Issuu on Google+

Philippine Institute for Development Studies April 1997



Notes No. 97-08

Improving the Policy Environment and Institutional Structures for Technological Development Ponciano S. Intal, Jr.


echnology is central to the issue of international competitiveness. Growth in productivity does not only stem from improved allocation of resources among economic sectors and industries and from improved organization of firms but also from technological adoption, adaptation or generation. A country’s international competitiveness and growth prospects are shaped in part by its capability to absorb, adapt, improve and/or develop technology that are appropriate to its changing circumstances. Dahlman (1990) highlights four critical elements for technological policy and the technological support structure needed to successfully compete internationally, namely: v technological acquisition – acquiring foreign technology to reduce the gap between the best local practice and international practice; v technological diffusion – using and diffusing technology

effectively to reduce the wide dispersion of efficiencies of firms and industries in the economy; v technological adaptation and generation – improving and

developing technology to keep up with the latest developments internationally; and v strengthening technological capability primarily through the

improvement of the “human technical capital” so as to be able to

PIDS Policy Notes are observations/analyses written by PIDS researchers on certain policy issues. The treatise is wholistic in approach, and like the PIDS Executive Memo, it aims to provide useful inputs for decisionmaking. The author is President of the Institute. The views expressed are those of the author and do not necessarily reflect those of PIDS or any of the study's sponsors.


undertake the first three component tasks set out above. Acquiring foreign technology Given that the Philippines does not have the human capital resources and the appropriate infrastructure to develop much of the technology needed by the country’s industries, it is clear that acquiring foreign technology cheaply and effectively is the first best option for improving the technological profile of the country visa-vis the rest of the world. Acquiring foreign technology can be done through foreign direct investments, import of capital goods, technological purchase through licensing agreements, and through local efforts at translating foreign technology into specific methods via foreign study, reverse engineering, copying, and others (Dahlman 1990, p.41). Foreign direct investment increases both the investment rate and the technology content of the Philippine economy. The whole Philippine semiconductor industry grew largely as a result of foreign direct investments. Strengthening the technological base of the country’s semiconductor industry such that it can move from assembly operations to higher value added operations will involve largely foreign direct investment that is either fully owned or through joint ventures. Thus, for example, the private group operating the Gateway Business Park

P olicy

(a privately-owned and developed industrial estate in Cavite) is actively searching for foreign investors in wafers manufacturing in order to consolidate the semiconductor support industries in the industrial estate. The role of foreign direct investment in helping upgrade technologically the country’s production system is also evident in other industries although not in the same degree of dependence perhaps as in the semiconductor industry. In the more established industries with mature technologies such as textiles, dependence on foreign investment for technological upgrading is less critical because the technology can be bought off the shelf for the most part. Thus, in these industries, local investors can upgrade their firms technologically without the need for foreign investors unless there are other considerations involved like foreign market linkages. Encouraging and courting foreign investors especially in skilled labor-intensive industries is, at present, an important means of strengthening the technological base of the country. Capital goods are, to a large extent, embodied technologies. At present, much of the capital goods in the country is imported. Importation of capital goods has been an important means by which the country updates its technological


stock. The higher the investment rate over a significant period of time is, the greater is the probability that the country’s technological stock will improve significantly. One reason for the improvement in the international competitiveness of Thailand, Indonesia and Malaysia over the Philippines during the 1980s and early 1990s has been the sharp reduction in the investment rate in the Philippines relative to Thailand, Indonesia and Malaysia for more than a decade. Moreover, imports of capital goods as a ratio of the gross domestic product has been lower in the Philippines than in Thailand and especially Malaysia since the mid1960s1 (Dahlman and Brimble 1990, p.17). This means that the country’s firms became relatively technologically backward and less efficient compared with the newer and larger plants in the three other ASEAN countries which have been geared for exports since the mid1980s. Raising significantly the overall investment rate and increasing the ratio of capital goods imports to the gross domestic product will likely reduce the technological backlog of a large percentage of the country’s industrial firms. This suggests that the strengthening of the country’s macroeconomic fundamentals through ——————— 1 The ratios for Singapore and Hong Kong are atypically extremely high.

April 1997


higher domestic saving and investment rates as well as the further improvement of the country’s industrial protection regime such that it would encourage more efficient and outward linking agroindustrial sectors will contribute to the upgrade of the country’s technological stock. Japan and the US alternated as the lead source of capital goods imports of the Philippines during 1975-1985. Beginning 1986, however, Japan was consistently the leading source of major capital goods imports such as nonelectrical machinery and equipment, and road and transport equipment. The third category—telecommunications and electrical machinery— was primarily imported from the US until 1989 when Japan became the leading source in all three major categories of capital goods imports (Tan and Intal 1992). The third important means of acquiring foreign technology is through foreign technology licensing contracts. The Bureau of Patents, Trademarks and Technology Transfer reports that there were 495 technology transfer agreements with US entities and 194 technology transfer agreements with Japanese entities as of 1990. Of the Japanese license agreements with Philippine firms, around 44 percent are with Philippine firms without any equity participation whatosoever by the Japanese licensor while only 5

P olicy

percent are with virtually Japanese-owned subsidiaries in the Philippines. Thus, technology transfer via the licensing route tend to be resorted to primarily by local firms. As of 1990, the Japanese technology transfer agreements were concentrated in the metal-based industries (e.g., automotive, electrical machinery and appliances) and chemical- based industries, most of which were import substituting and domestic market oriented (Tan and Intal 1992). It may be noted that South Korea relied on the technology licensing route in its acquisition of foreign technology in as much as it restricted the flow of foreign investment into the country. In sharp contrast, Singapore relied more on foreign direct investments although at the cost of a larger foreign presence in the Singaporean economy. Although there is no explicit technology policy enunciated by the Philippine government, the current policy increasingly emphasizes foreign direct investment over the foreign licensing route as the key means of acquiring foreign technology. There is nevertheless no disincentive to foreign licensing except that clauses in the technology transfer agreements encouraging technology dependence are prohibited. The Philippine policy posture appears to be similar to the Thai policy posture, i.e, greater emphasis on foreign direct investment as the means of foreign technology acquisition.


In both Thailand and the Philippines, however, there appear to be no deliberate efforts to influence foreign direct investments to hasten the process of technology transfer to local firms and personnel. In Thailand, subcontractors of the multinational firms also tend to be foreign firms. It appears though that using technology transfer criteria for selective investment policy is not as effective as improving the capability of local firms to absorb newer technology and become more viable subcontractors of the foreign multinationals (Dahlman and Brimble 1990, p.15). Nevertheless, it is useful for the government to view foreign direct investments also from a technology acquisition and deepening perspective in order that the set of industries to be promoted at each point in time will have technological complementarities. The last means of acquiring foreign technology is linked with increasing the country’s technological capability through such means as foreign study or training, bringing in of foreign experts, reverse engineering, copying, and others. It is important to note that one of the first actions of the Japanese government in its modernization drive during the Meiji period was to hire thousands of foreign experts and engineers as well as to send Japanese abroad to study. China has recently sent thousands of Chinese to foreign universities to study. South Korea initiated a April 1997


successful program of encouraging South Korean experts and scientists to return to South Korea and be involved not only in research and teaching but also in providing expert advisory services to South Korean firms. The Philippine government has tried to tap the expertise of the overseas Filipino experts and scientists through the Balik-Scientist program and the TOKTEN. Nevertheless, the government could support a strengthened, institutionalized and streamlined program of tapping overseas Filipino scientists and experts to provide, together with locally based experts and scientists, expert advisory services to Filipino firms through institutions similar to the South Korean research institutes. This implies that the government would have to set aside funds for this and not rely primarily on aid funds like TOKTEN. It also means that the appropriate mechanism are not government institutes or the bureauracy but rather private or joint private-government mechanisms that ensure greater flexibility in providing appropriate emoluments to locally based and overseas Filipino scientists and experts and is consistent with a well defined and well designed strategy and program of action to support the country’s agroindustrial restructuring efforts.

P olicy

Using and diffusing foreign technology Given the hands-off policy of the government with respect to the use of technology transfer criteria for selective investment promotion, it is apparent that the policy challenge is to provide the appropriate incentive measures and institutional support system that would ensure a more effective and widespread use and diffusion of foreign technology throughout the whole economy. The importance of ensuring faster and wider diffusion of technology in the country lies in part on the wide spectrum of efficiencies and inefficiencies among firms within the various industries in the Philippines. The latter can be attributed in part to the variation in technology being used. For example: v among the garment firms in 1988, 52 percent were efficient small firms, 8 percent were efficient large firms, 22 percent were very inefficient small firms and 2 percent were very inefficient large firms (Austria 1994, p.56), v among the textile firms in 1988, 24 percent were efficient small firms, 9 percent were efficient large firms, 23 percent were very inefficient small firms and 11 percent were very inefficient large firms (Austria 1994, p.57),


v among the appliance manufacturing plants in 1988, about 33 percent were efficient, 20 percent were mildly inefficient and 47 percent were very inefficient (Lapid 1994, p.68), v among the small appli-

ance manufacturing plants, 26 percent were efficient while 59 percent were very inefficient (Lapid 1994, p.68), v among the radio and TV parts manufacturing plants in 1988, about one-fourth of all the firms were efficient while two thirds were inefficient. Within the sector, the large firms predominate with more than one-half of all the firms being large firms. Of all the large firms, about 22 percent were efficient and about three fourths were very inefficient (Lapid 1994, pp.68-69), v among the resins firms in

1988, 38 percent were efficient, 15 percent were mildly inefficient, and 46 percent were inefficient (Banzon 1994, p.57), v among the plastics workshop, 41 percent were efficient (of which 32 percent were small producers), 16 percent were mildly inefficient, and 36 percent were highly inefficient (Banzon 1994, p.58), v among the dairy product plants, about 37 percent were efficient, 16 percent were mildly in-

April 1997


efficient, and about 42 percent were very inefficient; among the small plants, about 34 percent were efficient and about 47 percent were very inefficient (de Dios 1994, p.33), and v among the meat process-

ing plants in 1988, about 20 percent were efficient, 30 percent were mildly inefficient and nearly 50 percent were very inefficient. Among the small plants, 20 percent were efficient and 46 percent were very inefficient (de Dios 1994, p.32). There are several mechanisms and special institutions that have been utilized by the successful East Asian economies in their efforts to hasten and widen the diffusion of technology. They include the following: 1. Information, training and industrial extension system – South Korea has, for example, the Korea Institute of Economics and Technology (KIET) which has online databases on technology and undertakes special technology search from its data files as well as technical support to client South Korean firms. South Korea also has the South Korean Productivity Center which has a flexible automation demonstration center and offers extensive training in the use of new technologies. In Taiwan, the China Productivity Center provides training and extension, and sends out experi-

P olicy

enced engineers to visit plants to help manufacturers solve specific technological and productivity problems (Dahlman 1990, pp.1051). Japan’s prefectural governments were very important in the provision of information on new technology through the regional research and testing centers which provide technical guidance and testing services, organize lectures and training courses and provide publications on new technology for the SMEs (Nagaoka 1989, p.41). In the Philippines, much remains to be done to strengthen the industrial technical extension system in the country. The country needs to establish an institution similar to the KIET that has online data bases on foreign technology and undertakes specialized searches for its client firms. The country has the CITEM and the Design Center that have been useful in helping firms in product development and product design. This experience can be extended to include institutions or mechanisms that, like the China Productivity Center in Taiwan, enable the fielding of experienced engineers to client firms to help solve specific technical problems. The country can institute a program similar to Singapore’s Local Industries Upgrading Program that links up multinationals with selected local firms for training on new technologies. What the country has an abundance of are institutions and


mechanisms geared for livelihood programs like the Technology, Livelihood and Resource Center (TLRC). Many of the industry teams in the Export Development Council have recommended the establishment of industry productivity centers cum training centers cum demonstration or model factories (e.g., decorative ceramics, jewelry, marble). These centers could be tapped as additional institutional mechanisms for spreading further new technologies and good manufacturing practices. 2. Standards, testing and quality control. It is worth highlighting that the Japanese prefectural governments and industrial cooperatives established 46 institutions to provide testing services and technical guidance to regional industries during 18941925. The Japanese national government also established national testing and research institutions during the period (Nagaoka 1989, pp.2-3). Thus, Japan established an extensive system for the diffusion of technology early in the country’s industrialization drive. Japan’s programs on a national quality control system and the development of the industrial standard and certification system during the 1950s and early 1960s were but natural extensions and intensifications of the initiatives during the early part of the 20th century.

April 1997


In the Philippines, there are inadequate national standards pertaining to various industries. For example, there are ISO standards that have not yet been incorporated in the Philippine national standards for fruits. In addition, there is inadequate knowledge among Philippine producers of relevant international standards where Philippine standards are inadequate. Moreover, in some industries like the metals industry, a significant portion of the firms are themselves unaware of the Philippine national standards. Philippine firms, especially the small and medium scale enterprises, tend not to employ quality management principles and quality control measures. Laboratory facilities also appear to be sorely inadequate and/or below par in service quality (there are a few exceptions such as the MIRDC facilities which have an ISO 9000 rating). At times, Philippine exporters have to send their samples to foreign laboratories for testing because of lack of facilities in the country (Sharif 1995, pp.69-70). The Philippines may as well follow the Japanese example. It is recommended that the country establish strong testing centers and technical guidance centers in key industrial production areas of the country. The government can work with the private sector including private universities on a possible joint effort in the establish-

P olicy

ment and operation of the testing services and technical guidance centers. The centers can institute appropriate fees for their services in order to make them as self supporting as possible. To give a concrete example of a possible model of a testing and technical guidance facility in the Philippines, the following are the major activities of the Tokyo Metropolitan Industrial Technology Center (Nagaoka 1989, pp.7273): v (for a fee) testing, inspection and analysis of equipment, parts and materials for firms (SMEs) without such testing and inspection facilities; v (with subsidy from the

government) research on selected themes with the results disseminated through technical consultations, guidance tours, research reports, and lectures to interested firms; v (free) technical guidance on a wide range of fields like machinery, metals, electricity, chemistry and industrial arts; v (free) supply of technical information; v (free) guidance tours; v (free) technical advisors in the development of new products and techniques;


v (for a fee) training of technical experts; v (free) technical exchange program among SMEs for exchanging different experiences and facilitation of technical transfer and exchange.

It is also important for the country to strengthen its quality control system as well as the industrial standard and certification system. Although there is the ISO 9000 program being undertaken by the Department of Trade and the DOST, it is apparent that this is not enough considering that most firms in the country would not require and neither could afford the ISO 9000 program. Popularization of the statistical quality control system through television and radio courses could be undertaken, just like what Japan did in 1956 and 1957 in order to popularize the system especially to the small and medium enterprises. 3. Subcontracting. The well developed subcontracting system in Japan is generally considered one of the important reasons behind the international competitiveness of the Japanese economy. Subcontracting is now strongly encouraged in the Asian NIEs. In contrast, subcontracting is not yet well established in the Philippines. Subcontracting is viewed here in terms of “... [a] long term

April 1997


comprehensive and implicit contract that includes the supply of technical guidance, supply of working capital, leasing of equipment, risk sharing by a parent firm. (as well as) strong incentives and pressures for the subcontractor to innovate” (Nagaoka 1989, p.36). There is a growing view that where there is strong competition among subcontractors, the subcontracting system can be more efficient than vertically integrated production units. Indeed, in the Japanese case, the strong competitive pressure among the subcontractors has led to greater efficiency in the subcontracting network in terms of organizational structure, e.g., development of subcontractors with advanced and specialized technology, integrated inventory control systems, and more sophisticated contractual relationships (Nagaoka 1989, p.37). In the Japanese case, subcontracting encourages innovation because the subcontractors are competitively selected, the frequent interaction among subcontractors through the subcontractor associations allows for fast diffusion of new technologies, and there is built in pressure to the SME subcontractors to improve efficiency because parent firms usually do not allow price adjustments of subcontractors if there were cost increases like wage increase and energy cost increase. In addition, there are incentives in the subcontracting contracts that reward sub-

P olicy

contractors for suggestions for better component design. Moreover, subcontractors with high technological capability can participate in the actual product design (Nagaoka 1989, 68-69). Subcontracting in Japan is efficient and contributes to the economy’s flexibility and competitiveness because there exist numerous SMEs with the capability to absorb technology and even collaborate technologically with the parent firms. In contrast, subcontracting in the Philippines and other ASEAN countries is hampered by the technical and organizational weaknesses of the SME sector. In these countries, the government becomes more proactive in the promotion of stronger technological linkages between the SMEs and the parent firms through such programs as Singapore’s Local Industries Upgrading Program. As noted earlier, these government interventions are most successful if they focus on improving the technological absorptive capacities of SMEs. In view of the importance of strengthening the technological capability of SMEs in order to hasten and widen the diffusion of technologies in the Philippines, it is important that the government adopts a well designed program of strengthening the linkages between large enterprises and the SMEs through programs simi-


lar to Singapore’s Local Industries Upgrading Program or Taiwan’s Center-Periphery Factory Program as well as through the establishment of technical support institutions similar to the Tokyo Metropolitan Industrial Technology Center or support programs similar to Singapore’s Small Industries Technical Assistance Programs. Adapting, improving and developing technology Effective technology transfer generally would require some adaptation to the country’s factor price situation compared to the factor conditions and factor price situation in the technology’s country of origin. Technological adaptation is particularly important in the agricultural area because of the location specificity of agricultural technologies. Moreover, technology transfer can occur at various stages of “technological packaging.” That is, technology transfer can occur at the stage of a capital good which is highly packaged, or at one step removed, as a technology that is reverse engineered and already adapted and translated to the Philippine conditions by the country’s research institutions. The greater is the country’s “technological capability,” especially of its technological research institutions, the better are the chances that the technology transfer will occur at the pre-fully packaged stage.

April 1997


At this stage of economic development and quality of scientific and technical know how in the country, investing substantially in developing new technology is not called for especially in the electronics and machinery arena where the R&D costs of new products and technologies are high. The country’s capability to develop technologies is also hampered by the lack of a viable capital goods industry, which is almost a sine qua non for any effective and sustained capability in developing new technologies. Where there may be a greater need as well as probability of success in technology development is in the agricultural area because of the locational specificity of agricultural technology (including seeds) and the country’s larger stock of scientific power in the area. Nevertheless, even in agriculture, there would be greater returns to research at present if it is primarily geared for technological adaptation rather than focusing on basic research. Considering that technological adaptation involves R&D expenditures, it is therefore apparent that other things being equal, the higher the R&D expenditures the greater is the likely magnitude and probable success of technological adaptation. The Philippine R&D expenditures as a ratio of GNP averaged 0.11 percent of GNP during 19851990 (Tan and Intal 1992, Table

P olicy

2). This ratio is much lower than the corresponding ratios of Thailand (0.17 percent in 1987), Singapore (0.90 percent in 1985), Taiwan (1.04 percent in 1986), South Korea (1.82 percent in 1986) and Japan (3.49 percent in 1985) (Dahlman and Brimble 1990, p.28). The institutional structure for science and technology in the country is weak, hampered by low salaries, antiquated equipment and poor linkage with industry. Furthermore, despite a comparatively large pool of potential scientists and engineers for research and development, the training of most is inadequate. Accordingly, the share of scientists and engineers engaged in research and development to the total pool of potential scientists and engineers is comparatively one of the lowest in the region. Much of Philippine R&D expenditures is in the public sector and largely geared to the academic sector rather than towards addressing the actual needs of the productive sector. The R&D sector in the Philippines historically did not have a strong symbiotic relationship with the industrial sector. Magpantay (1993) blames the colonial and neocolonial past of the country which led to the rise of a trader’s (comprador) class and the dominant position in industry of multinationals which tend to im-


port technology rather than develop it. A more likely reason, though, is that the incentive structure within the bureaucracy does not quite encourage the strong orientation of the research community in the public sector to the needs of the industrial sector. There are two options for a greater symbiosis between the R&D sector and the agroindustrial sector: v transform all government R&D institutions especially those geared for industry into joint private-government institutes, with initial funding from the government for their endowment funds. This measure effectively privatizes the institutes and would allow them to institute more realistic salary levels and structures to entice and retain very good personnel; and v require all R&D institutes to source a significant percentage of their financing from projects with the private sector. This measure can be implemented through a matching grant system. In order for the R&D institutes to have some measure of stability, the government may finance the salaries of the regular plantilla but the direct cost of the projects must have private sector funding. In addition, promotion policies should include service to the private sector as an important criterion.

April 1997


The government, through the Science and Technology Coordinating Council and the STAND, has increasingly emphasized the importance of making the R&D sector in the service of the private sector and the economy. The challenge is in ensuring that the incentive structure within the government and/or the institutional structure of the R&D sector is conducive to the promulgated increased client-and economic-orientation of the R&D system. In this regard, it is recommended that the two options mentioned above be implemented where feasible. The first option has some implications on the organization of the Department of Science and Technology. Specifically, it may be worth looking into the efficacy of privatizing many of the institutes under DOST or instituted jointly with the private sector, e.g., MIRDC, ITDI and PTRI. At the same time, a number of the DOST institutes that are more geared towards basic research (e.g., ASTI) can be transferred to or instituted in selected academic institutions simply because most of the serious research work in the basic sciences involve mainly faculty members of academic institutions. These research institutions can be overseen by a consortium of universities (Magpantay 1993). The new DOST will then be a leaner and more strategic player in the R&D sector by working closely with the pri-

P olicy

vate sector and the academe either through the joint-ownership of the research institutes or through research and matching grants.

region have substantially improved theirs. The Philippines appears to be especially comparatively weak in science, mathematics and technical education.

Investing in human capital for improved technological capability Technological capability, defined as the “...ability to scan, assess, select, use, assimilate, adapt, improve and develop technology that is appropriate to changing circumstances” (Dahlman 1990, pp.47-48), fundamentally depends on the quality of people and the efficacy of institutions involved in the technology transmission process. Improving the human capital foundations of the country’s technological capability means improving the quality of Philippine education, especially technical education, raising the quantity and quality of the country’s S&T practitioners, and strengthening on-the-job training of workers.

Underlying the weakness of education in science and mathematics at the secondary level in the country is the teacher training policy and low professional standing of teachers in the country. Teacher training emphasizes form and method rather than substance (i.e., education courses with minor or major fields in the sciences and mathematics, rather than science and mathematics courses with minor or major fields in education). At the same time, those who go to the teaching profession tend to be less academically prepared than those in such courses as medicine, law, or engineering. As a result, the science and mathematics teachers in the secondary schools tend to be less academically prepared to effectively teach science and mathematics at the secondary level (Magpantay 1993).

Historically, the Philippines has given more importance to education than many developing countries in the world. The average number of years of schooling of Filipinos and the percentage of graduates of tertiary education are higher than most other developing countries. However, the quality of basic education in the country has slipped badly over the years while other countries in the


Tertiary education in the country has tended to focus on courses with little laboratory needs like commerce, liberal arts and education courses. This is because tertiary education in the country is primarily privately-provided under a regime of cost minimization. About 20 percent of tertiary students in the Philippines are enrolled in engineering and other

April 1997


technology courses. In contrast, tertiary education in Japan and the East Asian NIEs has been strongly biased in favor of technical areas. For example, the proportion of tertiary education students enrolled in technical areas to total tertiary students is 52 percent in Singapore, 39 percent in Taiwan and 36 percent in Hong Kong (Dahlman 1990, p.54). In addition, the quality of technical education in the country is likely to be lower than that in the East Asian NIEs as indicated by the high failure rate in engineering board exams in the country. It is likely that the strong bias for technical education in these NIEs explains in part their success in assimilating and effectively using technology for their economic growth.

be underinvesting in S&T. The proportion of R&D personnel to total population in the Philippines declined secularly during the 1980s, from 229 personnel per one million population in 1980 to 120 personnel per one million in 1987(de Dios 1992), probably because of the budgetary crunch during the decade. In contrast, Singapore had 1,931 personel per million, South Korea had 2,102 personnel, and Japan had 6,269 personnel in 1984 (Magpantay 1993). The stunted growth of the country’s technological capability is also indicated by the inverted U-trend in the share of patents granted to local investors, rising from 42 percent in 1977 to 50 percent in 1980 but declining to 24 percent in 1990 (Tan and Intal 1992).

Although the share of tertiary students in technical areas is lower in the Philippines than in the East Asian NIEs, the proportion of technical education graduates to total population in the country is comparable to the NIEs because of the higher rate of enrollment at the tertiary level in the country. This explains in part the growing attractiveness of the Philippines as an investment location for semiconductors and other technology intensive industries because of the large number of trainable graduates of engineering courses at comparatively low wages.

The incentive structure in both the bureaucracy and academia does not augur well for a robust R&D sector in the country. Although the doctoral graduates in the sciences and engineering are very few in the country, they are given low honoraria rates for research activities and are shunted to managerial positions very soon in their careers. Moreover, Filipino scientists are largely isolated from the international scientific community because of irregular subscriptions to scientific journals, poor local funding of trips of Filipino scientists to foreign seminars and workshops, and inadequate access to the Internet.

The country appears to

P olicy


Finally, salaries of scientists in the UP system are low and (in the light of the salary standardization law) at times even lower than their previous students who eventually became faculty members with higher professorial rank at other state colleges and universities (Magpantay 1993). It is apparent that the government would have to radically change the current incentive structure within the bureaucracy and the academia in order to revive and strengthen the R&D sector in the country and thereby significantly improve the country’s capability to “...scan, assess, select, use, asssimilate, adapt, improve, and develop technology...” (Dahlman 1990, pp.47-48) that is appropriate to the changing needs and circumstances of the country. On-the-job training is another mechanism for improving the capability of the country’s workforce to learn and adapt new technologies. It appears that multinationals are particularly conscious of the importance of on-the-job training, especially for the more skill-intensive industries. For example, about 89 percent of Japanese joint ventures in the Philippines use on-thejob training (Imaoka 1989 as reported in Tan and Intal 1992), although the rate of on-the-job trainees sent to the parent companies in Japan is less in the Philippines than in the other ASEAN coun-

April 1997


tries. The intensive use of onthe-job training in Japan is worth emulating and evaluating for adaptation to Philippine conditions. 4

de Dios, L. Meat and Dairy Processing Industry: Impact of Trade Policies on Performance, Competitiveness and Structure. Research Paper No. 94-08. Makati: Philippine Institute for Development Studies, 1994.


Intal, P. "Fostering Nationalism." Manila Chronicle reprinted in Economic Notes, 1990, 1987.

Austria, M. Textile and Garments Industries: Impact of Trade Policy Reforms on Performance, Competitiveness and Structure. Research Paper No. 94-06. Makati: Philippine Institute for Development Studies, 1994.

Lapid, D. Appliance Industry: Impact of Trade Policy Reforms on Performance, Competitiveness and Structure. Research Paper No. 94-05. Makati: Philippine Institute for Development Studies, 1994.

Banzon, C. Synthetic Resins and Plastic Industries: Impact of Trade Policies on Performance, Competitiveness and Structure. Research Paper No. 94-03. Makati: Philippine Institute for Development Studies, 1994.

Magpantay, J. "Streamlining the Science and Technology Sector for the Country's Development Goals." Report submitted to the Philippine Institute for Development Studies and the Department of Budget and Management, 1993.

Dahlman, C. "The Role of Government: Education Policy, Technical Change, R&D, and Competitive Advantage." In International Competitiveness: Interaction of the Public and Private Sectors, edited by I. ul Haque. Washington, D.C.: The World Bank, 1990.

Nagaoka, S. "Overview of Japanese Industrial Technology Development." Industry and Energy Department Working Paper No. 6. Washington, D.C.: The World Bank, 1989.

_________ and P. Brimble. "Technology Strategy and Policy for Industrial Competitiveness: A Case Study of Thailand." Industry and Energy Department Working Paper No. 24. Washington, D.C.: The World Bank, 1990.

Sharif, N. "GAINEX Program: Dynamic Technological Initiatives for Emerging Agroindustrial Export Winners." Report submitted to the Department of Science and Technology, and the United Nations Development Programme, Manila, 1995. Tan, J. A. and P. Intal. "A Preliminary Study on Japanese Technology Transfer to the Philippines." Paper presented at the International Conference on Japan's Role in the Transfer of Technology in ASEAN Countries, Bangkok, 26 - 27 June 1992.

For further information, please contact The Research Information Staff Philippine Institute for Development Studies NEDA sa Makati Building, 106 Amorsolo Street Legaspi Village, Makati City Telephone Nos: 8924059 and 8935705; Fax Nos: 8939589 and 8161091 E-mail:

P olicy


20 Years of Service through

Research April 1997

Improving the Policy Environment and Institutional Structures for Technological Development