The Internet Year in review - E-TALK by Roberto O. Valdes (PHILWEB.COM)

I apologize for not having come out with this column in the last month or so. It’s just that the ongoing political fiasco has taken on such significance that most other issues, including the Internet, have taken the sidelines in recent weeks. As the year ended, however, I took the opportunity to look back at the Internet highlights (and "lowlights") of 2000, and thought it would be worth mentioning a few of these.

The bubble pops

After hitting all-time highs in March, suddenly, Internet stocks started a downward spiral that ended many investors’ love affair with Internet investing. Fortunes were lost just as abruptly as they were made. The Nasdaq index, heavily weighted with Internet stocks, dropped 39% for the year. Its 54% drop from peak-to-low point erased over US$3 trillion in paper value. Is it any wonder that investors continue to be gun-shy when it comes to Internet investing?

The Philippines, which was just getting into the Internet game, was not spared from the bloodshed. Late into the game, due to the effects of the Asian financial crisis, the Philippines had nevertheless identified the IT sector as one of its investment priority areas. The local availability of knowledge workers was supposed to attract foreign investments and generate foreign currency exports. However, the few technology ventures that were launched locally all experienced decreases in their share values. New Internet projects that were expecting to raise venture capital financing suddenly found the well dry and new funding unavailable.

Many observers agree, however, that just as the early dot-com mania was over-hyped, the pullback may be overdone. Internet has become a bad word — investors are avoiding the sector like the plague. This is in all likelihood a knee-jerk reaction. I’ve said it before, and I’ll say it again. The Internet is changing our world, and it will continue to do so. Technology is advancing quickly — new applications continue to be introduced at a rapid pace — in many ways at a pace even faster than initially predicted by industry observers. Not all Internet companies will succeed, however, and investors will need to choose the right Internet services and products, and therefore the right companies.

The e-Commerce Act: A great start

In June, the Philippines became only the fifth Asian country to have an electronic commerce law when Republic Act 8792 was passed into law. This was supposed to have been one of the first big steps towards developing electronic commerce in our country. By reducing transaction risks to buyers and sellers, improving availability of information, expanding markets, and lowering transaction costs and inefficiencies, electronic commerce should be a great benefit to a developing country like the Philippines. I believed this then, and I still believe it now.

In fact, in a country where imperfect information, transaction inefficiencies (e.g. middlemen) and limited markets increase business costs, the benefits of electronic commerce should be even greater. Our e-commerce law, however imperfect, provides a framework within which the private sector can now work towards the development of electronic commerce initiatives in our country. Quietly, many ventures have started, and I hope more will develop. Perhaps, the current political distractions have taken a bit of steam off some of the earlier initiatives (just as most other business sectors have been affected), but certain projects that can offset the disadvantages presented by the low Internet penetration in our country with the relatively low start-up cost of e-commerce platforms should still find some opportunities attractive.

The Love Bug

The Philippines also grabbed world headlines last year when a global Internet virus was determined to have been developed and released by a Filipino programmer connected with one of the numerous computer training centers that have sprouted all over the country. The virus highlighted the vulnerability of Internet-based networks and systems, and the need for improved system security. While the power of the Internet is based on the wide access and availability of the network, this characteristic is also the source of weakness. The global coverage of the network resulted in the unchecked and rapid spread of a relatively simple virus program, which, in turn, caused millions of dollars in damage.

Looking for a silver lining? Well, the Love Bug highlighted the talent (???) of Filipino programmers (I understand the anti-virus was also developed locally), and the availability of these knowledge workers (and the training schools where more are continuously being developed). Today, I believe the Philippines is still positioned to take advantage of this strength. We continue to have creative and talented programmers, designers and other IT workers. With a highly educated population that is widely exposed to western culture and language, we also have the "raw material" to feed computer schools that will generate even more talent.

So, it’s not quite as headline-grabbing as the ongoing impeachment trial, but the Internet also had an exciting year. By all indications, at the rate that it continues to develop both locally and globally, there will be more Internet headlines in 2001. I, for one, am looking forward to them.