Tuesday, November 28, 2006 | MANILA, PHILIPPINES
News
The Information and Communication Technology (ICT) sector could be an important source of employment and growth, the Information Economy Report 2006 noted, and developing countries, including the Philippines, stand to benefit if they successfully adapt to the "structural changes" related to the globalizing trade in the ICT sector.
Increasing trade in the ICT sector, broadly defined as those activities involving the information processing and communication transmission for both manufacturing and services sectors, in the more developed nations can mean business growth for the ICT sector of developing world, the report added.
"Generally speaking, the data show that after the contraction in early 2000, developed countries experienced an increase in both value added and employment in the ICT sector in 2003. This increase in demand and supply in the developed countries’ ICT sector opened up new prospects for developing country business partners," said the latest report prepared by the United Nations Conference on Trade and Development (UNCTAD).
In 2003, the ICT sector represented 5.5% of total business employment in developed countries and was a source of employment growth. The sector employment grew by over 8% annually between 1995 and 2003, which represented an additional one million people employed.
The majority (66%) of those working in the ICT sector were employed in the services sectors, a figure that corresponds to the high share of services in a typical developed economy.
Moreover, services tended to be less intensive in ICT labor than manufacturing, with a 5% share of ICT service employment in total business services employment compared with 7% for manufacturing.
In terms of value added or contribution to the gross domestic product (GDP), the ICT value added to the business sector among developed countries picked up between 2000 and 2003, to reach over 9% in 2003, closely matching the 2000 performance.
Services accounted for over two-thirds of the ICT sector, but were on average less ICT-intensive than manufacturing
"As suggested by data, services contributed increasingly to the manufacturing value added, with important consequences for outsourcing. Between the early 1970s and the mid-1990s this evolution reflected the outsourcing of manufacturers’ service activities previously produced inhouse," the report said.
This in effect, presents new business opportunity that developing countries can take advantage of. The report said that in the developing world, the Philippines is in great position to service the outsourcing needs of more developed countries.
Among its advantages, the report noted, is the country’s high share of ICT employment in its business sector. The Philippines in 2001 has about 11% ICT-skilled work force in total business workforce, even higher that the European Union’s average of 8%.
In the same year, the local ICT sector contributed around 21% value added to the business sector’s total output, again the highest among countries included in the report.
These suggest that the country has what it takes to capture a decent share of growing global demand in outsourcing, now that most ICT-related transactions are becoming borderless.
ICTs make services more easily tradable all over the world in two ways: by facilitating transactions with traditionally traded services and, at the same time, by making previously non-tradable services tradable.
Better access to information and lower communications costs have reduced existing barriers to trade. Additionally, the new technologies have generated an array of completely new services such as application service providers, data warehousing, Web hosting and multimedia services.
"The decline in trade costs in services has given rise to new international business opportunities, notably for developing countries. The slicing-up of the value-added chain has been extended to also take into account the services industry and the delocalization to lower-cost markets. More standardized services such as customer services, human resource management or software consultancy no longer have to be provided inhouse," the report said.
"At the international level, the result is a deeper specialization that is bound to benefit all parties involved, with more productivity-driven gains on the outsourcers’ side, and more employment-driven gains in the host country. Developing countries that are receivers of offshoring are given the possibility to complement their development policies with a services-based strategy," it added.
The market of offshoring or business process outsourcing (BPO) activities is valued at $300 billion but only 10% has so far been captured by service providers as of 2005. In addition, BPO represents only 5% of total world exports of ICT-enabled services, allowing for bigger market potential that the country can take part of.
United States-based offshore advisory firm neoIT has assessed the Philippines as the second attractive BPO destination following India, as a result of their comparative study of 15 offshore and near-shore destinations.
On the other hand, US-based research firm A. T. Kearney also concluded in a similar study that the Philippines is the fourth attractive offshore destination following India, China and Malaysia.
According to Business Processing Association Philippines, an industry association for the country’s ICT services and ICT-enabled services, there were about 62 BPO service providers and around 24,500 people were employed in this industry segment as of the first quarter this year. Estimated revenue in 2005 was $160 million, which grew 80% from the previous year.
Apparently, the country is a bigger player in the call center industry. The BPO industry size is currently only a tenth of the call center industry which generated $1.7-billion revenue and employs more than 110,000 in over 100 centers in 2005.
While it is true that improved access to and use of ICTs have the potential to boost trade in services, the report said other factors play an equally important role both in international trade and offshoring. It said ICTs cannot be used as "plug and play" technologies.
"The legal and regulatory environment, the level and type of education of the people, the transparency of the political system and various cultural aspects can scale up ICTs’ impact on trade. For that purpose, governments have to ensure that the right ICT strategies are put in place, then evaluated and eventually redesigned to extend access to, and efficient use, of ICTs."
http://www.itmatters.com.ph/news.php?id=112806a
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