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.