 1,474,457 1,692,932 As % of GDP 3.92 % 3.95 % 4.60 % 6.72 % GNP (in million pesos) 1,254,562 1,374,838 1,500,287 1,736,382 As % of GNP 3.90 % 3.88 % 4.52 % 6.55 % Sources: National Statistics Office and 1997 Philippine Statistical Yearbook Note: As classified by the National Statistics Office, in its annual survey of establishments business services include (1) professional business services namely legal services, accounting, auditing and bookkeeping services, engineering, architectural and technical services, and market research services on a fee or contract basis; (2) advertising services, (3) machinery and equipment renting and leasing; and (4) other business services not elsewhere classified including data processing and tabulating services, adjustment and collection agencies, duplicating, addressing, blueprinting and photo services, employment agencies, business management and consulting services, detective and protective services, and other business services not elsewhere classified.
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The sub-sectors that generated the greatest revenues in 1994 included
real estate services, with P61.9 billion; private medical, dental, and other health
services, P15.5 billion; professional business services, 7.9 billion; detective and
protective services (investigation and security services), P5.06 billion;
employment agencies (placement and supply services of personnel), P4.8 billion;
and advertising services, P4.31 billion.
Employment. Despite the significant increase of its contribution to
national output, however, business services barely increased its share of total
employment, growing by an average of only 1.35 per cent from 1991 to 1994.
Business services employed at least 342,013 people in 1994 compared to
303,212 in 1991, an 11 per cent increase over the same four-year period. (See
Table 2).
Table 2. Employment (average for the year) of business services, 1991-1994 Industry description 1991 1992 1993 1994 Professional business services 29,290 31,761 29,449 32,743 Advertising services 8,434 9,417 12,689 12,318 Machinery and equipment renting & leasing services
1,986 2,188 1,853 1,846
Business services, n.e.c. 146,133 146,636 139,121 140,202 Real estate services 14,829 14,988 16,952 18,148 Private medical, dental, and other health services
79,644 93,605 102,115 103,160
Sanitary and similar services 10,183 11,264 13,130 13,988 Research and scientific institutions 1,414 1,645 1,464 1,708 Photographic studios including commercial photography and related services
11,299 13,435 15,396 17,900
Total employment in business services 303,212 324,939 332,169 342,013 Total employment in RP (number in thousands)
22,979 23,917 24,443 25,166
As % of total employment 1.32 % 1.36 % 1.36 % 1.36 % Total labor force in RP (number in thousands) 25,246 26,180 26,822 27,483 As % of total labor force 1.20 % 1.24 % 1.24 % 1.24 % Sources: (Annual Survey of Establishments) National Statistics Office and 1997 Philippine Statistical
Yearbook
In terms of generating employment, the sub-sectors that provided the
most jobs in 1994 were private medical, dental, and other health services, with
103,160; detective and protective services (investigation and security services),
90,974; employment agencies (placement and supply services of personnel),
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26,532; professional business services (including legal services, accounting
auditing, and bookkeeping services, engineering, architectural and technical
services, and market research services), 32,743; photographic services, 17,900;
and sanitary and similar services (including building-cleaning services), 13,988.
Number of establishments. The number of establishments of business
services increased by 13.35 percent over a four-year period from 29,819 in 1991
to 33,801 in 1994. It barely increased from 1993 to 1994, even registering
decreases in the following sub-sectors: professional business services,
advertising services, and real estate services. The private medical, dental, and
other health services had the most number of establishments in 1994 at 19,622,
followed by professional business services with 4,221.
Table 3. Number of establishments of business services, 1991-1994 Industry description 1991 1992 1993 1994 Professional business services 4,304 4,414 4,375 4,221 Advertising services 1,211 1,338 1,438 1,296 Machinery and equipment renting & leasing services
135 151 162 193
Business services, n.e.c. 2,965 3,264 3,326 3,185 Real estate services 1,106 1,279 1,381 1,319 Private medical, dental, and other health services
16,669 18,122 19,121 19,622
Sanitary and similar services 247 235 239 243 Research and scientific institutions 18 24 16 15a Photographic studios including commercial photography and related services
3,164 3,416 3,550 3,707
Total 29,819 32,243 33,608 33,801 Source: (Annual Survey of Establishments) National Statistics Office, 1991-1994 a data for establishments with employment of less than 10 is unavailable
As expected, most of the establishments were located at the National
Capital Region (NCR), which accounted for 41.55 per cent of the total. It was
followed by Southern Tagalog, which had 11.62 per cent, and Central Luzon,
8.93 per cent (See Table 4). The ARMM accounted for a mere 0.23 per cent of
the total.
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Employment per region. Employment was likewise concentrated at the
NCR, which accounted for 63.32 per cent of total employment in business
services in 1994. Southern Mindanao came in second, contributing 25,011 or
7.39 per cent of employment in business services. It even outpaced Southern
Tagalog (5.28 per cent), Western Visayas (5.15 per cent), and Central Visayas
(4.36 per cent).
Table 4. Employment (average for the year) and number of establishments of business services by region, 1994 Region Employment % No. of establishments % National Capital Region (NCR) 214,147 63.32 14,027 41.55 Cordillera Administrative Region (CAR)
3,307 0.98 522 1.55
Autonomous Region in Muslim Mindanao (ARMM)
306 0.09 77 0.23
Region 1 – Ilocos 6,024 1.78 1,596 4.73 Region 2 – Cagayan Valley 2,410 0.71 645 1.91 Region 3 – Central Luzon 12,485 3.69 3,014 8.93 Region 4 – Southern Tagalog 17,867 5.28 3,924 11.62 Region 5 – Bicol 3,991 1.18 1,065 3.15 Region 6 – Western Visayas 17,407 5.15 2,108 6.24 Region 7 – Central Visayas 14,744 4.36 1,571 4.65 Region 8 – Eastern Visayas 2,759 0.82 481 1.42 Region 9 – Western Mindanao 4,362 1.29 658 1.95 Region 10 – Northern Mindanao 8,882 2.63 1,084 3.21 Region 11 – Southern Mindanao 25,011 7.39 2,296 6.80 Region 12 – Central Mindanao 4,521 1.34 691 2.05 Total 338,223 100.0 33,759 100.0 Source: National Statistics Office, 1991-1994
Supply of professionals. As a whole, the supply of business service
sector professionals can adequately meet the demands of the local market as
indicated by key respondents from the survey and data from various government
and private agencies.
Table 5. Supply of professionals vs. local demand Is the supply of professionals adequate in
meeting local demand? Sectors YES NO
Professional services ✓ , with exceptions Computer and related services ✓ Research and development services -- Real estate services ✓ Rental/leasing services without operators ✓ Other business services ✓
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1.2. Specific profile of business services
1.2.1. Professional services Professional services, according to the GATS Services Sectoral
Classification List, includes the following: legal services, accounting, auditing,
and bookkeeping services, taxation services, architectural services, engineering
services, integrated engineering services, urban planning and landscape
architectural services, medical and dental services, veterinary services, and
services provided by midwives, nurses, physiotherapists and paramedical
personnel.
According to the records of the Professional Regulation Commission
(PRC), there were a total of 1,850,014 professionals registered with the PRC as
of the end of December 1998, including 323,736 nurses, 125,516 midwives,
98,121 accountants, 90,566 physicians, and 83,300 civil engineers (See Table
6). Only those covered in Table 6 are the professions regulated by the PRC.
Otherwise, they are not technically considered as a profession.
The supply of professionals engaged in legal services, accounting,
auditing, bookkeeping, and taxation services, urban planning and architectural
services, interior design, veterinary services, nursing services, and optometry
services is more than enough to satisfy local demands. In fact, there is a glut of
lawyers, architects, and nurses at present. For instance, the latest figures
released by the Philippine Nurses Association (PNA) show that there are 85,000
nurses who are currently active in service, but more than 100,000 are employed
in fields which are not related to the nursing. Based on data from the UNDP in
1995, the USA and Canada are maintaining current levels of admission of
migrant workers. Europe on the other hand, is decreasing the number of
entrants.
For veterinary services, according to Dr. Rhodora Carlos, president of the
Philippine Veterinary Medical Association, despite the adequacy of meeting the
demand for the care of small animals, there is an unmet need by the agricultural
sector for practitioners who focus on the care of poultry and livestock.
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In the field of engineering services, which cater to various industries such
as construction, real estate, and telecommunications, local demand far exceeds
the supply of professionals. Engr. Roderick Yap, chairman of the Electronics and
Communications Engineering Department of De La Salle University and a
member of the Institute of Electronics and Communications Engineers of the
Philippines (IECEP), said that job opportunities for ECE graduates are good
because they are immediately hired by large multinational companies in the
Philippines.
Table 6. Number of registered professionals (as of December 1998) Profession Number of professionals 1 Accountants 98,121 2 Aeronautical engineers 480 3 Agricultural engineers 4,476 4 Architects 14,623 Interior designers 672 Landscape architects 110 5 Chemical engineers 21,893 6 Civil engineers 83,300 7 Dentists 39,669 8 Professional electrical engineers 3,101 Reg. Electrical engineers 19,637 Reg. Master electricians 2,968 Master electricians 15,034 Associate electrical engineer 3,651 Assistant electrical engineer 31,690 9 Electronics and communications engineer 18,478 10 Geodetic engineers 4,934 Jr. Geodetic engineers 5,746 Geodetic engineer’s aides 100 11 Professional mechanical engineers 3,454 Mechanical engineers 54,403 Certified plant mechanics 9,312 Mechanical plant engineers 2,070 ACRE 65 12 Medical technologists 37,369 Medical laboratory technicians 3,143 13 Mettalurgical engineers 427 14 Midwives 125,516 15 Mining engineers 2,608 16 Naval architects and marine engineers 400 17 Nurses 323,736 18 Nutritionists and dietetics 10,165 Dieticians 1,410 19 Optometrists 8,971 20 Pharmacists 40,979 21 Physicians 90,566 22 Physical therapists 6,988 23 Occupational therapists 636 24 Radiologic technologists 2,959 25 X-ray technologists 7,581 26 Sanitary engineers 2,056 27 Veterinarians 5,077
Source: Office of Continuing Professional Educational Councils, Professional Regulation Commission, 1999
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In integrated engineering services, Angel Santiago, president of EDCOP
Engineering Consultants, mentioned the need for professionally-run firms who
can meet the global standards of major funding institutions such as the World
Bank (WB) and the Asian Development Bank (ADB), which award large-scale
projects to local contractors. At present, these large institutions are very careful
in selecting their contractors. Most of the time, they award the contracts to
foreign firms, who are perceived to be more credible. These foreign firms,
however, end up subcontracting projects to local firms anyway.
Two major sub-sectors of the professional services sector are the medical
and dental professions. In both of these fields, there is a huge local demand for
competent practitioners, especially in the rural areas. The Philippine Medical
Association (PMA) posts only 26,000 actively practicing members, while the
Philippine Dental Association (PDA) estimates the number of dental
professionals to be 33,000. That the ratio of these professionals to the national
population is small and aggravated by the concentration of such professionals in
the urban areas, where it is more financially-rewarding to practice one’s
profession.
There is also a huge demand for Filipino professional workers abroad.
Records of the Philippine Overseas Employment Administration (POEA) show
that a total of 55,576 professional, technical and related workers were deployed
abroad in 1998 alone, of which 41,766 were female and 13,810 were male.
1.2.2. Computer and related services Among the major sub-sectors under computer and related services are
software implementation services, data processing services, and database
services. Software implementation services pertain to the provision of contract
services rendered locally for offshore clients, or the assignment of manpower to
the client’s facilities. These include analysis, design, programming, training,
documentation and consultancy. Data processing services, on the other hand,
involve the conversion of data by encoding from source documents to computer
readable formats or databases.
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Figure 1. Number of Philippine computer software firms
Source: Asian Computer Directory, 1993
According to the 1991-92 Philippine Computer Directory, there were about
200 software development and data conversion companies in the Philippines, of
which 80 were computer software firms (See Figure 1). In addition, there were
independent software consultants providing software development services.
Most software firms are wholly-owned by Filipino investors, and close to
80 per cent of local software houses are capitalized at less that P5 million. The
industry is also dominated by small companies, which employ less than 50
people. This situation presents a constraint as competitive conditions in the
global market seem to favor software companies with a minimum critical size
(200 professional workers).
The computer and related services sector earned US$250 million in export
receipts in 1997 from only US$60 million in 1993 (See Figure 3). This growth has
been partly due to the rapid developments in information technology, forcing
many large companies to keep updating their information systems to remain
competitive in their respective markets.
23 3144 47 51
6075 80
020406080
100
1981 1982 1983 1984 1985 1986 1990 1992Year
# of
firm
s
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Figure 2. Employment generated by BOI-registered software firms
Figure 3. IT services export performance, 1993-1997
Source: Department of Trade and Industry
733 720
3165
1154 862
01000200030004000
1989 1990 1991 1992 1993
Year
Empl
oym
ent
60 66125
206250
050
100150200250300
1993 1994 1995 1996 1997
Year
Valu
e (in
mill
ions
)
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1.2.3. Research and development services Research and development services include the performance of the
following types of activities: (1) basic research, experimental or theoretical work
undertaken primarily to acquire new knowledge of the underlying foundations of
phenomena and observable facts, without particular application or use in view;
(2) applied research, original investigation undertaken in order to acquire new
knowledge, but directed primarily towards a specific practical aim or objective; (3)
experimental development or systematic work, which draws on existing
knowledge gained from research and/or practical experience, and is directed to
producing new materials, products and devices, to installing new processes,
systems and services, and to improving those already produced or installed.
The research and development (R&D) services sector in the Philippines is
a relatively small industry, as can be gleaned from its contribution to the gross
national product, and to total employment. According to the Department of
Science and Technology (DOST), R&D spending in the Philippines accounted for
only 0.22 per cent of GNP in 1992. NSO figures for 1994 show that there were
only 15 research and scientific institutions, employing only 1,708 people and
contributing at least P224 million in revenues. DOST is currently commissioning
the NSO to conduct a study on the spending of private companies on R&D.
1.2.4. Real estate services Real estate services involving own or leased property includes buying,
selling, renting, and operating of self-owned or leased real estate such as
apartment buildings and dwellings, and non-residential buildings; developing and
subdividing real estate into lots; and development and sale of land and cemetery
lots and operation of apartelles. Real estate services on a fee or contract basis,
on the other hand, includes buying, selling, renting, managing and appraising
real estate on a fee or contract basis.
In 1994, there were 1,106 establishments in the real estate industry,
contributing P61.97 billion in revenues, and employing at least 16,952 people.
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The real estate services industry is largely affected by the health of the
local economy. The boom-and-bust cycles of the economy have, in fact,
coincided with the real estate industry's own upturns and downturns. The
economic slump in 1984, 1985, 1991, and 1997 triggered a slowdown in the
growth pace of gross value added (GVA) of ownership of dwellings and real
estate (ODRE), while the economic recovery experienced in 1986 and 1992
initiated the boom years for the property sector. With the economy recovering
from the Asian financial crisis, the real estate services industry is again expected
to trek the path of growth.
Table 7. Value and growth rates of ownership of dwellings and real estate, 1986-1996
Year Value (in million pesos) Growth (%) 1986 33,205 4.70 1987 34,759 5.60 1988 36,691 6.52 1989 39,083 2.72 1990 40,146 0.20 1991 40,242 0.00 1992 40,534 0.70 1993 41,269 1.81 1994 42,473 2.90 1995 43,765 3.04 1996 45,576 4.14
Source: 1997 Philippine Statistical Yearbook
1.2.5. Rental / leasing services without operators Rental and leasing services without operators include the renting without
operator of land transport equipment, e.g. railroad vehicles, cars, trucks, trailers
and semi-trailers, motorcycles, caravans, campers and containers; renting of
water transport equipment, i.e. commercial boars and ships, without operator;
renting of air transport equipment, i.e. airplanes without operator; and renting of
other machinery and equipment including agricultural machinery, civil
engineering machinery and equipment, office machinery and equipment; and
other machinery and equipment, n.e..c., including the renting of all kinds of
machinery, electrical or not, generally used as capital goods by industries.
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Records by the NSO show that the sub-sector on machinery and
equipment renting and leasing, which includes the renting or leasing of
agricultural machinery without a driver, of construction machinery and equipment
without a driver, of office machines and equipment, contributed P1.06 billion to
the economy. In the same year, there were 193 establishments engaged in the
business, employing at least 1,846 people.
In the aircraft chartering industry (renting of aircraft without operator),
companies suffered a drop in the demand for their services because of the
economic crisis that hit the country starting 1997. Mr. Allan Miller, Finance Officer
of A. Soriano Aviation, Inc., revealed that several smaller companies have closed
down, and acknowledged that the industry is “barely surviving.” Ms. Aurora P.
Acelajado, Secretary-General of the Federation of Aviation Organizations of the
Philippines, Inc. (FEDAVOR), agreed, saying that corporate customers that
previously availed of chartered flights shifted to commercial airlines during the
crisis, severely affecting the aircraft chartering industry. The geographical
characteristic of the Philippines, Acelajado explained, would have made the
business of chartering aircraft lucrative. The demand for aircraft chartering
services, however, is limited to some big companies who can afford to shoulder
expenses, but even only during periods of robust economic growth.
1.2.6. Other business services According to the GATS classification, the sub-sectors belonging to other
business services are the following: advertising services; market research and
public opinion polling services; management consulting services; services
relating to management consulting; technical testing and analysis service;
services incidental to agriculture, hunting and forestry; services incidental to
fishing; services incidental to mining; services incidental to manufacturing;
services incidental to energy distribution; placement and supply services of
personnel; investigation and security; related scientific and technical consulting
services; maintenance and repair of equipment (not including maritime vessels,
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aircraft or other transport equipment); building-cleaning services; photographic
services; printing and publishing; and convention services.
In the Philippines, management consulting services falls under
professional consulting services, together with engineering consulting services.
It is closely linked to professional services such as integrated engineering
services, engineering services, architectural services, and accounting, auditing,
and bookkeeping services.
The consulting services provided by the industry include engineering and
architectural design, construction management and supervision, aerial and
geological surveys, operation and maintenance, environmental impact
assessment, pre-investment and feasibility studies, human resource training and
development, executive and staff recruitment, quality management systems,
organizational development, accountancy, and software development.
Over the past 50 years, the country has built a strong professional
consulting services industry. Many Filipino consulting firms have a sufficiently
large domestic base, enabling them to handle consulting assignments abroad.
These firms have been engaged as prime consultants, joint-venture partners or
associates of international consultants for public and private sector projects in
and outside of the country. Many of these firms have also provided consulting
services for loan and technical assistance projects of various financial institutions
such as the World Bank (WB) and the Asian Development Bank (ADB).
The professional consultancy services sector’s export earnings are quite
substantial. In dollar terms, the sector grew at an estimated average of 14.05 per
cent during the period 1993 to 1997. However, domestic and export earnings
dipped in 1998 due to the slump in infrastructure projects in the Asian region
caused by the financial crisis that started at the middle of 1997.
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Table 8. Export performance of professional consulting services (Gross billings in US$ million)
Year Engineering consultancy
Management consultancy
Total
1990 6.48 10.07 16.55 1991 11.14 10.79 21.93 1992 13.35 12.34 25.69 1993 12.23 11.78 24.01 1994 12.53 12.96 25.49 1995 17.10 4.85 21.95 1996 22.23 9.13 31.36 1997 28.35 12.27 40.62 1998 9.78 NA
Source : Department of Trade and Industry, 1999 Advertising services includes creating and placing advertising in
periodicals, newspapers, radio and television for clients; outdoor advertising like
billboards, panels, bulletins and frames, window dressing, showroom design, car
and bus carding; media representation, i.e. sale of time and space or various
media soliciting advertising; aerial advertising; distribution or delivery of
advertising materials or samples; and the renting of spaces for advertising.
In 1994, the sub-sector contributed over P4.32 billion to national output. In
the same year, there were a total of 1,296 establishments, employing at least
12,318 people. Mr. Oscar Valenzuela, Industry Development Director of the
Advertising Board of the Philippines, explained that there are a good number of
exceptional graduates working in the industry. He added that the high
occurrence of piracy and transfers of people among advertising firms is proof of
the demand for local practitioners.
Data from media handbook of 4As showed the following advertising
expenditures:
Year Advertising Expenditure (in millions of Pph)
1990 4,528 1991 5,176 1992 6,638 1993 7,649
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Market research and public opinion polling includes investigation on
market potential, acceptance, and familiarity of products and buying habits of
consumers for the purpose of sales promotion and development of new products;
and investigation on collective opinions of the public about political, economic,
and social issues. In 1994, this sub-sector generated total revenues of P507
million. In the same year, there were 37 market research establishments,
employing at least 2,556 people. With respect to public opinion polling services,
the Social Weather Stations (SWS) mentioned that there are no industry data
available.
Technical testing and analysis service includes testing of all types of
materials and products, i.e. testing of the composition and purity of minerals,
food, etc.; qualification and reliability testing, certification of products, failure
analysis, materials evaluation; testing the physical characteristics and
performance of products or materials for their strength, thickness, durability,
electrical conductivity, radioactivity, etc.; testing of textiles, radiographic testing of
welds and joints and performance testing of complete machinery, motors,
automobiles, appliances or electronic equipment, whether or not with the use of
models or mock-ups of ships,aircraft, dams, etc.
NSO data in 1994 lumped this sub-sector under the engineering,
architectural and technical services, not elsewhere classified category, which
contributed P558 million in revenues to the economy.
According to Mr. Eduardo Habaradas, Vice President for Technical
Services of Jefcor, Inc., a company engaged in laboratory testing and technical
services, there are approximately 10 companies doing similar services in the
country. These companies provide services such as the analysis of water
samples, soil samples, pesticides, fertilizers, mosquito coils, pharmaceutical
products, and metals, with each laboratory having its own expertise or
specialization.
These companies are also referred to as ‘third-party laboratories’ because
their customers are usually manufacturing companies that also have their own
laboratories but contract services of independent laboratories to validate tests
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they have done themselves. These tests are usually required by regulatory
agencies such as the Bureau of Food and Drugs (BFAD), Fertilizer and
Pesticides Authority (FPA), and the Environmental management Bureau (EMB)
of the Department of Environment and Natural Resources (DENR).
Placement and supply services of personnel includes personnel
search, selection, referral and placement in connection with employment in any
field; executive search and placement activities; labor contracting activities, i.e.
the supply to others, chiefly on a temporary basis, of personnel hired by, and
whose emoluments are paid by the agency.
According to Ms. Ma. Victoria Ochoa, Corporate Secretary of the
Philippine Association of Service Exporters, Inc. (PASEI), there are over 1,000
recruitment agencies in the country, of which 700 are members of PASEI. In
1994, this sub-sector contributed P4.8 billion to gross national product, and
employed at least 26,532 people.
More importantly, this sub-sector facilitated the overseas deployment of
thousands of Filipinos who are now remitting billions of dollars to the economy
every year. In 1998 alone, 219,246 Filipinos were deployed abroad.
20
Table 9. Deployed Overseas Filipino Workers (1997-1998) 1997 1998 Professional, technical and related workers 51,381 55,576
Accountants 407 311 Aircraft and ships’ officers 70 60 Architects, engineers and related technicians 3,593 2,860 Authors, journalists and related workers 12 13 Composers and performing artists 31,674 35,885 Economists 1 1 Jurists 2 0 Life scientists and related technicians 288 565 Medical, dental, veterinary, and related workers 7,061 7,445 Physical scientists and related technicians 83 44 Professional technical and related workers 379 279 Religion workers 7 0 Sculptors, painters, photographers and related creative artists 455 470 Sportsmen, athletes, and related workers 56 98 Statisticians, mathematicians, systems analysts and related technicians 968 1,091 Surveyors, geodetic engineers, draftsmen and engineering technicians 6,162 6,328 Teachers 163 126
Administrative and managerial workers 572 385
Legislative officials and government administrators 1 0 Managers 377 318 Managers assistants 194 67
Clerical and related workers 3,632 2,881
Bookkeepers, cashiers and related workers 434 404 Clerical and related workers 87 81 Clerical and related workers, others 1,582 1,464 Clerk mail distribution 159 31 Computing machine operators 544 257 Conductors, transport 6 6 Operators, telephone and telegraph 120 79 Stenographers, typists and card and tape punching machine operators 684 547 Supervisor, transport and communication 16 12
Sales workers 2637 2510
Insurance, real estate securities, business service salesmen, auctioneers
47 66
Managers (wholesale and retail trade) 30 28 Sales workers, others 637 714 Salesmen, shop assistants and related workers 1,224 1,196 Salesmen, technical, commercial travelers and manafacturers’ agents 440 335
Supervisors, sales and buyers 259 171 Service Workers 76,644 80,917
Caretakers, building charworkers, cleaners, and related workers 20,197 25,011 Cooks, waiters, bartenders and related workers 5,249 4,939 Hairdressers, barbers, beauticians and related workers 570 494 Laundry day cleaners and pressentors 219 187 Maids and related housekeeping service workers 47,786 47,357 Managers, assistant managers (catering and lodging services) 120 64 Service workers, others 2,036 2,270 Supervisors, housekeeping and related workers 184 304
21
Table 9 (continued) . Deployed Overseas Filipino Workers (1997-1998) 1997 1998 Agricultural, animal husbandry, and forestry workers, fishermen, and hunters
546 388
Farmers 104 52 Fishermen hunters and related workers 58 17 Forestry workers 8 2 Husbandry, agricultural and animal 350 301 Managers and supervisors, farm 26 16
Production and related workers, transport equipment operators and laborers
85,829 75,222
Blacksmiths, toolmakers and machine-tool 2,578 1,795 Bricklayers, carpenters, and other construction workers 9,605 8,792 Cabinetmakers and related woodworkers 377 525 Chemical processors and related workers 201 125 Cutters and carvers, stone 100 76 Electrical fitters and related electrical and electronics workers 8,662 6,144 Food and beverage processors 579 591 Glass formers, potters, and related workers 328 203 Laborers 12,783 11,282 Machine fitters, machine assemblers and precision instrument makers except electrical
5,033 4,287
Makers, paper and paperboard products 46 48 Makers, rubber and plastic products 615 313 Material handling and related equipment operators, dockers, and freight handlers
2,432 2,085
Miners, quarrymen, well drillers and related workers 342 175 Operators, broadcasting station and sound equipment and cinema projection
17 6
Operators, stationary engine and other related equipment 483 335 Operators, transport equipment 948 1,410 Painters 1,544 1,766 Plumbers, welders, sheet-metal and structural metal preparers / erectors
9,909 8,507
Printers and related workers 446 481 Processors, metal 785 428 Production and related workers, others 19,999 18,678 Shoemakers and leather goods makers 127 35 Spinners, weavers, knitters, dyers, and related workers 1,795 1,660 Supervisors, production and foremen 2,597 2,286 Tailors, dressmakers, sewers, upholsterers and related workers 3,338 3,048 Tanners, fellmongers, and pelt dressers 7 0 Wood preparation workers and paper makers 38 0 Workers, jewelry and precious metal 115 141
Others not elsewhere classified 0 1,367 GRAND TOTAL 221,241 219,246
• Preliminary figures, Philippine Overseas Employment Administration, 1999
22
Investigation and security includes investigation and surveillance
activities, guard and other protective activities for individuals and property, such
as: checking of individuals’ backgrounds; tracing of missing persons;
investigation of thefts and embezzlements; patrol or other activities with primarily
hired personnel to directly protect individuals or property; bodyguard activities,
street patrol, guard and watchman activities for apartment buildings, offices,
factories, construction sites, hotels, theaters, dance halls, etc.; store detective
activities; activities such as monitoring mechanical or electrical protective
devices; and consultancy in the field of industrial security, finger printing,
signature and handwriting identification, etc. In 1994, this subsector contributed
P5.06 billion to the national economy, and employed at least 90,974 people.
Building-cleaning services includes cleaning of buildings of all types,
including offices, factories, shops, institutions and other business and
professional premises and residential buildings; building interior cleaning, e.g.
floor cleaning and waxing, interior wall cleaning, furniture polishing, and window
cleaning, inside as well as outside, for offices, industrial plants, factories and
high-rise apartment buildings, chimney cleaning and cleaning of fireplaces,
furnaces, incinerators, boilers, ventilation ducts and exhaust units, etc.; and
disinfecting and exterminating/pest control activities. In 1994, it contributed
P1.18 billion to gross national product, and employed at least 13,988 people.
Photographic services includes all commercial and consumer
photograph production as well as processing photograph and motion pictures,
such as: portrait photography, aerial photography, film processing, mounting of
slides and copying and restoring or transparency retouching in connection with
old photographs. In 1994, this sub-sector contributed P1.5 billion to the national
economy, and employed at least 17,900 people.
Packaging services includes packing activities on a fee or contract basis,
such as: mixing and filling of aerosols, cans, and bottles; packaging of
pharmaceuticals and cosmetics; card-mounting for novelties and buttons;
labeling, stamping and imprinting; parcel packing and gift wrapping, whether or
not this involves an automated process. Packaging performs three basic
23
functions: (1) containment and protection which refers to product protection,
preservation, tamper-proofing and extension of shelf life; (2) information and
marketability as an aid in brand identification, content disclosure and information
and promotion of product appeal; and (3) transport and storage to enable
products to be stored, stacked, conveyed, delivered and distributed to target
destinations in the most effective and efficient manner.
According to the Bureau of Export Promotion and Trade, the packaging
industry is composed of about 300 firms. Around 85% of the plants are located in
the National Capital Region (NCR) mainly due to the concentration of the
manufacturing sector in the area.
The country’s leading packaging group is San Miguel Packaging Products
(SMPP), the packaging subsidiary of San Miguel Corporation. It is into glass,
metal, paper, composite and plastic packaging for consumer and industrial
goods.
The leading manufacturer for glass-based products is SMPP, which has
four plants producing around 1,000 MT of glass containers per day and with a
market share of 85%. Other suppliers of glass products are Asia Brewery Inc.,
Anglo-Watson Philippines and Pacific Glass Products Manufacturing
Corporation.
Firms in the metal subsector are usually grouped into manufacturers of
food grade tin cans and general line cans for the paint, chemical and oil-based
industries. Oriental Tin Can Manufacturing is the leading manufacturer of sanitary
cans. Rowell is the leading producer of general line cans, while SMPP is the
largest supplier of metal closures (crowns, metal caps, and roll-on pilfer-proof
(ROPP)), accounting for an 80% to 85% share of the crown closures and almost
all the ROPP closures required in the domestic market.
The leading manufacturers of paper and corrugated board-based
packaging products are Packaging Products Corporation (a subsidiary of SMPP)
and Steniel Manufacturing Corporatioin with capacities of 60,000 MTPY and with
market shares of 25% each. Medium-scale firms include Johannesburg
Packaging Corp., Dowell Container and Packaging Corp. and Oriental
24
Corrugated Fireboard Box Company. Most of the plants of the major paper,
corrugated board and carton board manufacturers are located in NCR while a
few are situated in Cebu.
The major flexible firm manufacturing companies are Rightpack (SMPP),
AR Packaging Products, Flexo Manufacturing Corporation, Solmac Marketing
Inc., Solvic Industrial Corp., and Best Chemicals. These firms are all located in
NCR and the CALABARZON area. The rigid plastics subsector is characterized
by numerous firms which are mostly medium sized. Beverage bottles and
containers for cosmetics account for the largest share of production. The firms
are located mostly in Metro Manila.
Printing and publishing. The printing and publishing sub-sector is
composed of several industries. It encompasses the printing industry and its
allied industries, and the publishing industry, which includes newspaper
publishers, magazine publishers, and book publishers.
The Philippines lags behind among ASEAN countries in terms of annual
book production. Since the passage of R.A. No. 8047 or the Philippine Book
Publishing Industry Development Act, however, book production increased by 35
per cent from 3,770 titles in 1996 to 5,093 titles in 1997. It dipped slightly to
4,326 in 1998 due to the economic crisis.
1.3. Opportunities and threats 1.3.1. Professional services The worsening labor shortage in developed countries is an opportunity for
the professional services sector. The working age population of countries like
Japan, France, Spain and Italy, and even of some Southeast Asian countries like
Singapore and Malaysia, is growing more slowly than the whole population
because of a much larger share of people over 65 years old. The Philippines, in
contrast, has working age population growing at more than 4 per cent annually
compared to the yearly 2.3 per cent growth in total population. This labor
shortage in other countries has resulted in an increasing overseas demand for
25
Filipino workers, including skilled professionals and knowledge workers (See
Table 10). Figures released by the POEA reveal that among business service
professionals, those that had the most number of deployed abroad are medical,
dental, veterinary, and related workers with 7,445; surveyors, geodetic
engineers, draftsmen and engineering technicians, 6,328; architects, engineers
and related technicians, 2,860; and statisticians, mathematicians, systems
analysts and related technicians, 1,091.
According to noted economist Dr. Bernardo Villegas, there will continue to
be millions of Filipinos working abroad even if the Philippines succeeds in
reducing its poverty incidence to single-digit levels. Their motivation to go
overseas will no longer be extreme poverty, but the opportunity to utilize their
above-average education and skills, such as in the fields of medicine, nursing,
engineering, accounting, and management (Manila Bulletin, June 1999).
Table 10. Deployed professional, technical and related workers abroad (1997-1998) Professional, technical and related workers 1997 1998 Accountants 407 311 Aircraft and ships’ officers 70 60 Architects, engineers and related technicians 3,593 2,860 Authors, journalists and related workers 12 13 Composers and performing artists 31,674 35,885 Economists 1 1 Jurists 2 0 Life scientists and related technicians 288 565 Medical, dental, veterinary, and related workers 7,061 7,445 Physical scientists and related technicians 83 44 Professional technical and related workers 379 279 Religion workers 7 0 Sculptors, painters, photographers and related creative artists 455 470 Sportsmen, athletes, and related workers 56 98 Statisticians, mathematicians, systems analysts & related technicians 968 1,091 Surveyors, geodetic engineers, draftsmen and eng’g. technicians 6,162 6,328 Teachers 163 126 TOTAL 51,381 55,576
Source: Philippine Overseas Employment Agency, 1999 Another opportunity for professional services is the emergence of the
cross-border supply mode through the use of telecommunications. This offers
huge employment and export earning opportunities for information technology
26
and other computer specialists, product designers, architects, and engineers,
among others.
1.3.2. Computer and related services According to the DTI, opportunities that drive the software implementation
services sub-sector include the growth of electronic commerce, and the Y2K
problem. The International Data Corporation (IDC) estimated the number of
Internet users to reach 147 million and the value of Internet commerce to top
US$68 billion in 1999, opening up opportunities in the areas of multimedia, web
development, and software applications among others.
The Y2K problem, on the other hand, has opened a huge market for
Filipino software firms who now engage in software development, conversion,
maintenance, and Y2K work for many US and Japanese firms. The IDC placed
the global Y2K spending in 1999 at US$76 billion, with the US market expected
to spend US$27 billion. Also, the advances in telecommunication technologies
have facilitated the cross-border supply mode of delivering information
technology services, opening up huge employment and export earning
opportunities for information technology specialists without them having to leave
the country.
While opportunities abound, Philippine software players are confronted
with several structural weaknesses that affect their viability and international
competitiveness. These include under-capitalized companies, low budget for
research and development, limited domestic demand for their services, poor
international marketing network, and high cost of hardware, software, books, and
other accessories (Tullao, 1998).
For data entry and conversion companies, the traditional demand for data
conversion evolved from the need to convert voluminous paper files into digital
form. As more firms worldwide, particularly in the United States and Western
Europe, began to computerize their operations, there arose a need to convert
paper-based data into information stored in computer databases. These
companies found it impractical to build up their own clerical work force to serve
27
their data processing needs, and therefore resorted to subcontracting these jobs
to local and overseas computer services bureaus, including those in the
Philippines. As a result, the country emerged as an excellent provider of highly
skilled yet cost-effective computer programmers and data encoders.
With the emergence of multimedia personal computers and the growing
use of the Internet, several industries have been transformed into data entry
potentials, including electronic publishing, graphics imaging, medical and legal
transcription services, and computer aided drafting and design encoding and
conversion. It is in these so-called “higher end” services that experts believe the
local industry will capture a significant niche, even as it faces tough competition
from several countries. Hong Kong and Singapore, for instance, are adept in
geographical imaging systems (GIS) and computer-aided design-manufacturing-
engineering (CAD/CAM/CAE) conversions, while Ireland is highly competitive in
medical abstraction services. Philippine firms, however, are expected to exploit
the competitive advantage of their labor force: high computer skills, large
familiarity by significant percentages of its workers in the nuances of the medical,
engineering, architectural, and legal professions, proficiency in English, creativity,
and cultural familiarity with Western forms of entertainment.
A major threat that hounds the data entry and conversion industry is
“commoditization,” which is caused by countries that offer clients cheaper rates
given their lower labor costs. The Philippine Association of Data Entry
Companies (PADEC), however, believes that “the Philippine data entry and
conversion industry need not engage foreign rivals in cutthroat price wars. It
could instead offer potential clients greater value added for their premium
services and optimize the innate capacities of its workforce.”
Another problem area is that smaller companies have inadequate training
facilities, while technical personnel are beset by limited capacities and limited
international exposure. PADEC intends to address this by setting up of a
Training Institute to “enable the training and re-tooling of our manpower resource
to address the requirements of the industry.”
28
Despite these challenges, PADEC believes that Philippine firms can thrive
“with a highly focused marketing scheme that targets specific and customized
niches” and with “strict attention to quality control and innovative management
techniques, a constant passion for continuous improvement and innovation, and
the nurturing of the industry’s collective stock of intellectual capital.”
1.3.3. Research and development services The government’s attempts to increase the pool of science and technology
professionals through human resource development projects and programs are
an opportunity for the research and development sector, particularly in the
natural sciences.
Through the leadership of the DOST, there have been efforts to upgrade
the capabilities of the faculty, to improve facilities and equipment, to strengthen
elementary and secondary schools, and to maintain linkages with R&D
institutions locally and abroad.
In 1995, Republic Act 7687, known as the S and T Scholarship Act, was
fully implemented. Under the program, students who wanted to pursue degree
programs or training in S and T at any state college or university, or in private
schools recognized by the Commission on Higher Education (CHED) were given
scholarships. In 1995, a total of 2,587 applicants qualified for the scholarship.
In 1996, the government awarded a total of 3,693 scholarship grants,
inclusive of new grantees at the graduate level. DOST also supported 70
scholars in engineering and 36 scholars in various emerging technology fields
under its different councils. Assistance was also provided to 17 training
programs in priority areas such as research methods, phytochemistry, medical
mycology, cardiophysiology, and research management. These programs
benefited 1,867 trainees.
Worth mentioning is the adoption of the Scientific Career System (SCS),
an innovative approach in scientific human resources development within the
government civil service. The SCS is a system of recruitment, career
progression, recognition, and reward for scientists in the public service. It serves
29
as a means to develop a pool of highly effective and productive scientific work
force through attractive awards and incentives and a career path that allows
scientists to develop within their areas of expertise without having to change their
status.
Also noteworthy is the Balik Scientist Program of the DOST, which aims to
encourage the return of Filipino scientists and professionals working abroad.
The primary goals is to strengthen the scientific and technological work force of
the academe and of the public and private sectors in order to promote exchange
of information, and accelerate the flow of new technology into the country.
Related to this is the Brain Gain program organized by Filipino expatriates
in the United States and other parts of the world in support of the government’s
science and technology agenda for national development (STAND). Through
E.O. 270, Philippine diplomatic and consular offices are required to assist in
organizing expatriate Filipino scientists, technologists, engineers, and allied
professionals within their jurisdiction into overseas chapters of the Philippine
Science and Technology Advisory Councils.
The major concern of the research and development services industry,
however, is the very small domestic market for R&D activities. Mr. Roel Sancho,
Project Development Officer of the DOST, said that few private companies are
doing R&D “because it is a very expensive activity.” This situation limits the
opportunities for growth of this particular sector. Some big companies, according
to Sancho, have their own R&D department, and conduct research and
development in-house, while a few engage the services of R&D companies.
Other companies approach public research institutes, state colleges and
universities (SUCs) and some private universities to conduct research for them.
1.3.4. Real estate services Opportunities for the real estate services industry include the recovery of
the Philippines from the financial crisis. As proven by experience, a growth in the
economy also results in the growth for the industry. Specifically, the inflow of
investments in the country has boosted demand for office and industrial space,
30
residential units and tourist resorts. In fact, the surge in both foreign and local
investments in the country from 1992 to 1995 coincided with the property sector’s
boom period.
Other opportunities include the policy of the Bangko Sentral ng Pilipinas
(BSP) to stabilize interest rates, which will enhance real estate transaction
liquidity by encouraging the participation of more banks in real estate lending,
and by increasing real estate mortgages in the portfolio of the banking system.
Likewise, the listing of property developers in the stock exchange to generate
more funds has widened the access of the industry in the capital market.
A threat for the industry is the rapid utilization of available land. The surge
in demand for properties is exerting pressure on the limited supply on non-
agricultural land. In fact, there is a growing concern regarding the allocation of
land between agricultural and non-agricultural sectors. The government
allocates only 10 to 15 percent of agricultural resources to non-agricultural
activities, and reserves the rest for the Comprehensive Agrarian Reform
Program. The shifting supply gap triggered the climb in the prices of lots and
other properties. In the short-run, property developments will be disrupted by the
unavailability of land in good locations. In the long-run, conversion of land for
commercial use will be limited by consideration related to ecological balance. In
both cases, the demand for real estate services would be affected.
1.3.5. Rental / leasing services without operators In the rental / leasing services of transportation equipment, the availability
of supply of equipment is a major determinant of costs of the rental / leasing firm.
For the business of leasing land transportation equipment, the increased
productivity of car assemblers in the country, and the competition among them,
have resulted in the production of new vehicles with lower prices and better
features. This has contributed to the lower acquisition cost of vehicles.
In the renting / leasing of air and water transport, however, the absence of
local manufacturers of aircraft and sea vessels, compels firms to purchase their
capital equipment from large foreign suppliers that have a great deal of
31
bargaining power over their customers. On top of this, local firms also depend on
the foreign suppliers for the spare parts of these equipment, raising the cost of
maintenance. The high cost of acquisition and maintenance of these equipment
has made it difficult for local players to expand their operations because it takes
a long time to recover their investments.
Another real threat for companies engaged in the renting / leasing of air
and water transport is the limited size of the domestic market. This makes local
players extremely vulnerable to an economic crisis, which further reduces the
demand for their services. Industry players are, therefore, looking forward to the
recovery of the Philippine economy.
Given the status of companies in this industry, the prospects of getting
business abroad are dim primarily because their operating costs are much higher
than foreign players who have large fleets of aircraft or of ships. Moreover,
international standards of safety are very stringent and would further jack up the
cost of operations of companies that attempt to meet these requirements.
1.3.6. Other business services
In the professional consulting services industry, the opportunities
include the large market for consulting services, both in the Philippines and
abroad. This market can be divided into three sectors, namely the government
public sector, the country development-assisted sector, and the private sector.
The government of public sector is composed of departments and
agencies of national governments that need consulting assistance in the
discharge of their functions. Most of the consulting requirements for this
segment are in engineering, energy, and agriculture.
The country development-assisted sector, on the other hand, is composed
of foreign funding institutions, including governments of industrialized countries
that provide official development assistance (ODA) in the form of soft
loans/grants to developing countries. The consulting services required by this
sector cover all fields of consulting.
32
Finally, the private sector is composed of private consultancy firms in
either the industrialized or developing countries that may need partners or
subcontractors for consulting projects in their country or in third countries.
Most consultancy projects abroad are executed through partnerships or
associations among firms or consultants. For example, the formation of a joint
venture for projects in developing countries require mandatory joint ventures with
local firms before a foreign consultancy firm can work on consultancy projects in
the local market. This tie-up between a local firm and a foreign firms will enable
the former to gain access to new niche markets, skills and technology.
Joint collaborative efforts in consulting may be done through any of the
following modes: (1) permanent joint venture firm to be based in the Philippines,
(2) ad-hoc or project specific collaboration, (3) Subcontract of consulting work to
a Philippine firm by an international consulting firm, and (4) seconding of
Philippine consulting professional / staff to an ad-hoc team abroad.
Another major opportunity in the consultancy services market is the
formation of a consortium where local companies can band together as a single
firm vis-à-vis a foreign client. The consortium approach is resorted to because
the risk of entering a foreign market is reduced when firms execute projects
together instead of individually. This also addresses the fact that a single firm
might not possess all the required technical and managerial resources to execute
the entire project. More importantly, the consortium also enhances its bargaining
power when negotiating with foreign clients.
In the technical testing and analysis industry, the opportunities include
the following: the increasing number of tests required by various regulatory
agencies of government due to the introduction of new products in the market,
and the stricter implementation of government regulations concerning the quality
and safety of consumer and industrial goods. While government agencies can
conduct these tests themselves, their heavy workload usually causes delays or
does not satisfy the time requirements of companies, which usually want
immediate results so that their production schedules or quality control activities
are not unnecessarily hampered. Another opportunity is the move of some large
33
companies to subcontract testing services to relieve them of the need to handle
personnel and to maintain expensive equipment.
On the other hand, there are several threats that deserve close attention,
such as the high cost of acquisition of high-tech equipment needed for testing,
the amortization for which could put a strain on the technical testing company’s
operating capital. Some companies, particularly newly-established ones,
experience difficulty in getting credit from banks as well as encounters delayed
payment of clients, both of which affect their operational viability. This is
aggravated by the limited supply of chemists / technical personnel, and the
inability of smaller companies to pay attractive salaries to skilled technicians, who
find employment opportunities elsewhere.
Placement and supply services of personnel. Opportunities for the sub-
sector include the high unemployment level in the Philippines, which ensures the
demand for placement services. The large labor shortage in developed countries
and the opening of new foreign markets are also opportunities that give rise to
demand for professionals and technical workers from the Philippines. Finally, the
high overseas demand for Filipino workers due to the quality of their work serves
as another opportunity for placement agencies.
The major threats, on the other hand, include the proliferation of fly-by-
night agencies that undermine the viability of legitimate firms through their illegal
practices. This is aggravated by the corruption of certain government employees
in agencies such as the Philippine Overseas Employment Agency (POEA), which
has emboldened illegal players. Also considered a threat are provisions in the
Migrant Workers Act, which makes recruitment agencies and their foreign
principals jointly and solidarily liable for whatever happens to deployed Filipino
workers. This has resulted in a lot of legal complaints against legitimate
recruitment agencies. Other threats include the cheap labor from other
developing countries like China and Thailand, and the cutthroat competition due
to the very large number of players in the industry.
The packaging industry, according to an industry profile prepared by the
Bureau of Export Trade and Promotion, is faced by several problems. A
34
particular concern for the industry is outmoded equipment and the high cost of
importing machinery. Converting, packing, filling and allied equipment are
imported by packaging product manufacturers and end users. However, due to
the high cost of money, packaging firms and end users are unable to upgrade
their equipment as often as competitor countries. It has been observed that
investors generally prefer to buy second-hand machinery from Taiwan since
state-of-the-art, electronically controlled equipment from Germany and the United
States are expensive and can be obsolete in a few years with the rapid changes
in technology in electronics. This has resulted in less efficient operations and
higher production costs.
Another threat is the high cost of raw materials needed to manufacture
packaging products. Since most of these raw materials are imported,
manufacturers have to contend with problems such as long delivery time and
accompanying delays, and large outlays for opening letters of credit.
Another problem that threatens the competitiveness of local players is the
lack of quality standards and inconsistent quality. The reason for the poor quality
of packaging by local manufacturers is said to be market niching and the
pressure to engage in price competition. The nature of the packaging demanded
and produced is influenced by the character of demand for the final product. For
example, producers use tin cans of lower quality for sardines than those used for
tuna in order to keep the prices down for the product consumed by low-income
groups.
Compounding all these problems is the lack of information, testing
facilities, and access to advanced technology. Specifically, there is lack of
information on markets for particular products, developments and trends in
packaging technology, sources of supply of machinery or materials and general
means to acquire technical know-how.
There are, nevertheless, several prospects facing the industry. For one,
local firms have started to adapt to trends which are seen to dominate the world
packaging market such as aseptic packaging, PET bottles, retort pouches, bar
coding and the move towards ISO 9000 accreditation. This could pave the way
35
for increased access in the global market. Also, many local companies have
taken steps towards modernization and expansion, and have gone into joint
ventures with foreign companies. SMPP, for example, has joint ventures in the
Philippines, China, Vietnam, and Indonesia.
Another opportunity is the large demand for packaging products outside of
the country as can be gleaned by the industry’s export receipts from 1994 to
1998 (see Table 11). Philippine export earnings of packaging products amounted
to US$47.14 million in 1998. The sector grew at an average rate of 18% during
the past five years.
Table 11. Philippine Exports of Packaging Products by Major Subgroup FOB Value in Million US Dollars, 1994 to 1998
1994 1995 1996 1997 1998 % Average
Share Growth1998 Rate
(1994-1998)TOTAL 24.32 34.21 40.78 46.53 47.14 100.00 18.00Glass-based 4.04 6.96 3.33 3.47 2.84 6.02 -8.35Metal-based 1.30 1.81 7.57 5.92 5.09 10.80 40.67Paper-based 1.26 1.56 4.36 3.06 2.32 4.92 16.49Plastic-based 17.72 23.88 25.52 34.08 36.89 78.256 20.12
Another opportunity is the increasing competition in the domestic market
with regard to quality and technology. This will promote the development of the
packaging industry.
A positive development for the industry is the recent establishment of the
Packaging Center of the Philippines (PCP), which has been a long time
recommendation of private and government sectors in order to address the
problems and issues affecting the packaging sector. The goals of the PCP are:
to make Philippine products globally competitive through better packaging; to
upgrade packaging standard of the country; and to advocate the critical role of
36
packaging on food security, on environment and in national economic growth in
general.
The PCP is one of the flagship projects of the Department of Science and
Technology (DOST). An Advisory Committee was formed to provide direction
and recommendations on the overall program strategy of PCP. This Committee
is composed of representatives from DOST (Chairman), Industrial Technology
Development Institute (ITDI), Packaging Institute of the Philippines (PIP),
PhilExport, NEDA, DTI, and CHED. DTI through the Trade Group will facilitate
the direction in terms of development, promotion, and expansion of Philippine
exports. Specific agencies are BETP and CITEM, PDDCP (technical) and PTTC
(training).
Printing and publishing. The printing industry, according to the Printing
Industries Association of the Philippines (PIAP) is faced by several threats,
including the inadequacy of technical skills in printing, “an inadequacy that needs
immediate attention.” The local printing industry has also been behind in
technological improvement as compared to its counterparts in other countries in
Asia, largely because of the huge costs involved in acquiring new equipment.
To address these concerns, the PIAP cooperated with several prominent
figures in the printing industry to form the Philippine Printing Technical
Foundation (PPTF) which assumed the role as PIAP’s technical arm. While
PIAP looks after the well-being of the industry from the trade point of view, PPTF
takes care of the development of technical skills in printing. PIAP has also
institutionalized the “Printing Update,” a series of seminars held free of charge for
interested members. The series is held regularly with the objective of helping
improve the technical level of craftsmanship of Filipino printers by educating
members on trade trends and technology.
The book publishing industry, on the other hand, is faced with the problem
of lack of capitalization, one that is aggravated by the concentration of book
publishing activities in Metro Manila. Moreover, the industry has to contend with
the proliferation of photocopying machines, which promotes the indiscriminate
reproduction of textbooks and other supplementary instructional materials. Dr.
37
Angel Alcala, Chairman of the National Book Development Board, said that “such
act should be controlled if we have to protect the writers and the publishers of
such textbooks and supplementary reading materials” (Manila Bulletin, June
1999).
The promulgation of Republic Act 8047 or the Philippine Book Publishing
Industry Development Act, and the adoption of a National Book Policy, are aimed
at developing the country’s book publishing industry to raise it to a level
comparable at least to those of other ASEAN countries.
The book policy, according to Alcala, seeks the decentralization of the
book publishing industry through the dispersal of book publishing activities to the
provinces and regions. It also encourages joint ventures between local and
international firms in an attempt to raise the standards of textbooks in the
country, to widen the access of local players to foreign markets, and to facilitate
the adoption of new technology. With the inclusion of the book publishing
industry in the Investment Priorities Plan (IPP), foreign investors are expected to
engage in book publishing in the country.
The book policy also seeks to achieve a balance of trade in the book
industry with an expanded market abroad. To address the low export volume of
the industry, there is a need to strengthen the industry’s international linkages.
Alcala said that “arrangements will be make to facilitate the entry of Philippine-
produced books in countries where we import a lot of goods.” To encourage more players to enter the industry, the book policy calls for
a review of the government’s tax policies on the book publishing business to
include possible tax holidays and other incentives to local book publishers. The
proposal is to grant a six-year tax holiday from the commencement of
commercial operations for upstart firms, and a four-year tax holiday for
established firms. Currently, the government provides tax and duty incentives for
the importation of raw materials as well devices and equipment used in book
publishing. This is meant to encourage the acquisition of state-of-the-art
technology needed to make the book publishing industry globally competitive.
38
In terms of intellectual property rights, the Philippines is a signatory to the
WTO agreement of the said topic. This implies that the Philippines will be
protected against both local and international infringements (Cruz, 1999).
1.4. Benefits and costs of liberalization to the business services sector
The liberalization of trade in services brings with it both benefits and costs
to the country and to the business services sector itself. Among these benefits
are the following: (1) transfer of technology, (2) improved delivery of, and greater
access to, efficient services, (3) expansion of service exports, (4) more job
opportunities abroad for Filipino professionals, and (5) higher level of income for
Filipino professionals (Tullao, 1998; Avila, 1998). The process of liberalizing the trade of services, however, brings with it
some social costs, including: (1) the possible displacement of local professionals,
(2) reverse transfer of technology, (3) the possible development of a dual internal
labor market, and (4) the possible decrease in demand for services of local
companies.
Below is a summary table of benefits and costs in the business services
sector as perceived by several key respondents from the survey.
Table 12. Benefits and costs of liberalization to business services Benefits PS CRS R&D RES R/LS OBS Transfer of technology ✓ ✓ ✓ ✓ ✓ Improved delivery of services ✓ ✓ ✓ ✓ ✓ Expansion of service exports ✓ ✓ More job opportunities for Filipinos abroad
✓ ✓
Higher level of income for professionals ✓ ✓ Costs PS CRS R&D RES R/LS OBS Possible displacement of professionals ✓ Reverse transfer of technology ✓ ✓ ✓ Possible development of dual internal labor market
✓ ✓
Decrease in demand for services of local companies
✓ ✓ ✓ ✓
Legend: PS – Professional services; CRS – Computer and related services; R&D – Research and development services; RES – Real estate services; R/LS – Rental/leasing services without operators; OBS – Other business services.
39
Professional services. The liberalization of trade in professional services
can contribute to the transfer of modern technology to the country through the
exchange of professionals and exposure to international employment (Tullao,
1998). Dr. Nenita Lee-Tan, President of the Philippine Medical Association,
foresees an “interchange and sharing of knowledge and expertise, with the
ultimate motive of healing.” Dr. Teresita Nadurata, former Vice President for
Operations of the Philippine Institute of Certified Public Accountants (PICPA),
sees greater professional development and more international exposure among
local CPAs with the liberalization of accounting, auditing, bookkeeping and
taxation services. Mr. Romulfo Villamayor, Audit Partner of SGV & Co., one of
the biggest auditing firms in the country, agreed, saying that this would pave the
way for the expansion of operations to other countries.
Liberalization could result into more job opportunities and better
employment packages for Filipino professionals, including CPAs, architects,
interior designers, and engineers. The substantial increases in contracts for
architects, engineers, surveyors, draftsmen and engineering technicians in recent
years, as reflected in POEA figures, would, therefore, likely continue if further
liberalization pushes through.
Professional associations representing doctors, dentists, and nurses see
numerous opportunities for Filipino professionals with the opening up of foreign
markets given the growing demand for medical-related services. Many of those
belonging to these professions, after all, have already established a reputable
track record abroad.
Liberalization is also expected to result in the improvement in the delivery
of services to the consumers and to the other sectors of the economy. Due to
foreign competition, the process of removing the barriers to trade in professional
services can “elevate professional standards in terms of efficiency,” and enhance
professional competence by making them “more aware of their ethical standards,
proper procedures and rules in providing professional services” (Tullao, 1998).
Atty. Rogelio Vinluan, President of the Philippine Bar Association, believed that
liberalization will “improve the quality of legal services in the country” even if he
40
does not see the legal profession being opened up to foreigners in the near
future.
There are fears, though, that many professionals and professional firms
might suffer a decrease in demand for their services if the country pursues
further liberalization. Dr. Rhodora Carlos, president of the Philippine Veterinary
Medical Association (PVMA) expressed the apprehension of local veterinarians,
who feel that Filipino clients, especially the bigger companies, would favor
foreigners over them. Architect Diogenes Barredo, President of the United
Architects of the Philippines, while acknowledging the talent of local architects,
fears that “majority of projects might be given to the ‘supposed’ superior
practitioners outside.”
In the accountancy profession, Pobre (1997) noted that large multinational
accounting firms are expanding their global market power through “a continuous
series of mergers and mega-mergers that have left the remaining firms larger
and more powerful than before.” These large firms can easily displace smaller
firms because they have the economies of scale, the huge resources for
research, and the specialist staff necessary in coping with the increasing
complexities of the field. By granting national treatment and market access to
foreign firms in the field of accountancy, Pobre speculated that the country’s
accounting firms, which now represent the principal firms as correspondents,
might be merged with, or absorbed by, their foreign principals. Should this
happen, “they might lose their identity and autonomy” (Tullao, 1998).
Computer and related services. In the computer and related services
sector, the main benefits of liberalization are the expansion of service exports,
better compensation for Filipinos abroad, and the transfer of technology acquired
by Filipino IT professionals abroad. The large number of IT professionals
produced by the numerous computer colleges and training centers all over the
country has also helped ensure a continuous supply of professionals needed to
meet both local and overseas demand. The demand for IT professionals abroad,
however, have raised certain concerns regarding brain drain.
41
According to the DTI, the information technology industry, which is
identified as one of the country’s “export winners”, requires the following to
sustain its growth: (1) an increase in software investments and strong export
financing scheme, including low interest loans and financial guarantees for
international bidding, (2) greater investment in research and development efforts,
(3) more aggressive overseas marketing, including participation in export
development missions and fairs, and the sponsorship of high level missions
meant to establish strategic business alliances with foreign partners, (4)
strengthening of educational institutions to ensure that the need for more IT
professionals with the requisite skills needed by industry is met, and (5) the
development of the local IT market.
Research and development services. Liberalization would benefit the
industry in terms of the possible influx of foreign scientists and professionals that
have the expertise the country currently lacks, therefore facilitating the transfer of
technology.
Rental / leasing services without operators. The entry of foreign
players is not a major concern of companies that charter aircraft. The market for
aircraft chartering services in the country, after all, is too small for foreign players
to take notice. The primary challenge among local players is surviving the effects
of the Asian financial crisis, which dealt the industry a major blow.
If foreign companies do come in, local players will be “clobbered” by
foreign companies if they compete head on, because local players “don’t have
the technology, aircraft, and engines.” The entry of foreign players in the
country, however, could open up opportunities for local companies who enter into
cooperative arrangements with these foreign companies.
For example, local aircraft charter companies can source surplus aircraft
from foreign companies, allowing local players to bring down their costs. Local
and foreign companies can also enter into joint ventures that could result in the
transfer of technology. Moreover, foreign companies might set up training
centers, which are currently costly to maintain.
42
The increase in the number of foreign players in the industry could also
lead to the setting up of service centers and other related businesses in the
country. The biggest beneficiaries would, of course, be local pilots and
mechanics who would be hired and given attractive compensation packages by
these companies.
Other business services. For the professional consulting services
subsector, liberalization will further increase the demand for Filipino professionals
abroad. Consequently, the placement and supply services of personnel sub-
sector, will benefit from liberalization because of the expected increase in the
demand for the services of placement agencies. Liberalization will also open up
new overseas markets, which will again increase business prospects for
placement agencies and Filipino professionals. With respect to opinion polling
services, liberalization will further enhance the sharing of information among the
various industry players which will facilitate the development of the field.
43
2. LINKAGES OF BUSINESS SERVICES This section seeks to identify and describe the scope of forward (refers to
the customers) and backward (refers to the suppliers) linkages of the different
business services sub-sectors. Also, the relationship of business service
establishments with various stakeholders, namely suppliers of human resources
(schools), government agencies, financial institutions, and other industry players
will be examined closely.
2.1. Backward and forward linkages Some business service sub-sectors such as legal services, advertising
services, accounting, auditing, and bookkeeping services, taxation services, and
management consulting services have close links with practically all industries
because of the nature of the service they provide. SGV & Co., for example, one
of the biggest auditing firms in the country, has clients from the banking,
manufacturing, real estate, insurance, transportation, computer, and
telecommunication industries.
2.1.1. Relationships with customers. Practically all of the companies
interviewed reported having very close relationships with their customers in terms
of getting feedback regarding service quality. This was true across industries.
Several respondents emphasized the importance of getting feedback from clients
in their quest to bag repeat business transactions.
Mr. Arlen De Guzman of Arlen P. De Guzman Design Consultants, a
company that provides interior design services, claimed to have a lot of repeat
clients, and said that referrals come in only if their projects satisfied customers.
Mr. Ricardo P. Salvador of Asia Business Consultants, Inc. stated that “we
ensure that we have an effective mechanism of getting feedback during each
engagement of the project, and we go out of our way to get feedback to get
repeat business.”
For some industries, it is imperative to fully understand customer
requirements to succeed in business. For A. Soriano Aviation, Inc., an aircraft
44
chartering firm, customers like Philippine Geothermal Inc. (PGI) demand high
levels of safety, and require aircraft chartering firms to pass safety audits. Mr.
Allan Miller, its Finance Officer commented that:
Our industry is very competitive. Not many companies survive. To remain viable, we must know what our customers want. We listen to their feedback. If they say we have a deficiency in our system, we make adjustments. Opportunities Unlimited, Inc. (OUI), a local placement agency, has
‘operation coordinators’ who get feedback from clients about the performance of
the contractual employees OUI sends to them. According to Mr. Fiorello S.
Adriano, President and General Manager of OUI, “we have our people there on a
daily basis to get the feedback of clients.”
Engr. Angel Santiago, President of Engineering and Development
Corporation of the Philippines (EDCOP), an engineering consulting firm, even
goes to the extent of talking directly to clients, particularly since the company
focuses on a few major clients such as the Fort Bonifacio Development
Corporation, the National Power Corporation, the Philippine Estates Authority,
the Department of Public Works and Highways, and the Department of
Transportation and Communication. Engr. Efren A. Sanchez, Vice President for
Administration of TCGI Engineers, considers getting feedback as “part of our
business development efforts.”
There are occasions when the customers themselves play an active role
in technology transfer and training of company personnel. In the case of
EDCOP, it is trained in the use of technology required by the clients (e.g.
computer software, planning tool), many of whom are foreigners or have foreign
partners. In this case, it is the customer, which facilitates the development of
consulting firm’s human resources.
Certain services are affected by the vitality of industries closely linked with
them. The veterinary service sub-sector, for example, is affected by the
developments in the livestock industry, which is a major customer. The entry of
meat and meat products from abroad due to the liberalization of trade, coupled
45
with the high cost of animal feed, has made the business of raising chicken, beef,
and swine less attractive to local players. This, in turn, reduces the demand for
the services of veterinarians, especially those who specialize in the care of
livestock.
2.1.2. Relationship with suppliers. In many business services, such as
the management consulting, printing and publishing services, photography
services, advertising, and computer and related services, it is critical to forge
strong relationships with suppliers because of the technology provided by these
suppliers.
Engr. Efren A. Sanchez of TCGI Engineers said that there is no choice but
to keep a close relationship with their contractors because of the need “to know
the latest in terms of equipment to be recommended to clients.” Mr. Ricardo P.
Salvador of Asia Business Consultants, Inc., on the other hand, cited the
company’s dependence on the IT industry in delivering service to their clients. If
a project calls for reengineering or for a delayering of the organization, they have
to utilize information technology to facilitate the process.
In the printing and publishing industry, the success of firms depends
largely on having a pool of dependable suppliers. A printing press, for example,
should have a steady supply of paper, which could be provided by paper
manufacturers or paper importers. For pre-printing and post-printing activities,
printing presses depend on other firms that offer related services such as color
separation, die cutting, binding, lamination, and stamping, even if many printing
presses perform these activities themselves. For the maintenance and repair of
its equipment, a printing press usually depends on the supplier of the printing
machine or of computers to ensure the proper functioning of the said machines.
Advertising agencies also require the services of many suppliers. They
contract the services of market research companies to help them formulate
effective advertising campaigns for clients; design studios and production houses
for the professional execution of their creative ideas; and the print and broadcast
industries for the exposure of their advertisements.
46
Commercial photography establishments, on the other hand, depend on
suppliers such as Kodak, Agfa, and Fuji for their photo processing machines and
photo supplies. Mr. Heracleo Caballero, Part Owner and Marketing Head of
Tony’s Art Studio, revealed that his supplier makes sure that his company gets
hold of the latest technology and equipment to provide the best service to its
customers.
Companies belonging to the computer and related services sector have a
symbiotic relationship with producers of computer hardware, which provide them
with the computers they need for their business. These companies also have
very strong linkages with the telecommunication industry, which enables them to
deliver their services through a cross-border supply mode. The linkage with suppliers is also critical in the area of training of
personnel. In the medical, dental, veterinary, and other health services, drug
manufacturing companies usually sponsor the training and continuing education
of professionals, particularly concerning the latest trends in the industry. In the
rental / leasing of aircraft sub-sector, the aircraft chartering firm depends on its
aircraft supplier for the training of its pilots and mechanics, often sending its
personnel abroad. In the case of A. Soriano Aviation, Inc., the aircraft supplier
sent to the Philippines an instructor from Germany to conduct training concerning
the aircraft the company bought. In the printing business, the printing press
depends on the supplier of printing equipment such as offset machines to provide
specialized training to the technicians to ensure the proper operation and
maintenance of the expensive machine.
Table 13 gives a summary of the backward and forward linkages of the
various business services sectors and sub-sectors.
47
Table 13. Backward and forward linkages of business services Subsector Backward linkage Forward linkage Legal services • Investigation and security
industry • All industries
Accounting, auditing, and bookkeeping services; taxation services
• Computer and related services
• All industries
Architectural services; urban planning and landscape architectural services
• Manufacturers of fabric, veneer, glass , leather
• Toilet manufacturers • Suppliers of finishes for
floors, walls, ceilings • Suppliers of accessories
• Construction industry
Engineering services; integrated engineering services
• Suppliers of construction supplies
• Manufacturers of building equipment
• Construction industry
Medical and dental services • Drug manufacturers • Suppliers of medical and
dental equipment and supplies
• Individual clients • Corporate clients
Veterinary services • Drug manufacturers • Suppliers of veterinary
equipment and supplies
• Livestock industry
Services provided by midwives, nurses, physiotherapists and paramedical personnel
• Drug manufacturers • Suppliers of medical
supplies and equipment
• Individual clients • Corporate clients
Computer and computer related services
• Manufacturers of computer hardware
• Telecommunication industry
• Manufacturing industry • Transportation and
communication industry • Banking and finance
industry • Wholesale and retail
industry Real estate services • Construction companies • Individual clients
• Corporate clients Rental / leasing services without operators relating to ships
• Ship owners • Spare parts suppliers • Petroleum industry
• Cargo forwarders • Wholesale industry
Rental / leasing services without operators relating to aircraft
• Aircraft manufacturers • Spare parts suppliers • Petroleum industry
• Tourism industry • Resort operators
Rental / leasing services without operators relating to other transport equipment
• Manufacturers of transport equipment
• Tourism industry • Wholesale industry
Rental / leasing services without operators relating to other machinery and equipment
• Manufacturers of various machinery and equipment
• Manufacturing industry • Construction industry • Agriculture industry
48
Table 13 (continued). Backward & forward linkages of business services Subsector Backward linkage Forward linkage Advertising services • Market research cos.
• Design studios; production houses • Print industry • Broadcasting industry
• All industries
Market research and public opinion polling services
• Data collection and processing agencies
• Manufacturers of consumer products
• Advertising industry • Print industry • Broadcasting industry • Government service • Educational institutions
Management consulting services; Services related to management consulting
• Engineering services • Accounting, auditing, and
bookkeeping industry
• All industries
Technical testing and analysis service
• Laboratory equipment suppliers • Chemical industry
• Pharmaceutical industry
• Food producers • Petroleum industry • Agri.-based industry • Fertilizer industry • Pesticide industry
Placement and supply services of personnel
• Investigation and security industry • All industries
Investigation and security
• Suppliers of guns and other security equipment
• All industries
Maintenance and repair of equipment (not including maritime vessels, aircraft or other transport equipment)
• Suppliers of repair equipment and materials
• Manufacturing industry
Building-cleaning services
• Suppliers of cleaning equipment and supplies
• Building owners
Photographic services • Manufacturers of cameras and photographic equipment and supplies
• Advertising industry • Publishing industry
Packaging services • Paper industry • Plastic industry • Metal industry • Glass industry • Printing industry
• Manufacturing companies
Printing and publishing • Paper manufacturers & importers • Lamination, color separation,
stamping • Printing equipment and computer
hardware • Design studios • Writers, editors, artists • Transportation industry
• Wholesalers and retailers of books and other printed matter
• Education industry • Ad agencies • Packaging industry • Companies that have
printing requirements Convention services • Transportation and communication
industries • Facilities and convention centers
• Tourism industry
49
2.2. Relationship with other stakeholders
2.2.1. Relationship with suppliers of human resources
Generally, companies belonging to the business services sector have
limited participation in the development of curricula of schools, mostly indirectly
through their professional associations. Some companies indirectly influence the
curricula through the teaching stints of some of the company’s partners,
principals or senior managers, feedback of their alumni, and through their
participation in on-the-job training programs of colleges and universities. This
limited participation in school curriculum development can also be attributed to
the absence or lack of formal academe–industry linkage or tie-up.
A few companies formally send their employees to school to avail of
continuing education programs, preferring instead to conduct their own training
activities or to send employees to specialized training programs of shorter
duration. Some companies allow their employees to pursue graduate studies,
and even provide scholarships for them, but “limited to areas the company needs
expertise.”
2.2.2. Relationship with government organizations The relationship of the business services companies with government is
largely limited to paying taxes, obtaining licenses, and following regulations
enforced by government agencies, although, there are many programs and
services available to all industries as claimed by the government. Most of the
respondents claimed to have received minimal support from government,
particularly in the areas of financial, technical, human resources development,
and legislative support. Some even complained of certain government policies
and practices, which have been detrimental to their businesses.
A respondent in the professional consulting services industry said that his
company has “avoided dealing with government as customers or in terms of
getting support” because one of the company’s principals was “very sqeamish”
about dealings with government, especially with the prevailing culture of
50
corruption. Another respondent in the same industry, complained that “the
government has been very unfair to the local consulting industry”, claiming that
preference is being given to foreign consultants, which subcontracts projects to
local firms anyway.
Companies engaged in placement services, on the other hand, complain
that POEA is competing against them by engaging in deployment activities even
if it is also tasked to regulate the industry, a seeming conflict of interest. The key
respondents also lamented that the POEA seems helpless in going after fly-by-
night employment agencies, which compete unfairly against legitimate agencies.
The PRC’s role, for example, is to ensure the quality of professionals by
administering board examination, renewing licenses, and spearheading the
continuing professional education program of the government.
Some companies also feel that certain government laws and regulations
are ‘prejudicial’ to their interests. The President of the Philippine Association of
Service Exporters, Inc. (PASEI), for example, said that the provision in the
Migrant Workers Act, which makes recruitment agencies “jointly and solidarily”
liable for abuses committed by foreign employers, is unfair to recruitment
agencies, who have no direct control over the actions of individual employers
abroad.
2.2.3. Relationship with financial institutions Most of the respondents said that banks are willing to provide funding for
their businesses. This willingness is reflected in the array of lending programs
which the borrower can choose from depending on one’s needs and capability to
repay. Companies that have banks for clients find the banks willing to extend
credit, although they have to go through the usual process of negotiating for
payment terms favorable to their companies.
Most of the respondents revealed that their companies do not avail of
funding from banks for their human resource development activities, preferring to
finance these activities themselves. For the acquisition of technology, however,
companies that invest in capital equipment such as transport equipment, printing
51
equipment, and photographic equipment, resort to loans. Mr. Heracleo Caballero
of Tony’s Art Studio, for example, related that banks have always approved their
loan applications, saying that if banks see that you have good accounts, they are
willing to loan.” A. Soriano Aviation, Inc., on the other hand, applies for a loan
whenever it acquires a new aircraft.
Some companies depend on internal funds or on other private sources for
their capital investment requirements. Mr. Eduardo S. Habaradas of Jefcor, Inc.
said that the company has not even attempted to avail of a bank loan because,
according to him, “newly-established companies are not given favorable attention
by financial institutions.”
2.2.4. Relationship with other industry players Most of the business services sectors have industry associations. Some
fledgling industries, however, such as those engaged in technical testing are not
yet formally organized, or have just recently been organized as in the case of
aviation organizations.
In the professional services sector, several recognized industry
associations have assisted the Professional Regulation Commission (PRC) in the
implementation of the continuing professional education program, and have
served as members of the different professional boards that administer the
licensure examinations. Through these activities, the industry associations have
contributed significantly to the upgrading of the different professions in the
country.
Moreover, many industry associations have successfully lobbied for the
passage of certain laws that benefit their respective industries, and have strongly
opposed certain measures detrimental to their membership. In the publishing
industry, representatives of several groups such as the Publishers Association of
the Philippines, Inc. (PAPI) and the Philippine Educational Publishers Association
(PEPA) to the National Book Development Board (NBDB) were instrumental in
the formulation of the National Book Policy, which was formally adopted last June
1999. This aims to develop the country’s book publishing industry, and to raise it
52
to international standards. The Philippine Industries Association of the
Philippines (PIAP), on the other hand, has succeeded over the years in getting
the government to lift the ban on the importation of printing machinery, to reduce
tariff duty on printing machinery, and to reduce the taxes on paper, spare parts,
and printing supplies.
Recently, member organizations of the Federation of Aviation
Organizations (FEDAVOR) reacted strongly against the move of the Ninoy
Aquino International Airport (NAIA) management to jack up rental rates for
hangars by as much as 400 per cent, and succeeded in reducing the rates. The
Council of Engineering Consultants of the Philippines (CECOPHIL) was also
instrumental in getting the Supreme Court decide in its favor the industry’s
dispute with the Department of Public Works and Highways (DPWH) regarding
the interpretation of the civil engineering law.
Table 14 lists the names of the major industry associations in the business
services sector.
Table 14. Business services industry associations Subsector Name of industry association Legal services ! Philippine Bar Association
! Integrated Bar of the Philippines Accounting, auditing, and bookkeeping services; Taxation services
! Philippine Institute of Certified Public Accountants (PICPA)
Architectural services; Urban planning and landscape architectural services
! United Architects of the Philippines (UAP) ! Philippine Institute of Architects ! Philippine Institute of Interior Designers
Engineering services ! Geodetic Engineers of the Philippines (GEP) ! Institute of Electronics and Communications Engineers of
the Philippines (IECEP) ! Philippine Association of Naval Architects and Marine
Engineers (PANAME) ! Philippine Institute of Civil Engineers (PICE) ! Philippine Metallurgical Engineers of the Philippines
(SMEP) ! Philippine Society of Mechanical Engineers (PSME) ! Philippine Society of Mining Engineers (PSEM) ! Philippine Society of Sanitary Engineers (PSSE)
Integrated engineering services
! Council of Engineering Consultants of the Philippines (CECOPHIL)
Medical and dental services ! Philippine Medical Association (PMA) ! Philippine Dental Association (PDA)
Veterinary services ! Philippine Veterinary Medical Association (PVMA)
53
Table 14 (continued). Business services industry associations Subsector Name of industry association Services provided by midwives, nurses, physiotherapists and paramedical personnel
! Philippine Nurses Association (PNA) ! Integrated Midwives Association of the Philippines (IMAP) ! Philippine Physical Therapy Association (PPTA) ! Occupational Therapy Association of the Philippines
(OTAP) ! Philippine Association of Medical Technologists (PAMET) ! Philippine Association of Radiologic Technologists (PART) ! Philippine Association of Optometrists, Inc. ! Philippine Pharmaceutical Association of the Philippines
(PPhA) ! (Samahan ng mga Optometrist sa Pilipinas) ! Nutritionist-Dietitians’ Association of the Philippines (NDAP)
Computer and related services ! Philippine Software Association, Inc. (PSA) ! Information Technology Association of the Philippines
(ITAP) ! Philippine Association of Data Entry Companies (PADEC)
Real estate services ! Chamber of Real Estate and Builders Association (CREBA) Rental / leasing services without operators relating to ships
! Philippine Ship Agencies Association (PSAA)
Rental / leasing services without operators relating to aircraft
! Federation of Aviation Organizations in the Philippines (FEDAVOR)
Rental / leasing services without operators relating to other transport equipment
! Philippine Association of Tourist Transport Operators (PATTO)
Advertising services ! Philippine Association of National Advertisers (PANA) Market research and public opinion polling services
! Philippine Marketing Association (PMA)
Management consulting services; Services related to management consulting
! Council of Engineering Consultants of the Philippines (CECOPHIL)
! Institute of Management Consultants of the Philippines (IMPHIL)
! Confederation of Filipino Consulting Organizations (COFILCO)
Placement and supply services of personnel
! Philippine Association of Service Exporters, Inc. (PASEI) ! Organization of Placement Agencies of the Philippines
(OPAP) ! Association of Recruitment Companies (ARCO)
Investigation and security ! Philippine Association of Detectives and Protective Agencies Operators (PADPAO)
Photographic services ! Packaging services ! Packaging Institute of the Philippines Printing and publishing ! Publishers Association of the Philippines, Inc. (PAPI)
! Philippine Educational Publishers Association (PEPA) Convention services ! Society of Association Executives of the Philippines
! Association of Professional Congress and Exhibition Organizers and Suppliers
54
3. REGULATORY FRAMEWORK AND SYSTEM OF INCENTIVES GOVERNING BUSINESS SERVICES
Under the World Trade Organization (WTO), one of the main thrusts of
liberalization of trade in services is to expand global trade and make it an avenue
for economic growth in all trading countries. The GATS has laid down the
general legal framework that will govern the promotion of global trade in services.
The challenge, however, for its members, including the Philippines, is how to
integrate these policies to the local setting. Furthermore, inconsistencies
between local laws, regulations and procedures and the major GATS obligations
on non-discrimination, domestic regulation, recognition, market access and
national treatment should also be determined and resolved. Transparency, which
is also another prominent general obligation in the GATS, entails the publication
and dissemination of all relevant laws and regulations regarding the conduct of
trade in services in member countries. The purpose of this chapter is to review
such laws and regulations, including the incentives that govern business services
in the country.
Services have been excluded in previous WTO negotiations primarily
because of their perceived non-tradability. Many services were not traded
internationally because of the inherent difficulties in transporting and storing
services, and because of the physical proximity between consumers and
suppliers required in any service transaction. In addition, government regulation
has contributed in preventing the tradability of services. The difficulty of
separating the quality of the business service from the service provider made it
necessary for the government to regulate, which in some cases excluded foreign
service providers, in the name of consumer protection, public safety, national
security and other reasons (Tullao, 1998).
3.1. Access to the Local Market Underpinning the whole system of laws and regulations that govern the
entry and practice of both foreign professionals and businesses in the country is
the 1987 Constitution, which provides that “the State shall promote the
55
preferential use of Filipino labor, domestic materials and locally produced goods
and adopt measures that help make them competitive” (Article 12, Section 12).
This provision is further discussed in Article 14 of the same section which states
that, …the practice of all professions in the Philippines shall be limited to Filipino citizens, save in cases prescribed by law.” The motive behind this
preference for local citizens is not only to give priority to the available human
talents but also to protect the national patrimony, safeguard the public interest
and preserve the national culture.
This nationalistic mandate is presently the most compelling factor in the
Philippines’ commitment in professional services under the GATS rule. Though it
would be very difficult to alter this constitutional limitation, it is still possible for it
to be waived through the enactment of appropriate laws by Congress, which
could serve as exemptions from this Constitutional provision for the sake of
reciprocity and conformity with international agreements.
This route is being followed by the Department of Labor and Employment
(DOLE) in its move towards amending Article 40 of the Labor Code of the
Philippines. The Bureau of Local Employment and the Tripartite Industrial Peace
Council (TIPC) Secretariat with the participation of representatives at the TIPC-
TEC meeting held March 9, 1999 reviewed the provision on the labor market test.
As proposed, the Department of Labor and Employment Secretary may waive
the labor market test depending on several conditions, to wit:
“The issuance of an employment permit shall be subject to the labor market test. However, the labor market test may be dispensed with in any of following cases after due consultations with the sector or industry affected, as well as the government agency involved in the regulation of such sector or industry; a. Where the expertise of the non-resident alien is needed; b. Where there is transfer of technology; c. Where the employment is in pursuance of joint venture
agreement; or d. In other analogous cases.” This proposed amendment can be considered as a move towards
hastening liberalization since the GATS commitment is just to review the labor
56
market test in the employment of foreign nationals. This amendment would
facilitate the entry of foreign practitioners by waiving the labor market test as a
requirement for local practice.
Another means by which foreign professionals may enter the Philippines is
the presence of foreign reciprocity provisions in the laws governing the practice
of a specific profession. These conditions make it easier for foreigners in certain
professions to enter the Philippines (Refer to Table 15).
Table 15. Summary of Reciprocity Provisions of Laws Governing Professions Profession No foreign
reciprocity With foreign reciprocity
Exemption for cases of: Need for expertise, technical consultants, non-availability of local experts
Exemption for cases of gov’t. consultation, academic teaching, medical mission or activities of similar nature.
Legal services ✔ Accountancy ✔ Architecture ✔ Interior Design ✔ Dentistry ✔ ✔ Aeronautical Engineer
✔
Electrical Engineer ✔ ✔ Electronics and Comm. Engr.
✔
Mechanical Engr. ✔ ✔ Environmental planning
✔ (except for firms, if a firm should be 75% Filipino-capitalized
Medicine ✔ ✔ Medical Technology
✔ ✔
Midwifery ✔ Nursing ✔ Optometry ✔ Pharmacy ✔ Veterinary medicine
✔
Physical therapy ✔ Optometry ✔
*To see the actual provisions, refer to Table 18.
57
Another barrier to entry of foreigners in the country is the requirements
listed under Commonwealth Act No. 613 (as amended by Republic Acts 118,
135, 144, 503, 749, 827, 1901, 4376, 5171, 5701, and Presidential Decree 524)
which controls and regulates the immigration of aliens into the country. Sec. 9 of
such law states that a foreign businessman and his family may be admitted as
immigrants under the following provision:
a) Alien businessman. An alien entitled to enter the Philippines under and in pursuance of the provisions of a treaty of commerce and navigation 1) solely to carry on substantial trade principally between the Philippines and the foreign state of which he is a national or 2) solely to develop and direct the operations of an enterprise in which in accordance with the Constitution and the laws of the Philippines he has invested or of an enterprise in which he is actively in the process of investing, a substantial amount of capital; and his wife, and his unmarried children under twenty one years of age, if accompanying or following to join him, subject to the condition that citizens of the Philippines are accorded like privileges in the foreign state of which such alien is a national.
Sec. 5, lists the requirements for employment permit needed by aliens to
work in the country:
a) Curriculum vitae duly signed by the applicant indicating his educational background, his work experience and other data showing that he possesses technical skills in his trade or profession.
b) Contract of employment between the employer and the principal which shall embody the following, among others: 1) That the non-resident alien worker shall comply with all
applicable laws and rules and regulations of the Philippines;
2) That the non-resident alien worker and the employer shall bind themselves to train at least two Filipino understudies for a period to be determined by the Minister, and
3) That he shall not engage in any gainful employment other than that for which he was issued a permit.
c) A designation by the employer of at least two understudies for every alien worker…
58
For a foreign worker to be given a work permit, the application of the
foreign worker must show: (1) the commitment of his local employer and himself
to train Filipino understudies for a designated period, (2) a report regarding the
availability or non-availability of any person in the Philippines who is both
competent and willing to do the job for which the service of the foreign worker is
desired, (3) certification from the bureau of immigration, (4) if the applicant will be
employed in preferred areas of investments or in accordance with the imperative
of economic development, then a recommendation from the Board of
Investments, or other appropriate government agencies is also needed.
These additional requirements in securing a working permit conditions are
seen to be further barriers to the entry of foreign professionals in the country.
The positive aspect of these requirements is that they ensure that the
employment of the foreign worker will redound to the national interest through the
training of a Filipino counterpart and the sharing of the foreign worker’s technical
expertise.
According to Ms. Rose Sajo, Senior Labor & Employment Officer of the
Philippine Overseas Employment Authority (POEA), most of the foreigners who
enter the Philippine market are those who act as consultants to multinational
companies or foreign-funded projects and/or who take on highly technical
positions which no local professional have the qualifications to fill. These foreign
workers must secure their work permit from the Bureau of Local Employment.
Another method by which foreign workers can access the local market is
through naturalization. The worker can take the board exams and apply for a
professional license. The approval of his license would depend on the results of
his application for naturalization. This applies to all professions, except law.
Presidential Decree No. 1350. “Aliens residing in the country who having developed and demonstrated love for and loyalty to the Philippine and affinity to the customs, tradition and ideals of the Filipino people, as well as contributed to the economic, social and cultural development of the country, may be integrated into the national fabric by the grant of Philippine citizenship,”
59
Whereas, the abovementioned objective is somehow thwarted by the rigid and technical requirement under existing laws that only those who are actually citizens of the Philippines on the date of examination may take the various Board examinations for the different professions;
Sec. 1. Any provision of existing laws to the contrary notwithstanding, any alien who has filed an application for naturalization as citizen of the Philippines by decree may, pending approval thereof, be allowed to take any examination given by the various Boards of Examiners for the different professions, except the bar examinations, if said alien is otherwise qualified to take the examination: Provided, that in case he passes the examination, he shall not be issued the certificate of registration to practice the particular profession until his application for naturalization is approved and he takes his oath as citizen of the Philippines. Source: Labor Code of the Philippines
However, very few foreigners would consider this as a viable option
considering the relatively lower fees charged by professionals in the local market.
As can be seen, although there are remedies to the Constitutional, legal
and regulatory barriers to the entry of foreign professionals in the Philippines,
these measures are more in the area of exemptions rather than the rule. These
laws still restrict the entry of foreign workers in the Philippines except for cases
when there is a need by government and/or private firms for highly technical
expertise that cannot be provided by local professionals.
In relation to the establishment of businesses in the Philippines, the extent
of equity capitalization is limited by Executive Order No. 362, which contains the
updated foreign investment negative list. As a general rule, there are no
restrictions on the extent of foreign ownership of business in the Philippines. The
State attracts, promotes, and welcomes foreign investments which significantly
contribute to national industrialization and socio-economic development to the
extent that foreign investment is allowed in such activity by the Constitution and
relevant laws (Sales, 1994). In domestic market enterprises which are firms that
manufacture and sell their products to the local market, foreigners can invest as
much as one hundred percent equity subject to the minimum required
capitalization of $200,000, except in areas included in the negative list which are
60
also specified in Table 16. In addition, if a foreign company wants to establish
commercial presence locally, the company goes through the same registration
processes with the Securities and Exchange Commission (for corporations and
partnerships), the Department of Trade and Industry, and the Bureau of Internal
Revenue as that of locally-owned firms.
As a whole, the Philippines generally does not discriminate between
foreign and domestic service providers but maintains restrictions on market
access. The movement of foreign personnel into the local economy is limited by
the licensing requirements set forth in the PRC laws, with some exceptions.
Foreigners from developed countries have easier access to the local market
because they are usually the ones who have the technical expertise needed by
the Philippines for technology transfer, consultancy and academic teaching. For
countries that have the same level of development as the Philippines, the level of
access is still the same, unless they can fit the conditions and exemptions
defined by existing laws.
Although the government encourages foreign investment to come in, there
are still some fields subject to caps on foreign equity investment and total
exclusion in selected industries as specified under the provisions in the Foreign
Investments Act.
63
a) that there is foreign reciprocity with his country b) that he is legally qualified to practice interior design in his country, and that his expertise is necessary and
advantageous to our country, particularly in the aspects of technology transfer and specialization; c) Foreign nationals shall be required to work with a Filipino counterpart and professional fees and
services, and expenses of documentation pertaining to the project shall be shared by both foreign and Filipino interior designers, including liabilities and taxed due to the Philippine government, if any, according to their participation in, or professional services rendered to, the project.
Engineering services P.D. 1570. Regulating the Practice of Aeronautical Engineering in the Philippines Sec. 14. Qualified foreigners who finished an equivalent course to BS in Aeronautical Engineering may take the licensure examinations subject to the provisions of existing laws Sec. 21 Temporary Registration; Issuance of Special Permits Upon application and payment of the required fee, and subject to the approval of the PRC, the following may be granted temporary certificates of registration: a) Aeronautical engineers who practice in their own foreign country called for consultation or for a specific design, construction or project, whose services in the Philippines shall be limited only to such particular work… b) Any person from foreign countries employed as technical officers or professors in such specialized branches of aeronautical engineering as may, in the view of PRC to be necessary and indispensable or the country The special permit is renewable every year. R.A. # 544 (as amended by R.A. 1582) An Act to Regulate the Practice of Civil Engineering in the Philippines Sec. 12. Qualifications for Examination Any person applying for admission to the civil engineering examination should be a citizen of the Philippines. (All applicants for registration for the practice of civil engineering shall be required to a pass that examination, Sec. 8) Sec. 15. Exemption from Registration 1. Registration shall not be required of the following persons: a) Officers or enlisted men of the United States and Philippine Armed Forces, and civilian employees of the
government of the United States stationed in the Philippines while rendering civil engineering services for the U.S and/or the Philippines.
b) Civil engineers or experts called in by the Philippine Government for consultation, or specific design and construction of fixed structures as defined under this Act, provided that their practice shall be limited to such work
R.A. 7920. New Electrical Law Sec. 14. a. Examination and registration shall not be required of foreign electrical engineers, erection/commissioning guarantee engineers employed as technical consultants by the Philippine government or by private firms, for which the pertinent professional society certifies that no qualified Filipino professional is available, or of foreign electrical installers for the erection and installation of a special project or for any other specialized work, subject to the following conditions: i. … foreign professionals are legally qualified to practice their profession in their own country in which the
requirements… are not lower than those specified in this Act; ii. That the scope of work to be performed by said foreign professionals shall be limited only to the particular
work for which they were contracted;
Table 16 (continued). Regulations Governing Business
64
iii. That prior to commencing work, the foreign professional shall secure a special permit from the PRC; iv. The foreign professional shall not engage in private practice on their own account; v. That for every foreign professional contracted pursuant to this section, one Filipino understudy who is
registered under the provisions of this act shall be employed by the private firm utilizing the services of such foreign professional for at least the duration of the alien expert’s tenure with said firm; and
vi. That the exemption herein granted shall be good only for six months; renewable for another six months at the discretion of the Board…
Sec. 35. Practice Not Allowed for Firms and Corporations The practice of electrical engineering is a professional service admission to which is based on individual or personal qualifications. Hence no firm or corporation may be registered or licensed as such for the practice of electrical engineering. However, persons properly qualified and licensed as professional electrical engineers may, among themselves, form a partnership association and collectively render electrical engineering service. Individual members of such partnerships or associations shall be responsible for their own respective acts. Sec. 38. Foreign Reciprocity No foreign engineer shall be admitted to take a board examination, be given a certificate of registration, or be entitled to any of the rights and privileges under this act unless the country of which he is a subject or citizen specifically permits Filipino engineers to practice within its territorial limits on the same bases as the subjects or citizens of such country.
R.A. 5734. The Electronics and Communications Engineering Act of the Philippines Sec. 5. Pre-qualifications for Examination In order to be admitted to the electronics and communications engineering examination, an applicant must, at the time of the filing of this application therefor, establish to the satisfaction of the Board that: … b. He is a citizen of the Philippines or of a foreign country qualified to take the examination under Sec. 23 of this act… Sec. 23. Foreign Reciprocity. No foreigner shall be admitted to an examination or registration as electronics and communications engineer under this act unless he proves in the manner provided by the board that, by specific provisions of law, the country, state or province of which he is a citizen, subject, or national admits Filipino citizens to the practice of electronics and communications engineering after an examination on terms of strict and absolute equality with the citizens, subjects, or national of said country, including the unconditional recognition of prerequisite degrees issued by institutions of learning duly recognized by the government of the Philippines.
R.A. 8495. An Act Regulating the Practice of Mechanical Engineering in the Philippines Sec. 14. Qualifications of Applicants for Professional Mechanical Engineer; and Sec. 15 Qualifications of Applicants for Mechanical Engineer; …Any applicant must be a citizen of the Philippines… (this provision is not included in the qualifications of applicants for certified plant mechanic) Sec. 31. Coverage of Temporary/Special Permits The following shall be required to secure a temporary/special permit from the board… a) Mechanical engineers, installation, commission or graduate engineers from other countries called in for
consultation or for a specific design or installation project not requiring more than three months residence in
Table 16 (continued). Regulations Governing Business
65
the Philippines in a twelve month period: provided, that such engineers are legally qualified to practice mechanical engineering in their own country…
b) Foreigners employed as technical officers, training officers or consultants in such special branches of mechanical engineering who, in the judgment of the Board, are necessary and advantageous for the country particularly in the aspects of technology transfer, may be issued temporary permits: provided… 1) Non-availability of a mechanical engineer and/or mechanic in the country who is competent, able and
willing at the time of engagement to perform the service for which the foreigner is desired for; 2) The foreigner must have been in the prior employ of the engaging firm, or its foreign business partner,
outside of the Philippines for a period of less than one year immediately preceding the date of his engagement…
Sec. 39. Foreign Reciprocity No foreign mechanical engineer or mechanic shall be allowed to practice… unless he can prove… that the country of which he is a subject or citizen, in the spirit of reciprocity, permits Filipino mechanical engineers and/or mechanics to practice within its territorial limits on the same basis…
Urban planning and landscape services
P.D. 1308. Regulating the Practice of the Profession of Environmental Planning in the Philippines Sec. 16. Qualification for Examination Any person applying for admission to the environmental planning examination… must be a citizen of the Philippines… Sec. 20. Consulting Firms and Corporations Engaged in Environmental Planning Practice A consulting firm, partnership, company corporation, or association may engage in the practice of environmental planning in the Philippines, provided: a) the consulting firm is registered with the board and approved by the PRC, and that at least 75% of the board membership of the board shall be registered environmental planners and at least 75% of total capitalization is owned by them.
Medical services R.A. 2382. The Medical Act of 1959 Sec. 9 Candidates for Board Examinations Candidates for Board examinations shall have the following qualifications: 1. He shall be a citizen of the Philippines or a citizen of any country who has submitted competent and conclusive documentary evidence, confirmed by the Department of Foreign Affairs, showing that his country’s existing laws permit citizens of the Philippines to practice medicine under the same rules and regulations governing citizens thereof; Sec. 12. Limited practice without any certificate or registration Certificates of registration shall not be required of the following persons: a) Physicians and surgeons from other countries called in consultation only and exclusively in specific and definite cases, or those attached to international bodies or organizations assigned to perform certain definite work in the Philippines, provided they shall limit their practice to the specific work assigned to them and provided further they shall secure a previous authorization from the board of examiners… c)Foreign physicians employed as exchange professors in special branches of medicine or surgery…
Dental services R.A. 4419. An Act to Regulate the Practice of Dentistry in the Philippines and for Other Purposes Sec. 15. Exemption from Registration … dentists or oral surgeons from other countries who are invited for consultations or demonstrations, provided,
Table 16 (continued). Regulations Governing Business
66
that in such cases their work shall be limited to the specific tasks assigned to them, and provided further, that a previous authority has been granted by the Board of Dental Examiners who shall have been the discretion to determine the duration of said authority, but in no case shall it exceed the period of thirty days. Sec. 17. Qualifications for Admission to Examination One of the qualifications is for the applicant to be a citizen of the Philippines Section 38. Foreign Reciprocity Except in the case of persons otherwise exempt under the provisions of this Act, no dentist who is a citizen of a foreign country or a particular state shall be granted any of the rights of privileges under this Act, unless the country or state of which he is a subject or a citizen permits dentists who are Filipino citizens to practice within its territorial limits on the same basis as the subjects or citizens of such country or state, but under no circumstances shall such a set-up be initiated by the Philippine government.
Veterinary services R.A. 382. An Act to Regulate the Practice of Veterinary Medicine and Surgery in the Philippines Sec. 16. The veterinary board may reciprocate with other countries in the recognition of exchange of licenses upon a basis of equality of educational standard and mutual recognition, which standard shall not be lower than the requirements of this Act.
Services provided by midwives R.A. 7932. An Act Revising Republic Act No. 2644, as amended, otherwise known as the Philippine Midwifery Act Sec. 22. Foreign Reciprocity No midwife who is a citizen… of a foreign country shall be granted any of the rights and privileges under this Act unless he or she shows to the satisfaction of the Board that the country of which he or she is a citizen… permits within its territorial limits on the same basis as the citizen, subject or national of such country; provided, that, the requisites for admission to midwifery school and for graduation in said country are substantially the same as those in this country.
Services provided by nurses R.A. 7164. An Act Regulating the Practice of Nursing in the Philippines Sec. 13. Qualifications of Applicants. a. He or she is a citizen of the Philippines, or a citizen or subject of a country which permits Filipino nurses to practice within its territorial limits on the same basis as the subject or citizen of such country: provided, that the requirements for the registration or licensing or nurses in said country are substantially the same as those prescribed in this Act…
Services provided by optometrists
R.A. 8050. An Act Regulating the Practice of Optometry, Upgrading Optometric Education, Integrating Optometrists, and For Other Purposes Sec. 34. Foreign Reciprocity No foreigner shall be admitted to the optometric board examinations unless he proves… the country of which he is a citizen, subject or national, either admits Filipino citizens to the practice of optometry without restriction, or allows them to practice optometry after an examination on terms of strict and absolute equality with citizens… of said country, including the unconditional recognition of prerequisite degrees prescribed by the Commission on Higher Education: Provided, however, that the board, upon approval by the PRC, may grant a special permit to a foreign optometrist to practice the profession in this country and the Philippines under such conditions as may be determined by the Board, if such foreigner is internationally known to be an outstanding expert in the profession or a well-known specialist in any of its branches, and that his services will promote the advancement of the profession in the
Table 16 (continued). Regulations Governing Business
67
Philippines… Services provided by medical technologists
R.A. 5527 (as amended by R.A. 6132, P.D. 498, and P.D. 1534) An Act Requiring the Registration of Medical Technologist, Defining their Practice, and for Other Purposes Sec. 14. No person shall practice or offer to practice medical technology as defined in this Act without having obtained a valid certificate of registration from the board provided that that registration shall be required of the following: … b. Medical technologist from other countries called in for consultation or as visiting or exchange professors to colleges or universities: provided, they are only practicing the said function…
Services offered by pharmacists
R.A. 5921. An Act Regulating the Practice of Pharmacy and Setting Standards of Pharmaceutical Education in the Philippines and for Other Purposes Sec. 18. A candidate for the board examination in Pharmacy have the following qualifications: a. He shall be a natural-born citizen of the Philippines; (as amended by P.D. 1363 on May 2, 1978)…
Services offered by physical and occupational theorists
R.A. 5680. An Act Creating the Board of Examiners for Physical Therapists and Occupational Therapists Sec. 15. Qualifications of Applicants a. He is a citizen of the Philippines, or if a foreigner, must prove that the country of which he is a subject or
citizen permits Filipino physical therapists and occupational therapists to practice within its territorial jurisdiction on the same basis as the subjects or citizens of such country;…
Sec. 21. Registration by Reciprocity Any physical therapist, physiatrist, or occupational therapist holding a valid certificate of registration issued under the laws of a foreign country may practice his profession in the Philippines without passing an examination given by the board if the requirements for the registration and licensing of a physical therapy, physiatrist or occupational therapist in such foreign country are substantially the same as those provided for in this act and that the laws of such country or state grant the same privileges to Filipino registered practitioners on the same basis as the subjects… of such foreign country…
R & D services on natural sciences
40% foreign equity is allowed for companies that explore, develop, and utilize natural resources. Full foreign participation is allowed through financial or technical assistance with the President (Art. XII, Sec. 2 of the Constitution as cited by Sales)
Advertising services Only Filipino citizens or corporations or associations at least 70% of the capital of which is owned by such citizens, shall be allowed to engage in the advertising industry. The participation of foreign investors in the governing body of entities in such industry shall be limited to the their proportionate share in the capital thereof, and all the executive and managing officers of such entities must be citizens of the Philippines (Sec 11, par. (2), Art. XVI, Constitution as cited by Sales)
Placement and supply services of personnel
Up to 25% of Foreign Equity is required for private recruitment, whether for local or overseas employment (Article 27 of Presidential Decree No. 442) and Executive Order No. 362, Second Regular Foreign Investment Negative List.
Investigation and security Private firms organized as a security or watchman agency must be fully owned by Filipino citizens. (Sec. 4 of R.A. 5487) and Executive Order. No. 362, Second Regular Foreign Investment Negative List.
Convention services Up to 40% foreign equity is allowed
Table 16 (continued). Regulations Governing Business
69
3.2. Access to Foreign Markets
According to the Marketing Services Bureau of the Philippine Overseas
Employment Authority (POEA), which is the lead government agency responsible
for the deployment of Filipino workers in the global market, the ease by which a
Filipino worker can access foreign markets is dependent on: (1) the type of
industry to which the worker belongs, and (2) the degree of immigration controls
and extent of professional licensing requirements of the country that s/he enters.
Presently, there is a very high demand for IT professionals and engineers
in countries such as Canada, the U.S., and Singapore. The primary mode by
which Filipinos get to access such markets is through a foreign company that
expedites the work permit, work visa, and other requirements needed by the
Filipino worker to work in these countries.
For example, in the United States, once a company identifies a qualified
applicant, that company submits the necessary requirements for a working visa
in the U.S. which is then forwarded to the U.S. Embassy in the Philippines. The
applicant then is contacted and is given a visa petition. After which, the POEA
processes the completed requirements, including: (1) the visa petition, (2) copies
of the work contract and pre-paid ticket, and (3) the results of the medical and
dental exams. In cases such as this, the process takes a relatively short period
of time with very little burden on the applicant.
There are, however, fields such as medicine and the allied professions
that have national and state board examinations. In the United States, for
example, an applicant must pass the following requirements to be eligible for the
medical board examination in Texas: (1) the applicant should at least be 21 years
of age, (2) a bachelor’s degree earned in a university that is duly recognized by
the professional board, (3) graduated from a medical school in Texas, or its
equivalent, (4) eligibility for licensure in the country of graduation, (5) a valid
certificate issued by the Educational Commission for Foreign Medical Graduates;
(6) must have the ability to communicate in the English language, and (7)
supplied all additional information that the board may require concerning the
70
applicant’s medical school. Once the applicant takes the exam, he or she must
pass the exam within three attempts only. In certain professions, such as
pharmacy, the United States requires foreign applicants to pass both the national
and state licensure exams.
Insofar as the countries where Filipinos are usually sent abroad, there are
less barriers to entry since there are no nationality requirements. In the
Philippines, being a Filipino is a primary requirement, particularly for professional
services. Filipinos who are directly hired by the company or are hired through a
placement agency have an advantage since it is the company or agency that
prepares and submits licensure requirements and follows up their approval.
Arthur San Gil, Board of Investments director, emphasized that whether inside or
outside the Philippines the “key in accessing the job market or the services
market, is having a qualified applicant, or the person having all the qualifications
(and none of the disqualifications) for a given position.”
There is some difficulty, however, when it comes to the licensure
requirements of the more advanced countries. Due to the lack of updated
technology and know-how in the country, local workers who apply for licenses in
certain professions such as medicine and its allied services, need to work extra
hard to study the more advanced developments in the field which are not yet
available in their country of origin. According to Tullao (1999), for professionals
to be given licenses abroad, they have to conform to the stringent rules,
regulations and requirements of advanced countries. But if foreign professionals
are allowed to practice domestically, they have a cutting edge even if the country
defines its licensing requirements because of the rigorous requirements that they
have passed in order to get licenses in their home countries.
However, new modes have sprung forth due to technological
advancements, allowing local professionals to take advantage of employment
opportunities in certain foreign countries. These new modes include: (1) job
postings on the Internet, where the recruitment takes place online (2) the
proliferation of international publications, (3) and training arrangements through
which locals working for multinational companies are sent abroad to the mother
71
company or foreign branches for training, and are consequently absorbed by the
foreign market. According to the POEA, the tried and tested method of the
“kamag-anak” (kin) system is most effective in easing the burden of accessing
foreign markets, among others. The system works through the relatives of the
local worker who reside in a foreign country. They act as the link between that
the local workers and the foreign job market, by updating them on developments
and requirements, and passing their documents to the employer, among others.
As a whole, Filipino workers have to deal with restrictions to market
access in other countries in the form of immigration controls and licensing
requirements in relation to the movement of natural persons. The extent of
access depends on the demand for local expertise, the level of development and
the degree of liberalization of the specific industry. In general, it is difficult for
Fillipinos to enter markets which are more advanced than the local market, since
the regulations and standards are more stringent such as the case in the field of
medicine. The IT sub-sector is an exception since the demand for local
expertise is very high in this field. It would be easier for Filipinos to enter regional
markets particularly ASEAN, since Philippine professionals are trained relatively
well and the industry structures are more similar.
On the other hand, the Philippines still needs to review the process of
providing access to foreign practitioners in the country and not just limit their
entry to exemptions in the law. When it comes to the establishment of
commercial presence abroad, local firms need to deal with foreign equity limits
and the registration requirements of each country, as well as with their own
financial resource limitations. Although the government encourages foreign
investment to come in, there are still some fields subject to caps in foreign equity
investment and total exclusion in selected industries.
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4. HUMAN RESOURCE DEVELOPMENT PRACTICES EFFORTS (FOCUSED ON TECHNOLOGY-SENSITIVE AREAS)
Driven by tremendous changes in the marketplace, organizations can no
longer rely on traditional processes and paradigms to survive, much less,
compete in today’s shrinking globe. In the Philippines, companies must
continuously build their technological capability while ensuring the effective
integration of both their human and technological resources. In this context, this
chapter focuses on the human resource development efforts and practices of
business services sector with emphasis on technology-sensitive areas.
Human resource development (HRD) is a planned, continuous effort by
management to improve employee competency levels and organizational
performance through training and development programs. Training focuses on
giving new or present employees the skills they need to perform their jobs, while
employee and management development programs are focused in developing
employees for future jobs with the organization.
In the local context, these training and development programs should
enable both managerial and rank-and-file levels to respond to the challenge of
industrial effectiveness. These training programs must be aimed at (1) enabling
both managers and workers to be multi-skilled, versatile, and highly motivated;
(2) giving employees the skills needed to cope with the requirements of the job
(and address the mismatch between employee competencies vis-à-vis
competencies needed by the firm at the time of hiring); (3) preparing employees
for higher level responsibilities/tasks; (4) enhancing productivity at organizational
participation, (5) developing corporate values characterized by openness, trust,
support, teamwork, fairness, results-orientation and fun (Edralin, 1999).
Training and development programs are commonly characterized by the
following: (1) Needs Analysis, which involves the identification of specific job
performance skills needed by employees to improve performance and
productivity; (2) Types, whether it is skills development or behavioral training; (3)
Methods, which pertain to the techniques or manner by which the contents are
conveyed; (4) Venue, as to whether it is conducted in-house or externally; (5)
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Materials, which pertain to the materials, equipment, and facilities used in
training; (6) Evaluation and Feedback, as to how to assess the effectiveness of
the program.
4.1. Needs Analysis All of the respondent firms assessed the training needs of their
professional employees using various methods. The regular appraisal of the
employee’s job performance is commonly the basis for management to
determine the training programs necessary in building the competitiveness of the
firm’s human resources. Feedback from the employee’s immediate supervisor
and one-on-one interviews with the employees themselves are likewise seen to
be effective methods.
Table 17. Common Methods of Needs Analysis Method of Needs Analysis Frequency Employee survey 6 Performance appraisal 11 One-on-one interviews 11 Feedback from customers 11 Feedback from suppliers 3 Feedback from supervisor 11 Others: Production charts; self-rating; regular progress reports; outside consultants
5
In technology-sensitive sub-sectors, namely computer software and
services, printing and publishing, engineering services, where the level of
competitiveness is determined by the ability of the firm to cope with the rapid
technology obsolescence, the feedback from suppliers of technology is as critical
as feedback from customers. For example, in Ingenium Systems, a Filipino-
owned computer software company that provides tailor-fit database management
systems to insurance companies, frequently needs to update the technical skills
of its programmers and marketing people since its major program
supplier/partner – Oracle – comes up with updated versions of its systems in less
than a year. Survey forms are also used by some companies to determine
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training needs. Table 17 illustrate the common methods of training needs
analysis conducted by firms.
4.2. Types of Training 4.2.1. Skills Training Skills training programs in business services firms are conducted more for
updating the professionals on the most current technology rather than for other
reasons. In the computer services industry, skills training on new programs and
equipment is rated by employees to be a very important factor in choosing and
keeping a job. In an interview with the training manager of one of Makati’s
software companies, the respondent revealed that “productivity training” is held
at least once a year in order to enhance the technical knowledge of their
programmers. Before the regional crisis, computer companies allocated an
estimated 30–35% of their total annual budget for skills training alone. In
Ingenium, programmers were sent to countries such as Hong Kong, Jamaica,
and Australia for one to two weeks, all expenses paid with allowance, as part of
their development. At that time, P100,000 was spent on every employee sent for
training. Due to the crisis, most companies had to reduce their spending to
around 15–20% of their total annual budget. Ms. Roselle DR. Angeles, the
training officer of Ingenium, explained that “echo training” was utilized, wherein
an employee is sent abroad for training, and after coming back he “echoes” the
new technology to his subordinates or co-employees.
The common methods used in skill training are: seminar/workshops, and
apprenticeships, which uses a combination of lectures and on-the-job training
under a more experienced trainor, and hands-on training using the actual
equipment and machines. The primary advantage is that it removes the
employee from the pressure of having to produce while learning, thus
emphasizing the skills required for the job.
In the computer industry, training usually lasts for 1 to 2 weeks at most.
Those industries that are not as technology-sensitive conduct training for 2 to 3
days on the average. The facilities used would depend on whether the training is
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conducted in-house or outside the company. In most cases, the actual
technology that needs to be learned is used in the training (refer to Table 18).
Table 18. Summary of Skills Training Programs in Business Service Companies
Venue % of Cos. That conduct the training
Topic Common methods Average duration
Facilities used
In-house and External (usually, abroad)
More than 90% of companies
Update on technology Computer programs Other job-related skills: Drafting General engineering topics Maintenance Security training Retouching Photography Darkroom techniques Machine operation
Seminars/workshops 0ne-on-one teaching Classroom lectures Coaching Apprenticeship Case method Behavior modeling
1 to 2 weeks (for computer – related services) 2 to 3 days (others)
External facilities and equipment – if externally sourced Co. equipment (e.g. computers, lab instruments) Co. facilities (e.g. aircraft, engines, training room, labs, classroom) AV aids (e.g. videos, OHProjectors, videos, hand-outs)
In the case of Cover & Pages, a printing company which caters to
universities and government agencies, sent technical staff to a printer in
Singapore with whom the owner had a tie-up. The staff worked in that company
and got trained on the latest printing technologies at the same time. The training
program took one year. The owner of the company was very satisfied with the
results of the apprenticeship training because the employee was taught on a
one-on-one basis, using the high-tech facilities of the Singaporean company,
and was able to apply the learnings on-the- job.
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The architects and interior designers, who work in Arlen De Guzman
Design Consultants, are usually trained in the utilization of modern building
materials through its suppliers. The owner also goes to Europe and the United
States annually to attend conventions and meet with suppliers.
In the case of professional services registered under the Professional
Regulation Commission (PRC), they are obliged under the law to participate in
Continuing Professional Education (CPE) programs as a prerequisite for
renewing their professional licenses. Local professional organizations such as
PICPA, UAP, PMA, PDA, PNA are members of or affiliated with international
organizations which also act as accredited CPE providers. The most
professions with the most number of accredited providers are nursing, which has
360; medicine, 230; dentistry, 121; professional teachers, 116; medical
technology, 77; accountancy, 67; and midwifery, 63.
Table 19. Number of accredited CPE providers Regulated profession No. of accredited providers Accountancy 67 Aeronautical engineering 1 Agricultural engineering 13 Architecture 21 Chemical engineering 16 Chemistry 30 Civil engineering 17 Custom broker 17 Criminology 10 Dentistry 121 Electronics and communication engineering 9 (and 50 other multidisciplinary providers) Electrical engineering 22 (and 4 other multidisciplinary providers) Environmental planning 5 Foresters 5 Geodetic engineering 8 Geology 4 Interior design 5 Landscape architecture Not available Librarian 30 Marine deck officer 53 Marine engine officer 53 Master plumbing 3 Mechanical engineering 28 Medicine 230 Metallurgical engineering 7 Midwifery 63 Mining engineering 19
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Table 19 (continued). Number of accredited CPE providers Regulated profession No. of accredited providers Naval architecture and marine engineering 6 Nursing 360 Nutrition and dietetics 26 Optometry 8 Pharmacy 34 Physical therapy / Occupational therapy 52 Professional teachers 116 Medical technology 77 Radiologic and x-ray technology 25 Sanitary engineering 2 Social work 33 Veterinary medicine 15 TOTAL 1611
Source: Aggregated based on the raw data provided by the Continuing Professional Education Office, Professional Regulation Commission (as of April 1999)
An example of skills training in a non-technology sensitive subsector,
which sources the skills training of its professional employees from external
organizations are security agencies. Soledad Cobrador, Vice President for
Operations of Combined Blue Dragon Securities and Services, Inc. mentioned
that they send their security personnel to Philippine National Police (PNP) and
Technical Education and Skills Development Authority (TESDA)--sponsored
lecture/seminars. During the two-day seminar, videos depicting problematic
security situations and role-playing were utilized in enhancing the skills of the
security guards.
4.2.2. Behavioral Training Behavioral training programs deal more with personality development,
team building, interpersonal relations, values formation, improvements in work
attitude and customer relations (See Table 20).
In technology-sensitive areas, the topics of training are more concerned
with values formation and customer relations (for the non-technical staff). Most
of the time, the training programs are held in-house or with affiliated companies.
For example, EDCOP Engineering Consultants invites external trainors for team-
building and values formation seminars for their staff.
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As far as behavioral training is concerned, there are no major differences
between non-technology sensitive and technology-sensitive sub-sectors. The
same topics are commonly used, similar training methods, duration, and facilities.
Table 20. Summary of Behavioral Training Programs in Business Service Companies
Source Frequency
Topic Common methods Average duration
Facilities used
In-house & External (local)
65% of companies
Personal development Values formation 7 Habits of Highly Effective People Relating with customers Personality dev’t. Group Development Team Building Cockpit Relationship management Staff rapport
Seminars/workshops Classroom lectures Coaching Behavior modeling
1 to 2 days less than a week
External facilities and equipment – if externally sourced Co. equipment (e.g. computers, lab instruments) Co. facilities (e.g. aircraft, engines, training room, classroom, laboratory) AV aids (e.g. OHProjectors, slides, videos, hand-outs)
In general, business service firms conduct more programs toward
enhancing skills rather than behavior. This may be attributed to the perceived
urgency of job-related skill deficiencies compared to the more difficult-to-measure
attitudinal and interpersonal needs. The general effectiveness of behavioral
training is seen to range from ‘fairly effective’ to ‘effective’ while skills training is
seen to be ‘effective’ to ‘very effective.’
Among the intervening factors that affect the effectiveness of training
programs are the (1) level of motivation, (2) capability of the professional
employees, (3) duration, and (4) amount of reinforcement of the training program.
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4.3. Venue of Training Training programs of Philippine business service firms are usually
conducted by the company itself (in-house) or external stakeholders such as
consultants, suppliers, and industry associations. In terms of facilities, for in-
house training, the facilities that are often used are company equipment (e.g.
computers, laboratory instruments), facilities (e.g. aircraft, training rooms,
laboratories, engines), audio-visual materials (overhead projectors, videos, hand-
outs). External training uses the facilities, equipment, and materials of these
external sources.
In many cases, mainly because of the past crisis, training programs were
conducted inside the firm for lesser costs, shorter periods, use of consistent and
relevant materials, and more control of content. In general, local firms rated their
in-house training to be effective since there was an observed marked
improvement in the performance of employees. Moreover, the specific
expectations of the trainees were met after the training.
Companies sponsor external training for the following reasons: (1) an
outside perspective and new viewpoints, (2) taking employees out of work
environments, (3) exposure to outside experts and content. In certain non-
regulated professions, such as photography and advertising services,
participation in conferences and seminars sponsored by international
associations play an important role in enhancing creative talents and skills.
4.4. Evaluation and Feedback Most of the business firms admitted difficulty in measuring the
effectiveness of training programs in a quantitative manner. Frequently, the
quality of training is assessed through: (1) the reaction of the trainees toward the
training, (2) the observation of the immediate supervisor’s reaction towards the
trainees’ post-training performance, and (3) the regular appraisal of the
employee’s performance.
For local business service managers/owners, especially, high-technology
companies, skills training effectiveness is measured through the productivity of
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the employees and their ability and speed in learning the new equipment and
software. The results of behavioral training are more difficult to gauge. The best
means to gauge whether a training program succeeded is by observing the
employee on the job, a process that takes time. The respondents of the study
mentioned that the ability and motivation of employees to learn, as well as the
duration of training, are critical factors that affect the success of the training.
When the respondents were asked to assess the average level of
effectiveness of their various training programs, most rated their in-house training
from moderate to very effective. This is due to the perceived increase in the
productivity of the employee and his or her enhanced adaptation to corporate
culture and processes. External training, which is training conducted by local
companies, was likewise rated to be effective. External training abroad was
considered to be ‘very effective’ since the trainee can concentrate on the learning
without being distracted by work-related matters.
Considering the fundamental role of human resource development in the
success of their operations, most business service firms in the Philippines,
regardless of size and nature recognize the importance of training and
developing its people. This is evidenced by the conduct of various types of
training programs in their organizations. However, if one were to gauge the
amount invested in training, most of the firms spend less than 1% to 5% of their
total annual budgets on training their professional employees. The exception to
this is the high-technology sub-sectors of computer services, which spend as
much as 45% on training. Large management consultancy services such as
Sycip, Gorres, & Velayo (SGV & Co.) also allocate a relatively substantial share
for training, with at least 10 per cent of its total annual budget.
As a whole, human resource development activities are present in all
business service firms, though the policies towards design, implementation, and
evaluation differ from one firm to another depending on the needs of the
employees, the existing structure and resources of the firm, as well as the
presence of external regulatory bodies and local and international industry
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associations. Various methods are employed in training and most are rated to be
effective in achieving the targets of the firms.
In all the business service sub-sectors, skills training is conducted more
frequently than behavioral training, and training programs are commonly
conducted in-house using company facilities and equipment. However, the
quality of training still needs improvement. Based on the response of the
surveyed industries, training is a means for satisfying the short-term demands of
the market and regulatory institutions. Very few offer proactive programs that
focus on the long-term competitive development of professionals in the light of
today’s global trends. Generally, a very small percentage of the total annual
budget is allocated for human resource development. Professional employees
are rewarded for their improved performance basically through job enrichment
and increase compensation whether or not it is a result of training and
development.
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5. QUALITY AND RELEVANCE OF TRAINING OF LOCAL PROFESSIONALS In order for the Philippines to fully reap the benefits of liberalization, it is a
prerequisite that local professionals have the capabilities and potential power to
perform well in the face of the increasing work demands of the local and global
markets. It is, therefore, necessary that the education and training of Filipino
professionals should be at par, if not better than international standards in terms
of quality and relevance. This chapter determines the human resources needs of
business service companies, and analyzes whether their needs are adequately
met by schools and other training institutions.
5.1 Human Resource Needs of Business Services Human resource needs refer to the level of manpower necessary in
supplying the needs of the industry. For the Philippines, a major source of local
labor are various technical and higher educational institutions (HEIs) in the
country. This portion deals, first with the description of the present supply –
demand situation in the various sub-sectors, the second part deals with
manpower projections.
5.1.2. The Present Supply-Demand Situation The supply-demand situation varies according to the type of professional
service. In most cases, the supply of graduates and technically-trained personnel
are enough to meet the requirements of their markets. However, in certain sub-
sectors, there is an oversupply of manpower. For instance, in the field of law, the
president of the Philippine Bar Association stated that there is a glut of lawyers in
the country. The secretary general of the United Architects of the Philippines
also has the same assessment towards the number of professionals in their sub-
sector. In the case of nurses, the Philippine Nurses Association estimated that
there are 85,000 nurses who are currently in active service, but more than
100,000 are employed in fields not at all related to nursing
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One important issue that needs to be raised is that many graduates in the
field of health aim for the external market while the country remains poor in terms
of health services (Tullao, 1999). While there are thousands of graduates in
nursing and medicine, majority of them work abroad because domestic
employment opportunities are not very encouraging. This view is supported by
the Philippine Medical Association (PMA) and the Philippine Dental Association
(PDA). Dr. Nenita Lee-Tan, president of the PMA, and Dr. Luis Orosa, executive
vice president of the PDA compared the very pathetic ratio of 40,000 doctors and
33,000 dentists respectively to the total Philippine population of more than 75
million Filipinos. Furthermore, these practitioners set up clinics in urban areas
because of the higher number of potential clients in these places.
There is also the presence of “internal brain drain” (Todaro, 1977) where
graduates do not physically migrate to developed regions but migrate
intellectually in the orientation of their activities. This can be seen in the field of
veterinary medicine where there is a surplus of practitioners who specialize in the
care of small animals, while there is a scarcity of vets who can take care of
agricultural livestock such as poultry and swine.
For engineering, external changes are important factors in the supply-
demand situation of their field. For instance, the Y2K problem and the trend
towards the computerization of business processes increase the demand for
electronics and communications engineers. However, in other areas related to
the construction industry, such as civil and mechanical engineering, they
experienced a reduction in the demand for their services due to the economic
slowdown brought about by the recent Asian crisis.
Statistics supplied by the CHED show that the supply of graduates in the
field of computer science and information technology increased dramatically,
from a mere 4,461 graduates in 1991 to 19,494 in 1996, posting more than a
400% increase in a span of 5 years. This does not include the more than 60,000
students who finish from commercial computer training centers annually. There
are 30 universities in the country that offer degree courses in computer science
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and technology and 200 training centers that offer short-term computer
programming courses (Philippines Export Product Selector, 1995).
The Philippine Software Association estimates over 20,000 Filipino IT
professionals working on mainframes, minicomputers and micro-computers;
there are 7,200 programmers and systems analysts, of which 5,000 are in end-
user firms, 400 are in software development companies, and 1,800 in the
academe.
Table 21 shows that, in 1989, 287,775 people were engaged in research
and development activities both in government and the private sector, including
academe.
At present, there is a surplus of personnel in the Rental/leasing Services
without Operators sub-sector. Severely hit by the Asian crisis, this industry
suffered a decrease in the demand for its services. For instance, in the field of
air transport rental/leasing, before the crisis, there was a great demand for pilots
and mechanics. During the crisis, owners sold their aircraft to foreign buyers.
Now, “there is an oversupply of manpower in the field”, according to Ms. Aurora
Acelajado of the Federation of Aviation Organizations of the Philippines
(FEDAVOR).
For other business services, there is a sufficient supply of professionals
for the various areas under this classification. Mr. Oscar Valenzuela, industry
development director of the Advertising Board of the Philippines (ADBOARD),
credits the presence of some exceptional fresh graduates in the field. There are
more than enough placement agencies in the country. The Philippine Association
of Service Exporters, Inc. (PASEI) stated that there are “too many agencies
already,” what with more than a thousand rival agencies in the industry at
present. Roel Ramirez, president of the Public Relations Society of the
Philippines (PRSP) mentioned that even though there are a lot of graduates,
there is a great need for competent people who underwent formal training in the
field of public relations.
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Table 21. Science and Technology Labor Force 1989 Field of Study Number of
People % of Total
Engineering 39910 13.87 Physical Sciences 4200 1.46 Math and Sciences 3400 1.18 Life Sciences 32670 11.35 - Biological 2200 .76 - Health 2400 .83 - Agricultural 28070 9.75 Social Sciences 6180 2.15 Education (in academe) 176860 61.48 Other Fields 6200 2.15 Unclassified 18355 6.38 Total 287775 100.00
source: Compendium of Available S&T Statistics, DOST, 1992
5.1.3. Manpower Projections Using data from the Commission on Higher Education (CHED) and the
National Census and Statistical Board (NCSB), Tullao (1999) forecasted the
manpower needs of the Philippines for each of the various disciplines and
compared these with the projected supply of graduates from each of the fields.
Some of these fields can be directly traced to a business service sub-sector,
such as law (legal services), criminology (investigation and security agencies),
information technology (computer and related services), engineering
(engineering professions and services) and medicine & health (medical and allied
professions). The rest may be dispersed across the other business service sub-
sectors.
As can be seen in Table 22, there will be an oversupply in most of the
identifiable fields that would fit under business services, with the exception of
criminology which consistently posted a negative demand gap during the whole
period. The oversupply in the medical professions will decrease while information
technology will continue to experience sharp increases in popularity. A source of
concern should be the deficiency of engineers in two years time since this
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profession plays a critical role in the modernizing needs of the other sectors in
the economy.
Table 22. Anticipated Supply/Demand Gaps per Discipline Discipline 2000 2001 2002 2003 2004 Arts & Sciences 18809 18809 17425 16470 16052 Engineering 2226 793 (610) (1994) (3355) Medicine & Health 14767 11416 8153 4964 1837 Business/Commerce 51427 49945 48448 46907 45303 Agriculture 8447 8567 8692 8820 8944 Law 844 714 591 474 441 Criminology (1339) (1408) (1447) (1455) (1419) Information Technology 26354 34002 43697 55963 71472 Maritime 7773 6033 4434 2952 1582 Source: Tereso Tullao Jr, Manpower Supply-Demand Forecast, unpublished. Figures in parentheses are deficits, those without are surpluses.
5.2. Quality and Relevance of Training of Professionals The quality of training received by local professionals has been one
among the controversial issues facing education today. The length of training,
the curricula, and the budget allocated for such programs are the factors which
are seen to affect the quality of training.
Formal training of professionals in higher education institutions (HEIs)
usually takes a minimum of four years (or its equivalent) to complete. The
exceptions to these are: Engineering which covers five years; dentistry (which
requires two years of pre-dental studies) and veterinary medicine takes six years;
law, eight years; and medicine, nine years. Admission to law and medicine
programs requires an undergraduate degree. On the other end of the spectrum
are the security agencies and building cleaning services that only require its core
workers (i.e. security guards and janitors) to be high school graduates.
The length of time of education is not really a major issue. What matters
more is kind of education/training that takes place within this period. For
instance, in Engineering and Interior Design, representatives of their associations
believe that the curriculum is too theoretical, “too little time is spent for hands-on
training and developing on-the-job experience.” For management consulting,
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further education in the form of master’s degrees is necessary in order to develop
the strategic and integrative perspective needed for the job. Generally,
companies need to provide additional training to graduates to equip them with
the level of necessary to perform the job.
In recent years, the Commission on Higher Education has embarked on
several measures to address the issue of quality and relevance of education
offered by Higher Education Institutions (HEIs). These initiatives are focused on
the strengthening of accreditation programs, international benchmarking,
formation of the Centers of Excellence and Development, as well as the role of
the Technical Panels.
Accreditation programs, through the Federation of Accrediting Agencies of
the Philippines (FAAP), enable schools to set and measure their own educational
standards. International benchmarking involves the establishment of international
linkages/networks, consortia and twinning programs abroad. As of 1997, at least
71 Philippine universities and colleges signed bilateral agreements and
memoranda of understanding with universities in Germany, Belgium, England,
France, Egypt, Switzerland, Kenya, Canada, Australia, Germany, Japan, Korea,
Thailand, Singapore, Pakistan, and Hong Kong (CHED, 1997).
The Centers of Excellence/Development (COE/COD) were identified by
the Technical Panels of the CHED in the nine clusters of disciplines. These
schools will be responsible for meeting international academic standards and
being sources of technology and expertise for other schools in the same field.
In terms of developing middle-level manpower with adequate technical
skills, the Technical Education Skills Development Authority (TESDA) has
initiated programs of its own. For instance, security agencies send their security
guards to seminars co-sponsored by TESDA and the Philippine National Police
(PNP), as a requirement for the guard’s license. The government has already
defined the roles of several agencies (i.e. PRC, CHED, TESDA, DOLE) tasked
with implementing or coordinating education programs in the country. Despite all
these, the overall effectiveness of these various initiatives still needs to be
assessed. In addition, the government still has to formulate and agree on a
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unifying framework on human resource development where future sectoral plans,
executive policies, legislation, and other programs and projects could be based
(Conferido 1988).
Since the 1990s, the share of higher education in the total budget has
steadily increased. In 1998, for example, government allocated a total budgetary
outlay of P18.3 billion to support the higher education level. Of this amount,
P14.5 billion subsidized the operations of the 101 state universities and college in
the country, P2.6 billion went to CHED, P455 million to the Philippine Military
Academy, P42 million to the National Defense College of the Philippines, P87
million to the Local Government Academy, and P545 million to the Philippine
Public Safety College (Dept. of Budget & Mgmt., 1998).
Intertwined with the discussion of quality of education is the relevance of
such education given the needs of local business service companies. In this
respect, the mismatch between the offered programs and quality of graduates of
higher education institutions, with that of employment and society needs
becomes more distinct. The common problem faced by business service firms is
that the academic training of the student is very different from the requirements
of the industry.
This section focuses on the relevance of the specific knowledge, skills and
values of local professionals vis-à-vis the expectations of the business service
firms.
5.2.1. Expected Knowledge
Table 23. Areas of Expected Knowledge Areas of Knowledge PS CRS R&D RES R/LS OBS Knowledge of underpinning theories and principles
✔ ✔ ✔ ✔ ✔ ✔
Operation and maintenance of equipment/facilities
✔ ✔ ✔
Knowledge of government regulations and requirements
✔ ✔
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5.2.1.1. Professional Services. The expected knowledge from
professional service practitioners is very defined since most of these professions
are regulated by the PRC. The curriculum is standardized across all the schools,
and includes all the necessary topics for study and a specified number of on-the-
job training (OJT) hours. Practitioners should be acquainted with the theories
and principles that govern each of the specialized fields. In certain cases, a
thorough knowledge of government regulations and policies are necessary,
especially in the fields of accountancy (for taxation) and legal services.
An indicator of the quality of education offered by schools is the passing
rate in the board exams (see Table 23). As can be seen the field of medicine,
landscape architecture, pharmacy, and nursing have the highest percentage of
passers compared to the rest of the professions. On the other hand,
aeronautical engineering, plumbing, and accountancy had the lowest passing
rates.
Another indicator is the opportunity for local professionals to work outside
the country. For instance, there is a demand for Filipino professionals from the
medicine and allied professionals, accountancy, and architecture in certain areas
abroad. For example, the assistant treasurer of the Philippine Institute of Interior
Designers stated that in his 8 years of working abroad, there are Filipinos in
every advanced design firm in the United States, Singapore, and Hong Kong.
Electronics and Communications engineers also work abroad particularly in the
United States, Canada, Australia, and Singapore. Even in the area of veterinary
services, Filipino expertise get sent to Saudi Arabia. Optometrists are hired in
Thailand, Malaysia, and other Asian countries.
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Table 24. National Passing Percentages in the Board Exam, 1991 - 96 (Sorted by highest to lowest Average) PROGRAM 1991 1992 1993 1994 1995 1996 Average 1 Environmental Planning NE NE NE NE NE 100.00 100.00 2 Medicine 68.48 78.29 81.14 86.54 75.16 74.94 77.43 3 Landscape Architecture 67.00 86.00 33.00 75.00 75.00 66.66 67.11 4 Pharmacy 51.78 68.58 66.00 63.02 69.61 56.22 62.54 5 Nursing 57.94 61.00 63.21 61.45 58.24 54.18 59.34 6 Sanitary Engineering 75.00 67.20 50.00 54.00 48.91 51.28 57.73 7 Metallurgical Engineering 48.14 59.00 55.00 55.00 64.51 52.50 55.69 8 Geology 55.55 59.00 68.00 7.00 50.00 68.00 51.26 9 Midwifery 43.88 48.94 45.15 54.08 59.39 51.75 50.53 10 Social Work 48.00 54.00 29.00 52.12 58.30 56.80 49.70 11 Librarianship NE NE NE 50.50 51.75 44.39 48.87 12 Optometry 47.00 44.00 24.00 67.00 50.66 54.66 47.89 13 Veterinary Medicine 54.54 61.00 49.00 37.00 31.88 44.93 46.39 14 Geodetic Engineering 38.01 54.45 47.19 53.98 45.20 38.97 46.30 15 Radiologic Technology NE NE NE 50.10 46.23 42.51 45.08 16 Criminology 47.00 28.00 32.53 50.36 60.25 48.19 44.39 17 Medical Technology 45.22 34.20 36.53 48.09 61.71 34.68 43.41 18 Elect. & Comm. Engineering 38.25 32.14 40.52 50.43 52.41 46.17 43.32 19 Agricultural Engineering 51.00 42.00 37.00 44.00 23.75 57.70 42.58 20 Mining Engineering 54.45 68.00 41.00 45.00 10.00 30.77 41.54 21 Physical/ Occupational Therapy 44.56 47.23 46.75 43.88 36.88 29.01 41.39 22 Interior Design 54.00 40.00 38.00 35.00 40.32 39.47 41.13 23 Marine Engine Officer 71.26 51.34 32.38 25.11 26.55 35.13 40.30 24 Nutrition & Dietetics 35.05 33.00 33.00 37.80 44.00 56.00 39.81 25 Chemical Engineering 35.53 51.06 44.00 31.14 39.89 31.40 38.84 26 Naval Arch. & Marine Eng’g 15.00 67.00 3.00 66.66 29.41 35.71 36.13 27 Electrical Engineering 37.95 30.50 38.94 42.91 35.36 29.62 35.88 28 Forestry 22.00 16.00 30.00 44.00 58.36 32.45 33.80 29 Chemistry 19.00 25.00 27.00 49.00 39.68 39.30 33.16 30 Civil Engineering 34.93 28.15 28.10 33.62 34.04 33.95 32.13 31 Architectural Engineering 28.43 22.90 19.31 32.07 37.09 36.53 29.39 32 Mechanical Engineering 22.20 14.72 22.29 43.11 35.76 33.54 28.60 33 Marine Desk Officer 63.85 32.23 9.28 14.77 19.42 25.97 27.59 34 Dentistry 41.30 26.36 25.90 18.18 22.62 30.96 27.55 35 Law 17.81 17.25 21.65 30.87 30.28 31.21 24.84 36 Professional Teacher 13.78 25.29 34.19 24.96 18.36 27.50 24.01 37 Aeronautical Engineering 8.45 28.00 17.00 33.00 18.64 20.75 20.97 38 Master Plumbing 22.95 20.00 15.47 20.15 16.67 16.72 18.66 39 Accountancy 14.15 15.35 15.27 14.76 14.15 17.18 15.14 40 Customs Broker 25.00 14.00 12.00 8.67 11.00 10.67 13.56 41 Sugar Technology NE NE NE NE NE NE n/a Sources: Professional Regulation Commission (PRC), Manila Law, Supreme Court, Manila Professional Teacher (PBET) 1991-1995, Civil Service Commission Compiled by : Information and Publication Division Office of Policy, Planning, Research and Information Commission on Higher Education 5/f DAP Bldg., San Miguel Ave., Pasig City NE - No Examinees
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5.2.1.2. Computer and related services. The expected knowledge from
workers under this sector is very specific to the existing kind of technology
available. Adeptness in work concerning mainframes, minicomputers, and
microcomputers, and knowledge in the current programming languages and
application software are necessary in the industry.
As an indicator of quality, the credibility and expertise of local IT
professionals are recognized worldwide as proven by their satisfied customers in
the fields of advertising, banking, communication, defense, education, finance,
government, health, insurance, manufacturing, mining, public utility, realty,
science and research, shipping, stocks and trading. Manila is recognized as a
major outsourcing center for companies in the United States, Japan, and Europe.
Several Philippine software companies have mastered the process of software
development on an “offshore” mode, starting with software platform conversion
projects and moving on to system construction, full systems development and
even to on-going systems maintenance.
5.2.1.3. Research & Development. It is necessary that R&D practitioners
know the various research methodologies and should have specialized
knowledge rooted in a specific branch of science. The quality of education is
sufficient, but according to the Department of Science and Technology, there are
not enough qualified R& D practitioners in the country.
5.2.1.4. Real-estate Services. Practitioners in this sub-sector must be
very aware of existing legal requirements on the real estate business in the
Philippines. Land laws, zoning regulations, and property valuation are examples
of the practical knowledge that they should possess. An examination is also
undertaken to ensure that all professionals that deal in this kind of business are
prepared with the needed knowledge.
5.2.1.5. Other Business Services. Unlike the other fields, the supply of
professional services of this sub-sector comes from diverse areas of study. In
the advertising industry, for instance, since there very few educational institutions
that offer full-blown college degrees in advertising, the graduates that are
accepted usually major in Marketing and other business-related courses.
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According to the ADBOARD, what is really needed in this business is creativity
and talent and not an abstract collection of concepts and principles.
Another example is in the area of management consulting where
knowledge in strategic management and organizational development is paired off
with very specific knowledge depending on the expertise of the firm. If they
specialize in project management, then a working knowledge of operations
research and engineering is necessary. If these are training specialists, then a
background in organizational behavior is required. In both cases, aside from a
formal education, these business service companies should acquire an extensive
knowledge of the industries of their customers.
For placement agencies, practitioners should know psychometrics and
salary wage administration. In the area of investigation and security, a high
school diploma is sufficient for one to be a security guard, though there are some
who continue their education by studying criminology courses. The academic
requirements for the core personnel of building cleaning service firms are the
same. Like the rest of the sub-sectors in business services, there are no specific
expectations on the knowledge of personnel, since what is more important are
skills and experience which can be acquired on the job.
There is a demand for Filipino practitioners in the region, especially highly
creative fields such as advertising, marketing, and public relations. The strong
Western cultural influences and the Asian roots of Filipinos enable them to excel
in large multinational companies that cater to Asian markets. For example,
marketing professionals are very “exportable,” according to the vice president for
education of the Philippine Marketing Association, especially in the fields of
brand management and advertising. Filipinos are sent to Hong Kong, Indonesia,
Singapore, and Malaysia where they take critical posts in the development of
their respective companies.
5.2.2. Expected Skills Skills refer to a trade or technique that requires special training or manual
proficiency. Skills vary widely across the various sub-sectors and are very
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specific to the work done in a firm. For example, in architectural services,
professionals must possess skills to match the following steps of a given project:
preliminary studies on site analysis/conditions and climactic/environmental
concerns, occupancy requirements; costing; schematic and final design
development; construction inspection; interpretation of contract documents;
preparation of progress reports; development of promotional materials/
presentations and operating manuals.
There are, however, skills that are common to all of the sub-sectors
namely, analytical skills, computer skills, communication skills, interpersonal
skills, equipment / machine related skills, and specific to sub-sector/business
skills. It must be noted that these basically fit the same areas that the EDCOM
Report of 1991 pointed to in its assessment of the mismatch between graduates
and industry needs. Velazco (1991) as cited by the EDCOM Report cited from
his direct observations and numerous interviews, the following attributes
expected of college graduates:
1. Ability to apply new methods and techniques learned in school to
actual business or industrial problems.
2. Ability to write clear, grammatically correct business memoranda,
letters, and reports.
3. Ability to present orally the status of ongoing projects in a professional
manner.
4. Ability to use computers for basic word processing and spreadsheet
calculations or computations.
5. Ability to understand how computers and data communication
technologies are applied in business.
6. Ability to deal with customers and fellow employees in a professional
manner.
7. Ability to show leadership potentials.
8. Ability to apply ethical decisions in difficult business situations.
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Analytical skills refer to the ability of local practitioners to examine
situations/a set of data in detail in order to discover meaning and essential
features, etc. For example, in the field of computer-related services, in order for
programmer to tailor-fit the database management needs of a client, it requires
that he must have studied the company thoroughly and matched it with the
capabilities of the available technology.
Computer skills refer to basic computer literacy (i.e. the use of Microsoft
Windos) - a prerequisite for all workers, in all industries and know-how in the use
of application programs specific to an industry. Examples are: graphic design
and lay-out software, such as Adobe Photoshop and Pagemaker are the norms
for the printing and publishing industry; Computer Aided Design (CAD) for the
fields of architecture and engineering; programs for statistical analysis is used by
placement agencies and R&D firms.
Communication skills refer to the ability to express one’s message
clearly in both oral and written forms. For instance, management consultants in
the field of accountancy, engineering, and organizational development need to
interface very closely with their clients. Reports and presentations, as well as,
listening skills play an important role in presenting ideas and building
relationships with clients.
Closely related to communication skills are interpersonal skills, which
refer to the local professionals’ ability to work effectively in teams and to build
satisfying business relationships with one’s co-employees, superiors, suppliers,
clients, and other stakeholders. In photography studios, the ability of the staff to
bring their different talents and skills (pictorial set-ups, retouching, photography,
selling) together and match these to the needs of the customer.
Equipment/machine skills pertain to the ability of technicians to operate,
maintain, and repair the company’s equipment and machines. A good case for
this is that workers in companies engaged in rental / leasing of air transport must
know how to maintain and fix airplanes, operate aviation equipment, and
maintain aviation engines.
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5.2.3. Expected Values
Similar to the needed skills, there are values commonly expected from
local professionals, namely honesty, professionalism, loyalty, integrity,
commitment, and learning. Almira (1990) as cited in the EDCOM Report,
mentions a training gap in so far as the need to develop a true sense of values
among employees. “She observed that there are graduates, even from highly
respected institutions, who do not have the values that companies expect –
discipline, honesty, etc.”
Among all the values, honesty is the most frequent value expectation of
management from local professionals. Professionalism, which means being on
time and having a positive attitude towards responsibilities, is another priority.
Loyalty is also seen as an important value, since some companies claim that,
particularly in the fields of engineering consultancy and information technology,
younger employees often transfer to other companies once they are offered
higher pay. Costs are higher because aside from losing the training investment,
it is difficult to train new personnel in the middle of a project.
Overall, the mismatch between the quality of graduates and the needs of
business service firms are still present. Therefore, there is a need to improve the
country’s present education and training so that it will not only satisfy local
requirements but international standards as well.
One of the concerns that should be addressed is the view that most of
those who have been entering the workforce in recent years can hardly speak
and write English properly (San Gil, 1999). This is traced to the need for basic
education institutions to provide students with a strong foundation in the 4Rs
(reading, writing, arithmetic, and right conduct).
In terms of supply, a critical shortage of engineers and criminologists is
forecasted while there is an oversupply in medicine and information technology.
In terms of quality and relevance, given the various fields under the business
services sector, there is need to look at each industry closely and identify which
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concerns should be treated on a per case basis, and which issues could be
addressed by broad programs.
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6. PROSPECTS OF NEGOTIATING MUTUAL RECOGNITION AGREEMENTS The process of liberalization may be carried out through the regulation of
the practice of the professions via bilateral and multilateral agreements between
and among the member economies/countries of the World Trade Organization
(WTO), Association of Southeast Asian Nations (ASEAN), and other regional
organizations. It may will provides a background that led to this approach
towards liberalization, and assesses the country’s prospects in negotiating
mutual recognition agreements with selected countries.
6.1. Background The General Agreement on Trade in Services (GATS) is one of the major
agreements completed during the Uruguay Round of trade negotiations in 1996.
The intent of the GATS is to expand trade in services internationally with its
commitment to progressive liberalization through periodic negotiations. Aside
from providing the legal framework for setting up transparent rules and
regulations that would limit the intervention of governments and other institutions
in the flow of trade in services, the GATS seeks to be an avenue of economic
growth for all trading partners and the development of developing countries.
(Tullao, 1999)
The scope of the GATS covers the four supply modes of services, namely:
(1)Cross-border supply, where services are supplied through telecommunications
and postal networks; (2) Consumption abroad, in which services are purchased
in the territory of another country; (3) Commercial presence, in which service
providers conduct business by establishing offices, branches, agencies, joint
ventures, etc. in another country; (4) Movement of natural persons, wherein
professionals from one territory are employed as service providers in other
countries.
In addition, the signatories of GATS have two major obligations which are:
(1) The Most Favored Nation Treatment (MFN), wherein countries shall not
discriminate in the extension of concessions to all signatories of the agreement.
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A benefit given to services and service providers of one member country shall be
accorded to services and service providers of other member countries. However,
the MFN treatment does not prohibit a group of member countries from extending
among themselves preferential concessions to facilitate and enhance trade in
services; and (2) Transparency, which calls for the publication and
dissemination of all relevant laws and regulations regarding the conduct of trade
in services in member countries. Commitments may be horizontal, which are
general limitations on market access and national treatment, or specific, which
pertains to more particular and more defined limitations (Domondon, 1997)
Progressive liberalization of trade in services takes two forms: (1)
National Treatment, which states that service or service providers shall be given
the same treatment as the citizens of the host member country in the conduct of
their commercial operations and, (2) Market Access, which refers to the removal
of restrictions on service providers like quotas, restrictions on commercial
presence, limitations on equity participation, and other barriers on the free flow of
services and service providers. Non-discriminatory barriers which limit market
access to a certain degree (e.g. qualification requirements and procedures,
technical standards, licensing requirements) are not considered to be
unnecessary barriers just as long that these are based on transparent and
objective criteria. (Tullao, 1998)
6.2. The Mutual Recognition Agreement (MRA) Under Article VII (Recognition) of the General Agreement on Trade in
Services (GATS), the Mutual Recognition Agreement (MRA) is seen as an
alternative by which liberalization of trade in services could be hastened. An
MRA does not automatically extend the right of professionals to practice in
another country, rather it is a formal agreement between two or more countries,
establishing procedures that assess the manner by which differences between
their qualification systems can be bridged, while considering the mechanisms for
the recognition of their respective home country requirements in the host country.
MRAs are also accepted venues for expanding trade in services not only by the
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World Trade Organization through the GATS, but also by the ASEAN, as stated
in Article V of the ASEAN Framework Agreement on Services (AFAS); and by
APEC, in the guidelines for the mutual recognition of professional services
developed by its members.
The difficulty of negotiating MRAs is the complexity of issues that need to
be faced when two or more countries negotiate and agree on the manner by
which to bridge the differences in the qualifications, regulations and requirements
necessary in the practice of a profession. Furthermore, inherent in reciprocity
agreements is the possible discrimination on third parties.
Despite the number of topics that need to be discussed and the length of
time necessary for such negotiations, there are certain benefits which may be
derived from MRAs, namely: (1) it liberalizes the trade in professional services
and results in the free movement of professionals across borders; (2) it
increases the comparative advantage of a country in professional services; (3) it
enables importing countries to use imported skills for the improvement of the
profession; (4) it allows various regulatory bodies involved in granting rights to
practice to save time and resources by working together and engaging in more
effective division of labor; and (5) it enhances mutual learning and the
transmission of regulatory experience, thus raising professional standards and
the level of access to professional services (Yew, 1997).
6.3. Prospects for Business Services Among all the business service sub-sectors, the only field that has any
immediate prospects for an MRA is the accountancy profession. The
Professional Regulation Commission, with inputs from the Philippine Institute of
Certified Public Accountants (PICPA), is currently in the process of forging an
MRA with certain ASEAN countries. According to Domondon (1997) the
accountancy profession was selected as a priority for liberalization because of
“its impact on the growth and globalization of the capital markets.” Atty. Antonio
Acyatan (1999), president of the ASEAN Federation of Accountants (AFA),
mentioned the difficulties in drafting an MRA with the neighboring countries,
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namely: (1) the wide differences in terms of education and ethics, (2) the
accounting standards followed and adapted in the specific country and, (3)
auditing standards and practices.
Acyatan added that liberalization in the professional services might take
time since all countries were “observed to be hedging their respective positions
during the negotiations. This is especially true among participating ASEAN
countries.” Considering the differences in language (Thais have difficulty
communicating in English), size of the market (Brunei is too small), standards
(Vietnam, Myanmar, and Laos still need to develop their accountancy sub-
sector); systems (Malaysia and Singapore are based on British accountancy
systems, while the local system is American-influenced). Indonesia was chosen
to be the most likely partner for an MRA. The MRA for Accountancy is seen to
be a benchmark for other professions when they choose to follow suit. Their
situation illustrates the various hindering factors that need to be overcome in the
negotiations for mutual recognition.
The choice for Indonesia as the most probable partner for the field of
Accountancy is both realistic and practical. Liberalization through MRAs could
be done more carefully and rationally by pursuing bilateral agreements with
friendly countries with similar standards, or between countries whose standards
are more mutually acceptable and where working relationships can be mutually
beneficial. The congruency of the Philippines and Indonesia in many aspects is a
facilitating factor that would contribute in the future success of the MRA. Once it
works, then the agreement could be gradually extended to other countries (De la
Rea –Tan, 1999).
Aside from the profession of Accountancy, the fields of Engineering and
Architecture are also being eyed as potential sectors where a mutual recognition
agreement would prove to be beneficial. An agenda for the specific items for
mutual agreement was drawn by the respective professional boards of the two
fields. They also listed the possible impediments in the negotiations, namely: (1)
Domestic regulations/codes and technical standards related to
structural/climatological conditions in the country; (2) Liability of a foreign
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professional based on civil and/or penal codes in case of structural failures due
to planning, design, construction method, and others; (3) Differences in
standards of professional fees and compensation; (4) Availability of technology
(including equipment, materials, etc.) to suit international standards; and (5)
Differences in availability of supply of manpower. In this case, it is not only the
recognition of qualifications which are given importance, but also the factors that
need to be considered in the actual practice of the profession with the presence
of foreigner practitioners in the market.
Filipino engineers, as a whole, have had a long experience in building
infrastructure needs in the Middle East and are now branching out to the latest
technologies. According to the Institute of Electronics and Communications
Engineers of the Philippines, many engineers are hired abroad (i.e. the U.S.,
Canadian, and Australian markets). Presently, the demand for engineering
services exceeds the available supply, and this trend is seen to continue in the
future. Considering the negative supply-demand gap for this profession, the
question of not having enough local professionals in this field should be
considered.
As far as architectural services are concerned, there is at present an
oversupply of architects in the Philippines. There are also some large Filipino-
owned architectural firms that have clients abroad (e.g. Locsin, Mañoza, etc.).
Interior designers also have the same opportunities, according to Arlen De
Guzman of the Philippine Institute of Interior Designers. Filipino designers can
enter markets abroad with ease, “there’s no need for a license, you’re already
hired in a company.” According to Architect Diogenes Barredo, the president of
the United Architects of the Philippines, if ever there would be foreign players
coming in, the industry must ensure that costs/ or professional fees are
standardized among professionals because a price war might result if one
practitioner slashes his rates just to get clients. This price war will destroy the
credibility of the profession.
After considering the issues that their industries need to face, the next
step is for them to find other countries that are willing to reciprocate and mutually
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recognize the qualification. Among the local practitioners, it is imperative that
they have a unified position as a profession towards liberalization, including the
specific goals that they want to achieve in their negotiations.
In September 1997, a consultation was conducted between
representatives from government and from the business and professional
sectors. The purpose of the consultation was to solicit the views of the various
sectors towards liberalization of trade in services, and to determine which among
the professions and fields are already competitive. The following professions
were identified: (1) agricultural engineering can compete in the areas of
consultancy and project implementation, (2) geodetic engineers are at par with
their foreign counterparts, especially if their equipment is modernized, (3)
mechanical engineers are better compared to counterparts in the ASEAN region,
however, when it comes to American and European engineers, local practitioners
are at a disadvantage because the available technology is outdated, (4) Filipino
nurses are very competitive due to the excess supply and their employment
versatility to health-related jobs, (5) medical technologists have their capabilities
in the areas of transplanting heart and bone marrow, nuclear medicine,
neurology, organ procurement, and sperm banking, (6) physical therapists are
capable in the prevention of physical dysfunction, especially in industrial
occupational diseases. At the end of the session, it was agreed that regulations
and requirements could be relaxed in certain sectors, namely: nursing, medical
technology, veterinary medicine, nutrition/dietetics, optometry, agricultural
engineering, midwifery, pharmacy, and information technology. These fields
could be seen as probable candidates for mutual recognition agreements.
Among all these professions, the field of nursing seems to hold the most
promise in negotiating an MRA since there is an abundance of local
professionals who are more than qualified in competing in outside markets,
especially in the region. Another facilitating factor is that the sub-sector is kept
updated through the Philippine Nurses Association’s active participation in
international conferences and conventions.
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The other fields such as: optometry, medicine, medical technology, and
pharmacy should review the present laws governing their profession and
determine the possibility of incorporating foreign reciprocity provisions if this will
afford greater access for Filipino professionals to external markets and better
technology.
In the research and development subsector, mutual recognition
agreements may provide the opportunity for local players to build this
underdeveloped industry by allowing the entrance of technical expertise and
more modern equipment and tools. The fields of public relations and marketing
services can also look into MRAs as a means for building their network of clients
in the region. Because, in these fields Filipinos have an edge since they are
more adaptive in western-run organizations that sell to fellow Asians. Dr.
Leonardo Garcia of the Philippine Marketing Association stated that Filipino
marketers have built its reputation in the region. Some Filipinos even get sent to
other Asian countries to develop the business there.
For external markets, the ASEAN region is seen to be the best option at
the moment due to the presence of Filipino professionals all over the region, as
well as due to the similarity in the requirements, regulations, and cultures. The
establishment of the ASEAN Framework Agreement on Services (AFAS) in
December 1995, is a venue for local service sub-sectors to open up talks of trade
in services among its member countries. Under the AFAS, the ASEAN member
states (Brunei Darussalam, Malaysia, Indonesia, Singapore, Thailand, Vietnam,
the Philippines, and soon Myanmar) shall extend to one another preference in
trade in services, including the practice of the professions. Thus, whatever
preference is given to one Member State under this agreement is automatically
given to other Member States. The specific objectives of the AFAS are:
1) To enhance cooperation in services among Member States in order to
improve the efficiency and competitiveness, diversify production
capacity and supply and distribution of services of their service
suppliers within and outside ASEAN;
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2) To eliminate substantially restriction to trade in services amongst
Member States; and
3) To liberalize trade in services by expanding the depth and scope of
liberalization beyond those undertaken by Member States under the
GATS with the view of realizing a free trade in services.
Such liberalization will be effected through:
1) Eliminating substantially all existing discriminatory measures and
market access limitations amongst Member States; and
2) Prohibiting new or more discriminatory measures and market access
limitations.
At present, the AFAS is running behind its target date – that by the Year
2000, there should already be an “acceleration of the free flow of professional
services in the region through an agreement for mutual recognition of
professional qualification, certificates and educational attainment” (De la Rea –
Tan, 1999). In this light, the Philippines can play a more active part in the AFAS
by initiating and facilitating MRA negotiations. It must be noted that the
Philippines already committed to liberalization of trade in services prior to the
GATS, since the Asean Framework dates back to 1995.
There are fields, however, where mutual recognition agreements are seen
to be superfluous since the benefits promised by such agreements are already
inherent or not necessary in the present industry situation. Examples of these
are computer-related services, and advertising services where: (1) the industries
are virtually liberalized, (2) there are no barriers to access to technology, and (3)
Filipino professionals are very competitive and can easily work in markets
outside the Philippines.
As a conclusion, a mutual recognition agreement is a feasible alternative
that countries can use to hasten liberalization of trade in services. Despite the
difficulties seen in negotiating for common standards, requirements, practices,
and penalties, there are many benefits which the Philippines may derive from
such arrangements.
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The success of an MRA is influenced by the degree of willingness and
availability of the parties involved for mutual recognition, the degree of similarity
in culture and requirements between or among the involved parties, the
regulatory framework governing their business services, and the capability of
their respective human resources.
Given all these considerations, the Philippine sub-sector that shows the
brightest prospects in negotiating an MRA is the field of accountancy, since it is
the only profession that is presently undergoing negotiations. The professions of
Nursing, Architecture, and Engineering, specifically electronics and
communications, aeronautical, agricultural, mechanical, civil, and electrical
engineering, can be next in line for negotiations.
Prospects of the sub-sectors of research and development, public
relations, and marketing services, and the professions of medicine, medical
technology, veterinary medicine, nutrition/ dietetics, optometry, midwifery, and
pharmacy should be further studied.
There are no benefits seen in MRAs for the areas of advertising services
and information technology, since these sub-sectors are already virtually
liberalized. It must also be noted that, it might be more difficult for the Philippines
to engage in negotiations with countries that are highly-developed and very
different in terms of economic and cultural backgrounds. Since, there are
already existing commitments with ASEAN neighbors whose backgrounds are
not as disparate from the local set-up, then MRAs could be pursued at the
moment with ASEAN members.
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7. ISSUES IN THE BUSINESS SERVICE SECTOR This section identifies critical issues and concerns related to the
development of business services in the country, and to the promotion of market
access of Filipino professionals abroad. These issues must be taken into
consideration as attempts at the further liberalization of trade in services are
undertaken.
7.1. Social and cultural issues
7.1.1. Level of education / skills of the labor force. The levels of
educational attainment of the labor force have an effect on the quality of service
provided by Filipino workers, especially in the light of the demands of
globalization. In 1997, only 11% of the total employed were tertiary level
graduates, while another 11% were tertiary level undergraduates. High school
graduates accounted for 20%, while 13% were able to finish only one or two
years of high school. The remaining 40% reached only the primary level, and 3%
had no schooling at all (Conferido, 1998).
7.1.2. Training gap. The quality of education of Filipino professionals is
significant in determining their preparedness to face foreign competition and their
acceptability in foreign markets. A major issue raised is how to bridge the gap
between the differences in educational qualifications and other training
requirements of professionals of countries entering into an agreement.
7.1.3. Quality of education. A look at the passing rates of several
licensure examinations (see Table 26) indicate an uneven quality of education
provided by schools across professions. Licensure exams in nursing and in
medicine yield relatively higher passing percentages compared to licensure
exams in law and accountancy, which have historically yielded very low passing
rates. This situation affects the supply of professionals in the industry, and
indicates that the investment made by many individuals for their education has
not resulted in positive personal returns for them.
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7.1.4. Colonial mentality. Some sectors believe that the entry of foreign
players in the country might result in the loss of business for local professionals
because of the perceived preference of Filipinos for what is foreign. This has
made some professional associations, justified or not, wary of liberalization.
7.1.5. Brain drain. The growing demand for the services of Filipino
professionals abroad has resulted in the exodus of skilled workers to other
countries even if the Philippines still has a shortage of professionals like
physicians, particularly in the provinces. The issue is seeking a balance between
satisfying local demand for certain professionals and taking advantage of
opportunities brought about by more liberal arrangements in the trade of services
in the global market.
7.1.6. Separation of families. With more Filipinos seeking employment
opportunities abroad, one-parent families have become a common occurrence,
threatening the stability of the family as the basic unit of society. The
liberalization of trade in services will likely contribute to the acceleration of the
deployment of Filipinos abroad.
7.2. Technological issues 7.2.1. Rapid development of technology. This development has left
certain industries behind those of other countries, and might serve to prevent
these industries from moving towards liberalization. After all, only those that can
keep up with technological developments will be able to survive in a liberalized
environment. On the other hand, the development of telecommunication
technology have made the cross-border supply mode a viable option of delivering
service for IT professionals, architects, and engineers among others.
7.2.2. High cost of technology. Some business services sub-sectors are
affected by the high cost of acquiring technology, either in the form of new
equipment or in the training of personnel. The primary cause of the expensive
technology is that these are largely provided by foreign suppliers because of the
absence of local industries that manufacture these equipment. In the aircraft
chartering business, local firms acquire their aircraft from countries such as
108
France, Germany, and the USA. In the printing business, machinery acquired by
local firms come from countries like Germany and Japan. Moreover, the spare
parts usually come from the suppliers of these equipment as well, making local
firms captive markets as far as the suppliers are concerned. This situation
makes local firms vulnerable to foreign suppliers, and prevents them from
bringing down their costs to a level competitive enough to establish a successful
commercial presence abroad. Most Philippine firms do not have the capital to
establish branches or subsidiaries in other countries.
7.3. Economic issues
7.3.1. Level of unemployment. While the level of unemployment in the
country remains high, there will be a compelling need for many Filipinos to seek
employment abroad even if they face relatively lower wages, discriminatory
treatment, and poor working conditions. This brings to fore the need to forge with
foreign countries agreements meant to protect the rights of overseas Filipino
workers and for the government to closely monitor Overseas Filipino Workers
(OFWs) in countries where they are deployed.
7.3.2. Supply of professionals. There is enough supply of professionals
for certain professions, and a relative scarcity in others. Despite the oversupply
in other areas, however, many professionals still cannot be readily absorbed
abroad because of deficiencies in their level of professional competence and/or
technical skills. The lack of limited technical capabilities, Avila (1998) said, would
make it difficult for the country to avail of opportunities in cross-border trade or
establishing commercial presence in other countries.
7.3.3. Underdevelopment of certain service suppliers. Local service
suppliers might be unable to take advantage of certain market openings to create
economies of scale or achieve significant enough level of specialization given
that the Philippines’ service suppliers are still relatively underdeveloped (Tullao,
1998). Most Philippine firms do not have the capital to establish branches or
subsidiaries abroad. The lack of limited technical capabilities would also make it
difficult for the country to avail of opportunities in cross-border trade or
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establishing commercial presence in other countries. The possibility of
commercial gain may be limited to the movement of local labor for international
services, and to the freeing up of the movement of consumers availing of
Philippines services (Avila, 1998).
7.3.4. Lack of access to capital. Funding training activities and the
acquisition of new technology is a very important issue in the development of
business services in the country. These are usually hampered by the
inadequacy of capital due either to the reluctance of banks to lend money to
start-up firms or to the lack of information regarding available funding sources or
credit facilities.
7.4. Political and legal issues 7.4.1. Equal treatment of manpower. Because of the large number of
Filipinos working abroad brings with it issues regarding their welfare. Do they get
the same benefits as nationals of the host country? Do they enjoy the same
protection and security of tenure? The treatment of Filipino women, who are
often victimized abroad (rape, sexual exploitation), is also a major concern since
majority of deployed Filipino workers abroad is female.
7.4.2. Role of government. The government’s role in the development of
business services is largely in the areas of enforcing laws and collecting taxes.
While different government agencies have specific roles to play in the
development of business services in the country, their efforts are largely focused
on their respective concerns and not geared towards the larger objective of
increasing the productivity and competitiveness of business services in the
country. This is likely brought about by the fact that government has yet to
formulate a unifying framework that would promote business services, and spell
out the specific roles, and areas of coordination, of key government agencies in
reaching this goal. Among the agencies that could contribute to the development
of business services in the country would be the Professional Regulation
Commission, the Department of Labor and Employment, the Philippine Overseas
110
Employment Agency, the Department of Trade and Industry, and the Board of
Investments.
111
8. RECOMMENDATIONS The following recommendations are presented in the context of the
country’s commitment to further liberalize the trade of services. The intent is to
develop the business services sector to prepare local players for the entry of
foreigners and to enhance the marketability of the country’s business services
manpower in the international market. The determinants of a subsector’s
competitiveness would depend on: 1) the level of expertise/competence of local
professionals/businesses, 2) the degree of openness of foreign markets and
their demand for local expertise, and 3) the degree of openness of the local
regulatory framework (i.e. absence or presence of reciprocity provisions).
8.1 Legal / regulatory environment 8.1.1. Study possible legislation that would make liberal exemptions to the
Constitutional provision on the practice of foreign professionals in
the country.
8.1.2. Review bilateral agreements on reciprocal recognition of
professionals that may have inconsistencies with the general
obligations of GATS.
8.1.3. Adopt the recommendations of the review of the labor market test
of the Philippines.
8.1.4. Pursue ongoing negotiations for mutual recognition agreements
with selected countries in the field of accountancy, and use it as a
model for negotiations in other professions. In the process of
negotiating MRAs, the goals and nature of the MRA should be
clearly explained to all parties concerned. Moreover,
representatives of accredited professional/industrial organizations
should be directly involved in the negotiations since they are most
knowledgeable about their respective professions and industries.
8.1.5. Accelerate the removal of barriers in professions that are deemed
globally competitive, such as law, accountancy, advertising,
medicine, nursing, and engineering, and in business services
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sectors such as management consulting services, engineering
consulting services, and computer and related services.
8.1.6. Develop national policies aimed at coordinating the efforts of all
concerned parties in the development of business services. These
policies could be patterned after the recently formulated National
Book Policy of the country which spells out the medium-term
targets for the book publishing industry, the strategies to be
adopted (including incentives) to modernize the industry and to
increase its productivity and its competitiveness in the global
market. These policies should also clearly state the roles to be
played by government, industry players, and other concerned
stakeholders.
8.1.7. Review rules on the prohibition of advertising of services of certain
professions (e.g. accountancy), and on the limitation of the use of
the name of a foreign partner company in domestic operations.
8.1.8. Initiate the rationalization of the classification of business services,
using the GATS classification as basis. This should include the
reclassification of certain services such as real estate services,
which is currently lumped under the construction industry.
8.1.9. In the process of negotiations for a Mutual Recognition Agreement,
(1) clearly explain the goals and nature of the MRA to all concerned
parties, (2) pursue bilateral arrangements since they are more
feasible compared to multilateral negotiations, and (3) solicit the
inputs of, and actively involve, accredited professional/ industrial
organizations in the negotiations.
8.1.10 Consolidate the proposals of all business services sectors, and
provide for a general framework of action towards a Philippine
position in the GATS services negotiations.
113
8.2. System of incentives 8.2.1. Grant tax exemptions to companies that provide training for their
employees. This will promote the concept of human resource
development as a strategic option in enhancing organizational
competitiveness.
8.2.2. Allow tax-free and duty-free importation of needed equipment, and
tax credits on locally purchased equipment, for capital-intensive
business service industries such as rental / leasing of transport
equipment, rental / leasing of other equipment, printing and
publishing, photographic services, technical testing and analysis,
computer related services.
8.2.3. Grant income tax holidays to upstart firms, particularly to those
belonging to industries that require heavy capital investments.
8.3. Human resource development 8.3.1. Formulate a unifying framework for human resources development
that will enable government to determine priority areas in the
implementation of training programs to enhance the professional
and technical skills of Filipino workers. This unifying framework
should provide a better perspective in dealing with issues on
globalization, technological developments, and the quality of
education as they affect the level of competitiveness of the
country’s labor force.
8.3.2. Strengthen the capability of educational institutions to satisfy
industry’s need for professionals, particularly in areas where there
is a lack of supply.
8.3.3. Strengthen the basic education system to enable elementary &
secondary schools to equip students the basic skills, primarily the
4Rs (reading, writing, arithmetic, and right conduct). This also
includes a strong foundation in the use of English.
114
8.3.4. Conduct a closer study on the human resources development
efforts of local firms to pinpoint specific areas of deficiencies.
8.3.5. Promote continuing education to enhance the skills of professionals
and technical workers to make them more competitive abroad and
less vulnerable to displacement by foreigners who enter the local
market.
8.3.6. Review the continuing professional education (CPE) program of the
Professional Regulation Commission (PRC) to determine the extent
with which the objectives of this program are being met. Issues
concerning the relevance of the CPE activities being offered by
accredited CPE providers, the cost of CPE programs, the limited
compliance of certain professions with the CPE requirements, the
commercialization of CPE programs, and the strong lobbying of
some industry associations to reconsider the mandatory nature of
the CPE programs, should be settled soon.
8.4. Networks and linkages 8.4.1. Develop and strengthen linkage among industry players. This
will assure industry players a stronger voice when dealing with
government regarding the formulation of national policies
concerning their respective industries. This will also open up
opportunities in terms of pooling of resources, exchange of
information, and the conduct of training for members. Industry
associations should also take an active role in the process of
negotiating mutual recognition agreements (MRAs) because they
are the one who are most familiar with their members’ needs,
capabilities, and preparedness to face liberalization.
8.4.2. Develop and strengthen linkage between industry and academe. This could be done through on-the-job training (OJT) or
apprenticeship agreements that would enhance the skills of college
students through hands-on training and exposure to the actual
115
workplace. The parties could also come up with consultancy
arrangements that would enable firms to benefit from the research
capabilities of the faculty of schools, and that would enable
academe to tap the expertise of professionals in their academic
programs. Finally, industry and academe could institutionalize
systems for the continuing education of company personnel either
through graduate studies or through in-house training / customized
programs that could be provided by schools to the firms.
8.4.3. Develop and strengthen linkage between industry and government. The industry associations should work closely with
government agencies in the following areas: (1) negotiation of
MRAs with other countries, (2) review of licensing and regulatory
requirements to make them more attuned to present-day
requirements, (3) provision and exchange of information regarding
both the local and foreign markets, (4) formulation of a national
policy for certain industries, (5) provision of continuing education,
(6) marketing efforts abroad, and (7) promotion among their
members of various financing sources offered by government,
among others. A model that could be closely examined concerning
government and industry coordination is the Packaging Center of
the Philippines, one of the flagship projects of the Department of
Science and Technology (DOST). It has an Advisory Committee
tasked to provide direction and recommendations on its overall
program strategy, taking into consideration the inputs of various
sectors who have a stake in the packaging industry. This
Committee is composed of representatives from the Department of
Science and Technology (DOST), Industrial Technology
Development Institute (ITDI), Packaging Institute of the Philippines
(PIP), PhilExport, NEDA, CHED, and DTI. 8.4.4. Develop and strengthen linkage between industry and
international associations. Local industry associations should
116
affiliate with international associations, and strengthen their
relationships with their counterpart associations in other countries.
This will open up opportunities for possible joint venture
partnerships and exchange of technology. This might also facilitate
discussions regarding the possibility of negotiating mutual
recognition agreements.
8.5. Joint ventures / alliances / mergers 8.5.1. Encourage local firms and foreign firms to form joint venture
partnerships and to explore mutually beneficial arrangements,
using the Philippines as base of operations. While local firms will
benefit in terms of additional capital investments and the transfer of
technology into the country, foreign firms will also derive gains in
terms of getting a foothold in the domestic market, and in terms of
utilizing their local counterparts’ strong understanding of the local
business conditions.
8.5.2. Encourage the smaller local players to consider the possibility of
merging with each other to enable them to build up their capital
base and to attain economies of scale needed to compete
effectively in a more competitive environment.
8.6. Financing 8.6.1. Encourage banks to create special financing schemes to help
business services gain access to more capital needed for
investment in advanced technology, and to help them bridge
working capital requirements.
8.6.2. Encourage banks (e.g. Development Bank of the Philippines) and
other financing institutions to provide funds for training and
development of local manpower.
8.6.3. Provide direct government assistance to professional associations
117
8.6.4. Encourage local business services players to avail of the benefits of
the “Productivity Incentive Act”
8.6.5. Simplify requirements for availing of loans to encourage business
services, particularly the smaller players, to take advantage of
financing schemes.
8.6.6. Encourage local investors, particularly in closely-linked industries,
to pool venture capital funds.
8.6.7. Encourage foreign investors to establish commercial presence in
certain areas that need expertise and advanced technology (e.g.
R&D services)
8.7. Recommendations for future research related to the industry Based on the difficulties the research team encountered in the process of
completing this project, the following suggestions are forwarded to facilitate
future researches:
8.7.1 Philexport-TAPS should have formal agreements with agencies
such as the National Statistics Office, Department of Trade and
Industry, National Economic Development Authority, Department of
Labor and Employment, Philippine Overseas Employment Agency,
and Professional Regulation Commission to provide updated and
harmonized data based on the GATS classification.
8.7.2 An agency should be identified to take charge of data banking
organizations, groups (local and abroad) who are players in the
industry. A complete directory is very much needed. This will help
identify key respondents in the industry.
8.7.3 Government agencies should provide harmonized and detailed
data, e.g. employment, revenue, etc. about the business services
sector.
8.7.4 Conduct separate in-depth study for each sub-sector of the
business services based on GATS classification.
118
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Appendix 1 GATS Services Sectoral Classification List
(Business Services) A. Professional Services
1. Legal Services 2. Accounting, auditing, and bookkeeping services 3. Taxation services 4. Architectural services 5. Engineering services 6. Integrated engineering services 7. Urban planning and landscape architectural services 8. Medical and dental services 9. Veterinary services 10. Services provided by midwives, nurses, physiotherapists and
paramedical personnel 11. Others
B. Computer and Related Services
1. Consultancy services related to the installation of computer hardware
2. Software implementation services 3. Data processing services 4. Data base services 5. Others
C. Research and Development Services
1. R&D services on natural sciences 2. R&D services on social sciences and humanities 3. Interdisciplinary R&D services
D. Research and Development Services
1. Involving own or leased property 2. On a fee or contract basis
E. Rental/Leasing Services without Operators
1. Relating to ships 2. Relating to aircraft 3. Relating to other transport equipment 4. Relating to other machinery and equipment 5. Others
122
F. Other Business Services
1. Advertising services 2. Market research and public opinion polling services 3. Management consulting services 4. Management consulting services 5. Services relating to man, consulting 6. Technical testing and analysis service 7. Services incidental to agriculture, hunting and forestry 8. Services incidental to fishing 9. Services incidental to mining 10. Services incidental to manufacturing 11. Services incidental to energy distribution 12. Placement and supply services of personnel 13. Investigation and security 14. Related scientific and technical consulting services 15. Maintenance and repair of equipment (not including maritime
vessels, aircraft or other transport equipment) 16. Building-cleaning services 17. Photographic services 18. Packaging services 19. Printing and publishing 20. Convention services 21. Others
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Appendix 2 List of Key Informants
Respondent Postion and Organization represented Mr. Oscar T. Valenzuela
Director, Industry Development, Advertising Board of the Philippines, Inc. (ADBOARD)
Ms. Rosie S. De Leon
Executive Director, Philippine Nurses Association (PNA)
Ms. Aurora P. Acelajado
Secretary-General, Federation of Aviation Organizations of the Philippines (FEDAVOR) Marketing and Business Development Officer, Ayala Aviation Corporation
Dr. Leonardo R. Garcia Jr. Vice President for Education, Philippine Marketing Association, Inc. Chairman, Marketing Management Department, De La Salle University-Manila
Atty. Rogelio Vinluan President, Philippine Bar Association (PBA) Mr. Diogenes A. Barredo Secretary General, The United Architects of the
Philippines (UAP) Mr. Arlen P. de Guzman Assistant Treasurer, The Philippine Institute of
Interior Designers (PIID) Proprietor, Arlen P. de Guzman Design Consultants
Mr. Roderick Yap Member, Institute of Electronics and Communications Engineers of the Philippines (IECEP) Chairman, Electronics and Communications Engineering Department, De La Salle University-Manila
Mr. Ruperto S. Nicdao, Jr. Vice President-Radio Kapisanan ng mga Brodkaster ng Pilipinas (KBP)
Mr. Federico Gonzalez Officer, Industrial Development Research Council Executive Vice President, De La Salle University Professional Schools, Inc.
Dr. Nenita C. Lee Tan President, Philippine Medical Association (PMA) Dr. Luis F. Orosa Executive Vice President, Philippine Dental
Association (PDA) Dr. Rhodora Carlos President, Philippine Veterinary Medical Association
(PVMA) Dr. Cynthia del Mundo Immediate Past President, Philippine Association of
Optometrists, Inc. Mr. Roel S. Ramirez President, Public Relations Society of the
Philippines Assistant Vice President, Development Bank of the Philippines
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Dr. Teresita Nadurata Former Vice President for Operations, Philippine Institute of Certified Public Accountants (PICPA) Chair, Accountancy Department, De La Salle University-Manila
Ms. Ma. Victoria Ochoa Corporate Secretary, Philippine Association of Service Exporters, Inc. (PASEI)
Mr. Allan Miller Finance Officer, A. Soriano Aviation, Inc. Ms. Elizabeth Reyes Director, DLSU Press, Inc. Mr. Ricardo P. Salvador Managing Principal, Asia Business Consultants, Inc. Mr. Heracleo Caballero Part Owner / Marketing Head, Tony’s Art Studio Mr. Jesus F. Crisologo Owner / President, Cover and Pages Corporation Mr. Eduardo S. Habaradas Vice President for Technical Services, Jefcor, Inc. Ms. Soledad B. Cobrador Vice President, Combined Blue Dragon Security
and Services, Inc. Engr, Efren A. Sanchez Vice President for Administration, TCGI Engineers Engr. Angel Santiago President, Engineering and Development
Consultants of the Philippines, Inc. (EDCOP) Mr. Romulfo Villamayor Audit Partner, Sycip Gorres Velayo & Co. Mr. Fiorello S. Adriano General Manager, Opportunities Unlimited, Inc. Capt. Victor Y. Alviola Crewing Manager, Citadel Lines, Inc. Atty. Emmanuel Sales Chairman, Commercial Law Department , De La
Salle University-Manila Ms. Rose Sajo Senior Labor and Employment Officer, Philippine
Overseas Employment Authority (POEA) Ms. Roselle DR. Angeles Training Officer, Ingerrium Systems Dr. Isagani Cruz DLSU University Press Ms. Linda Luz-Guerrero Social Weather Station Mr. Arturo San Gil BOI, Department of Trade and Industry