Dynamics of Cebu High Technology Urban Centers

During the 4th Mindanao Information and Communications Technology Congress last October 28, 2005, in General Santos City, I was one of the speakers in the breakout sessions. Rene Sanapo, Cebu City's Consultant for Geographical Information Systems or GIS was also a speaker during the plenary and luckily in the same room with me at the hotel designated for guests and speakers.

We were able to catch up and after all the day's activity we got to talk about a lot of developments in the ICT scene. He showed me a copy of a paper entitled, "International Seminar on Dynamics of High Tech Urban Spaces: Asian-European Perspectives" and a very intriguing paper at that.

The paper incidentally was referring to an event that will happen in Hyderabad, India some time in January or February 2006. Apparently, India is evolving from the standpoint of creating information technology driven economies to building
their society by either stimulating or forcing the growth of high-technology centers. Their strategy is to find out the how high technology urban places evolved in Europe and selected cities in Asia.

I was guessing that Rene wanted me to get a Cebu perspective using the paper as a reference point. My reading the paper was like serendipity because I was looking for a good reference point to write a paper for one of the pillars of the Silicon Valley Model being envisioned for Cebu. The Silicon Valley Model however is a totally different subject altogether and is taken up in a separate blog.

Anyway, I got to work right after I got back to Cebu.

The dynamics of high technology urban spaces in Cebu should be viewed in the context of what is a high technology urban center in the Asian-European Perspective.

The more successful experience has been in the microelectronics, pharmaceutical and biotechnology industries. The key distinction is that the major players in these industries are the primary sources of innovation in their respective areas of specialization.

The achievements of these industries have driven the economic restructuring process of the western world in the 1970s and beyond. Another distinction is the emergence specially in knowledge-intensive activities disengaged from industrial production.

The direction of property management shifted from the purely spatial and market value considerations to specific architectural symbols and landscaping. The experience is not specific to highly industrialized countries since high technology urban spaces have successfully evolved in Third World countries.

Putting the Cebu Picture in the Urban Space Perspective
As I got down to half of the paper I have to ask myself: Does Cebu have this high technology urban space?

The answer is no!

There are disparate characteristics found in several urban spaces but not one of these has all the distinctive characteristics of a successful high technology urban center within the perspective described above.

The creation of export processing or special economic zones have stimulated the growth of urban centers and literally built communities around it through worker migration. These centers are not high technology per se since it does not fall within the context of the distinction described here (that is knowledge-intensive activities disengaged from industrial production).

MEPZ I and MEPZ II locators for example are global companies considered leaders in their fields but their contributions in terms of knowledge-based activity is directly connected to their manufacturing operations and not disengaged from it. Their choice of location is not driven by any symbolism or landscaping consideration but by tax and other incentives offered to foreign direct investments. It did matter to the decision-makers and key executives though that the best resorts and leisure places are less than an hour's drive from their production sites.

An attempt was made to leapfrog development in the southern part of Cebu through an ambitious Naga Township but nothing came out of this project. It was envisioned to be a self-contained economic ecosystem but until now we still have to see a semblance of vertical development in the area.

AsiaTown IT Park was envisioned to attract information technology and IT-enabled service locators but we still have to see a company driven by a knowledge-based work force churning out leading edge innovations.

There are several observations of urban centers here in Cebu that needs to be shown. MEPZ I and MEPZ II attracted so many workers but commercial activity did not follow as expected. Logically commercial activity should be targeting workers but such a phenomenon did not happen since there is no mall anywhere in proximity. A small commercial complex did rise up but catering to the middle class rather than the workforce. The zones however did attract a lot of banks and freight forwarders to the zones.

AsiaTown IT Park on the other hand is quite near at least 3 malls and in the major residential communities but it still has to attract major global companies to the site. Efforts to come up with a cohesive IT initiatives and strategy might stimulate growth around AsiaTown IT Park.

Inhibitors to the Development of Urban Space Dynamics
There are so many factors that may have to come to fore in order to force this evolution. But there are very few that may have as much impact. Many inhibitors are still affecting this evolution.

A Weak SME Base
Our small and medium enterprises are not growing as rapidly as it should. The number of small and medium information technology enterprises alone is not very encouraging. You can disregard the number of computer retailers and Internet cafes from this number. We need small and medium enterprises that can deliver certain technologies and expertise.

Our Income Tax Base Burdens the Consumer
Government still relies on the low and middle income population for the bulk of its tax revenues hence the majority of the population has no savings or surplus to either invest or to buy high-technology goods or products created by high-tech production processes. Graft and corruption still constitutes the greatest single factor to tax revenue losses.

Government Processes Is Not Ready for Evolution
No amount of tweaking in government structure or political paradigm will change this. There is a need for credible over-haul of government processes and the integration of accountability in every level of government activity.

The headlines about government spending to encourage the economy, have no direct correlation to economic activity because most of this cash are not really going to the SME base.

Many small and medium enterprises consider government transactions as a wasteful business exercise. The irony is that the law, Republic Act No. 9184 or the "Government Procurement Reform Act" supposedly passed to create transparency and efficiency in the government procurement process seem to spawn a new form of big ticket corruption the likes of which done very well by the Department of Public Works and Highways or DPWH during the late 80s.

Government is A Poor Consumer of Technology
The reluctance of our politics to use technology for efficiency, standardization, transparency and accountability makes government a low and slow consumer of any technology whatever the applications. There is little confidence in any development programs whether for social or ICT since these programs will still have to be implemented within existing (or the lack of) government processes already stress by poor credibility and consistently waning public trust. This reality naturally does not encourage market mechanisms to thrive.

The best technology to ensure efficiency and standardization leading towards more transparency and accountability will not get deployed in this environment. The Government Procurement Reform Act already practically guarantees this in the coming years.

Private Investment in Infrastructure is Too Small and Too Slow
Since government itself does not make 'credible' investment as against high investment in infrastructure, private enterprise is not compelled to provide a counterpart investment. Political initiatives in government supports only small infrastructure projects instead of the more cost-effective mega projects that has longer and more strategic impact on the local economy.

In develop countries infrastructure projects provide one of the biggest channels for infusing cash into the economy but such a strategy does not work here. The 20% to 40% "Consulting" and "Service" fees that incumbents charge service providers and contractors already "rips off" whatever return on investment or margins these providers and contractors would have plowed back to the economy.

Tell-tale Signs of Urban Space Dynamics
There are existing and specific areas already for the emergence of potential high technology urban centers. The challenge really is to either wait for these areas to evolve 'naturally' or to force evolution at a rapid pace by planning and deliberately creating the business culture and the innovation ecosystem.

The new framework to stimulate this evolution is to move from the framework of simply encouraging foreign direct investment and export to a sublime strategy of actually creating a technological base through legal channels of transferring technology, collaboration or encouraging research and product development in these areas.

There are already efforts in this direction at least in Cebu. The main concern is determining the number of stakeholders who should be involved and the development of a process to 'trigger' this evolution.

The Evolution of the Cebu Information Technology

The 'Cebu is IT' experience has been a model for a lot of the parallel initiatives in many growing cities in the country. Being in the middle of the action during the Cebu Information Technology Summit of 2001, I find the succeeding initiatives in these places quite amazing. When I go to different forums I get to be ask the same questions a lot of times. How did we do it? Where there deliberate steps taken to get to where we are? How did we evolve?

We can safely say that we did something right. As to being deliberate in this direction, I'm not quite sure. It's more like toddle through. We did evolve definitely.

Looking back there were noticeable phases or transitions we have to go through to be where we are. However, the state of where we are is not yet our destination. We are really quite a distance from our collective vision. But it will matter a lot if we did look back and see what we went through to be here now!

Selection of a Model for Development 

The National Association of Software and Services Companies or NASSCOM is the premiere trade body and the chamber of commerce of the IT software and services industry in India with about 900 members. The members are into software development, software services and IT-enabled or BPO services. 150 members are global companies from the US, UK, EU, Japan and China.

NASSCOM considers itself the strongest proponent of global free trade in India today. The software sector in India has shown quite a phenomenal growth in the 1990s. To create a plan for the growth of the software industry in the next millennium for India, NASSCOM commissioned a study of existing companies and their IT strategies. NASSCOM commissioned a global management consultancy firm, McKinsey & Company to undertake this study.

McKinsey & Company is a global professional business services organization. It has been providing organizational development and strategic management services to Fortune 1000 global companies for 75 years. Three (3) of the largest global companies are served by McKinsey helping them acquire competitive advantage and leading edge management expertise.

Almost everyone knew from the very start of the Cebu initiatives that India was clearly the model. Most of the literature being circulated all lead to the NASSCOM-McKinsey Report of 1999. This report was publicly released during the "Indian IT Strategy Summit" in December of 1999.

The report outlined a general strategy for the IT sector in which most of the projections in that report have today proven to be right on target.

Research, Study and Synthesis of the Model 

We most definitely did our homework. Different stakeholders had a piece of the NASSCOM model and each had a strategy of the best way to mold it to make it their own. Our chamber of commerce did its role of putting the stakeholders together and introducing the NASSCOM model and the city government got both the local and national agencies to be involved in creating their own synthesis of the NASSCOM model within the sphere of their respective influence.

By year 2000, I have read at least two updates of the same McKinsey Report both have emphasized how well the Indian software and IT service sector were growing beyond projections. 

Informal Discussions and Consensus-building 

You just can't imagine the depth and breadth of the discussions that took place here when the NASSCOM-McKinsey Report finally reach a lot of the stakeholders. 

There were those who would like to clone the Indian experience from the NASSCOM-McKinsey Report right down to the punctuation. Others just didn't feel that it really reflected the kind of development exhibited in Silicon Valley. Still others felt that there has to be another model for Cebu like the Singapore success story if there is such a story.

Even before all these IT initiatives, so many development initiatives where already on the table but none however was as focus as the kind that grew out of the many discussions triggered by the NASSCOM-McKinsey Report. There were a lot of surprising consensus building up.

Many believe that whatever the outcome the IT initiatives have to be started soon. It has to be done and Cebu has to do it on its own. Cebu like always believe that the National Government cannot do it whatever the prodding and even if they did it they almost always do it wrong from the start. 

Buy-in and Adoption of the Model for Development 

There was a lot of talk going around that the whole idea of finding consensus for an IT initiative to drive the Cebu economy was more a political strategy than an economic one.

Whether this is true or not the fact is that the timing of the initiative forced a snowball effect for all sectors to come to a crossroad. This crossroad eventually led to a series of events that put even competing stakeholders in one table to discuss common issues affecting their industry. 

The most important milestone is the buy-in leading to the adoption of a model for development. The most significant decision that the stakeholders have made, and these stakeholders were mostly competing with each other, was to be in the same room to position Cebu as an information technology hub.

Most of the big stakeholders already got the point of the McKinsey Report of 1999 but the smaller players like the small information technology enterprises or SMITES have not read or heard of this report.

Even then, the call and opportunity to be in the same place and literally in the same table to plot the direction of Cebu's economy on the short and medium term was intriguing and enticing for a constituency seldom consulted of matters affecting them. 

Pre-summit Workshops participated by different stakeholders 

Prior to the Cebu IT Summit of March 2001 was a three-day Pre-Summit Workshop held on February 26-28, 2001 at the Toledo and Danao Room of Holiday Plaza Hotel along F. Ramos Street, Cebu City.

The Pre-Summit Workshop is a result of a series of meetings and workshops that attempted to cover as much issues about the information technology sector in general and Cebu's position in the current IT developments in particular.

I was engaged by TeamAsia the official event organizer to develop the materials and process for the workshop. It was not an easy task since I was given less than 30 working days to do it and informed that there maybe more than 30 people in each session, a number not ideal for a workshop of such nature.

In the workshop, I introduced a concept I referred to as the "Information Technology Loop". This concept was suppose to clearly identify who are legitimate stakeholders in the IT initiatives in the context of the Cebu IT Summit. 

The Pre-summit Workshop formed part of the final series. The IT Summit Steering Committee has organized four (4) Working Groups, namely: Policy & Incentives, Human Resource, Infrastructure, and E-Capital. Each of these Working Groups had a separate workshop session. The sessions were not smooth and uneventful. It was in reality far from that.

I already anticipated that the sessions will be a simmering cauldron since the organizers have invited practically the 'Who's who' of ICT and businesses in Cebu City. All with difficult issues to raise. All with strong willed CEOs, COOs, and key executives not about to give up a quarter of their respective positions in the agenda.

Current data at that time showed Cebu as a primary candidate for being the leading IT center in the country and Asia. Admittedly, there is still much to do and inhibitors we have to deal with to cross the borders beyond what it was then. This workshop became the first of our border crossings. What we gained in those three days became a road map that got us farther than just crossing boundaries.

The Cebu Information Technology Summit 

The Cebu Information Technology Summit or Cebu IT Summit was held on March 29-30, 2001, at the Cebu City Marriott Hotel. The keynote speech on the theme "Cebu is IT: Charting the Path, Setting the Goals Together" was delivered by Manuel "Mar" Roxas II, then Secretary of the Department of Trade and Industry. The Cebu IT Summit was made up of two big summit workshop. 

Summit Workshop 1 on Day One was 'Setting the IT Cebu Vision' and Summit Workshop 2 on Day Two was 'Operationalizing and Achieving the IT Cebu Vision'. 

 The Cebu IT Summit presented a challenge for me as a Lead Facilitator at that time and to Ms. Siony T. Hijara, then Lead Documentor for all the workshops, since there was almost a hundred people in a room in each of the Working Committee Workshops.

We had to devise a process and facilitating methodology that will make the other facilitators and lead documentors do their job in the same way we did it during the Pre-summit Workshops. Adding to the challenge was the fact that the two other facilitators in the persons of Frederick Amores and Ross Madrid will be available only on the first day of the Cebu IT Summit.

The Summit went down in Cebu business history as a resounding success. We came out with a document which I personally handed to then City Mayor Alvin Garcia who closed the summit by reading the summit document to the participants on the last day of the event.

Before that year ended the Cebu Educational Development Foundation for IT or CEDfIT was born. Among the many Information and Communications Technology (ICT) Councils in the country only Cebu has a clear direction and serious stakeholders with an agenda but was created a year after.

It took three years for the Cebu Software Development Industry Association or CebuSoft to be formed. The rest of the IT initiatives was a whole series of fora, conferences, workshops and programs from the different stakeholders. 

The dynamism of the sector can undeniably be trace back to the program of action defined in that summit document of March 2001. In the 8-Point Program of Action only one have no champion and that it is the program of action for improving the quality of electrical power. 

The Next Step: Cebu ICT 2007 and Cebu ICT 2015 Foundation 

For several meetings now, the Cebu Chamber of Commerce and Industry (CCCI), CEDFIT, CebuSoft, Cebu Computer Society, telecommunications company, SMITEs and the Small and Medium Enterprise for Sustainable Employment Program (SMEDSEP) have been discussing the next great leap in the Cebu IT initiatives.

These initiatives will start this 2005 with the work-in-progress towards the 2nd Cebu IT Summit. CCCI is envisioning the creation of an entity that will consolidate and put focus to all of Cebu's effort in the ICT sector. 

For a lack of a better name, the group is referring to this entity as Cebu ICT 2015 Foundation. This foundation hopefully will be responsible for managing the next Cebu ICT Conference and Exhibition in 2007. In a concept paper presented by Bonifacio Belen, Executive Director of CEDfIT, he proposed consolidating the gains of the 'Cebu is IT' efforts by moving from the NASSCOM-India model to a Silicon Valley Model. 

The proposal introduces a model that will put Cebu as 'a' or 'the' IT hub by year 2015. This will be Cebu's next milestone.

Opinions and Perspectives in Business and ICT

This blog site is a collection of my opinions and perspectives about business and information and communications technology.

More than 10 years of career was in this endeavor. Quite naturally, most of my musings, thoughts, opinions or perspectives will be in this field. I am biased towards issues and developments affecting business and ICT initiatives in Cebu.