The Philippines will have a wider role in the information technology industry, with the country becoming the Asian hub for backroom operations, according to Trade Secretary Manuel Roxas II.
Speaking at the weekly breakfast forum of the Greenhills Walking Corp. at the Ristorante La Dolce Fontana yesterday, Roxas said they expect electronic exports to reach $50 billion by 2004.
"We are in the forefront of a very important industry and the fact is, it's news only to us," Roxas said.
As the information age progresses, Roxas said, location would no longer factor in as more and more businesses farm out infotech-related jobs where expertise is reliable but cost is not exorbitant.
"Our country is favored because we have a well-educated workforce that is skilled, highly trainable, adaptable and famously easy to work with," Roxas said. "It is the one thing that attracts foreign businesses to come here despite our obvious limitations in infrastructure."
According to him, the Philippines was in the thick of the information age more than it realized. "Every desktop computer, every laptop has some component that is made here. Even in the airline industry, every Boeing 747 or 777 carries some parts that were manufactured here."
Electronics industry exports are expected to increase by 20 percent to $30 billion this year, from $24 billion in 1999, given the strong position of the local industry, the Semiconductor and Electronics Industries in the Philippines Inc. (SEIPI) estimated.
According to SEIPI, the Philippines was gaining headway in its export markets in the US, Europe, Japan and Association of Southeast Asian Nations. Exports of the semiconductor sector will account for the biggest growth in the electronics industry, due mainly to two large companies, Texas Instruments Philippines Inc. and Intel Philippines.
Texas supplies 70 percent of the world demand for signal processors in cellular phones while Intel is also producing Pentium II and III for computers.
Other semiconductor firms that are also expanding their operations are Amkor Anam, Toshiba, Fujitsu, Analog Devices, Cypress, Rohm, Sanyo and Motorola. Amkor Anam is a large contract manufacturer for the assembly of semiconductors whose expansion program in Laguna is going online this year.
However, the Philippines has yet to break into product development and design which is still being led by developed nations such as the US and Japan.
"We have the capability to not just be encoders but coders or software designers and programmers," Roxas said. "Even in the area of computer-assisted design in architecture and industry and similar areas, we have the capability and we just have to promote ourselves in order to maximize these resources."
Meanwhile, Roxas said the Estrada administration will have to make "soft cuts" in the 2000 budget to keep its deficit within manageable levels, admitting that it would not be able to raise the expected P22 billion from the sale of its assets due to a depressed market.
During the meeting with officials of the International Monetary Fund (IMF) last Tuesday, Roxas said the IMF was concerned about the government's reliance on its privatization program to help finance its unprogrammed deficit.
It had become apparent that the government would not be able to raise enough money and would have to rely on revenue generation to prevent the 2000 budget deficit from ballooning.
"We are still optimistic that we would be able to stay within the P62 billion budget deficit target but measures have to be taken immediately," Roxas said.
Roxas pointed out that the 2000 target deficit was made based on the "huge assumption" that the government would be able to generate P22 billion from the sale of such assets as its holdings in the Philippine National Bank, the privatization of the National Power Corporation and the sale of other government-owned corporations.
"Unfortunately, the market has gone down to such levels that would not make it worthwhile for the government to sell its key assets," he said. "The prices that were there before are no longer there today. We don't want to waste these assets by selling them at bargain prices when we know we can get a better price when the market improves."
The so-called soft cuts in the 2000 budget, according to Roxas, meant an indefinite deferment of discretionary programs that did not require immediate funding.
"These include specific projects that are dependent on the availability of funds, travels that could be postponed or canceled and some other similar activities," he explained.
"This only means that government would not be spending on these projects and programs until we see the actual revenue returns."
Roxas said the Departments of Finance and Budget were still determining the actual amount of the soft budget cuts. The final total would also have to be presented to the IMF for approval.
In the meantime, Roxas said, the Economic Coordinating Council has issued directives for speeding up the processing of government assets for privatization.
"We want everything ironed out so that as soon as the market picks up, we will be ready to sell and we won't miss any opportunities," he said.
Even if the market was good, the government was unlikely to be able to sell its key assets anyway because most were mired in legal and ownership problems while others were so deep in debt that it would be unlikely for the government to find any investor willing to take over.
Roxas had already earlier hinted that it was unlikely for the government to raise P22 billion from the sale of state-owned assets and shares in listed companies, saying that other measures would have to be taken in order to keep its budget deficit below P62.5 billion.
In 1999, the budget deficit had swelled to P111.7 billion against an initial forecast of P64 billion and already there were indications that its P62.5 billion programmed deficit would be impossible to meet by relying on revenue collection and sales proceeds alone.
An increase in the deficit is likely to require additional domestic funding and this would put pressure on interest rates, compounding the detrimental impact on the economy at large.
Last year the Estrada administration raised only P5 billion from the sale of government assets, one of the smallest annual hauls since privatization became a cash cow in 1986.
Programmed for sale this year are Philippine National Construction Co., television networks IBC-13 and RPN-9, Philippine Phosphate Fertilizer Corp., Philippine National Oil Co., National Power Corp. and Food Terminal Inc.
The government generated some P191.5 billion from the sale of state assets since 1987 and P78.6 billion from the privatization of government-owned and -controlled corporations for the same period.
But with the improved showing of the country's macroeconomic indicators, the government is hopeful that the IMF will give the Philippines the seal of good housekeeping.
Later in the afternoon after the weekly meeting of the Economic Coordinating Council at Malacañang, Roxas said the IMF review team that arrived last week favorably noted the passage of some economic reform bills such as the General Banking Act, the Securities Regulation and Enforcement Act, and the Omnibus Energy Bill.
"It was reported that the review of the country's financial state is proceeding quite well and that we expect a seal of good housekeeping coming from the IMF," Roxas said.
"I think the key element here is that the foreigners are reviewing our economy, the investors who are actually making investments in our economy, the traders who are exporting from our economy, all believe that we have a much better outlook than we ourselves do."
He said the government was optimistic that it will be able to meet all its revenue targets for this year despite concerns from the IMF as revenue generating agencies have surpassed their targets in the first quarter leading to a P4 billion surplus.
President Estrada, Roxas said, has ordered the Bureaus of Internal Revenue and Customs to "pursue assiduously their tax generating activities."
He also allayed the IMF's concern over the apparent slow pace of the privatization of the Philippine National Bank, saying PNB majority owner Lucio Tan has already agreed to put his shares together with that of the government to generate a much higher per share valuation.
Despite the IMF's advice to the government to raise its projected growth rates, Roxas said government economic managers "may adjust it if necessary later in the year."
"It was just indicative there was no fixed number. I think this is a positive sign because the 4.5 to five percent GNP target, and four to five percent GDP is being viewed by this objective third party as conservative and, in fact, they believe our economy would grow much faster than these targets," Roxas said. - With Paolo Romero