The Philippines’ telecom duopoly of PLDT and Globe Telecom doesn’t just ensure that usage rates are among the highest in Asia; nor that connectivity is inferior – slower and less reliable – to markets where there are multiple providers. It also handicaps innovators and entrepreneurs. Fast-developing information and communication technologies (ICT) are essential tools they need in their kit.
Unfortunately, despite calls for, and promises to, reform the Philippine telecom sector – to open it up and attract to it the best in the world – it remains surrounded by a bulwark of protectionism. Unfair business practices have long persisted in the Philippines and it wasn’t until 2015 and the administration of Benigno “Noynoy” Aquino, that any proper dedicated legislation was passed to confront the problem. To put that in perspective, US anti-trust laws go back to 1890 (the Sherman Act).
The 2015 Philippine Competition Act, in turn, set up the Philippine Competition Commission (PCC), the purpose of which is to “ensure fair competition in the market for the benefit of consumers and businesses”. So far, the PCC has failed to do that where the Philippine telecom sector is concerned. It’s failed businesses and consumers.
Separately, last month, the government’s man, appointed to deal with the industry’s problems – Rodolfo Salalima – resigned as head of the Department of Information and Communications Technology (DICT), after 15 months of making practically no impression.
Although well qualified and respected in the industry, Salalima’s appointment was always bothersome. He’d been a chief legal counsel and a senior advisor to Globe so – rightly or wrongly – there was always the potential for a conflict of interests. We’re not saying that happened, but it’s very likely that this may have played a part in his resignation. In any event, the telecom duopoly is as strong in the Philippines today as it was when Salalima took up his job with the DICT.
Under the sub-index, ‘Abilities’, the 2017 Global Entrepreneurship Index (GEI) – an annual indicator supplied by the Washington-based Global Entrepreneurship and Development Institute – assesses the following: ‘Competition’ and ‘Technology Absorption’.
Here we explain those areas and show, in terms of them, how the Philippines fairs in the context of its peer group; the 10 member states of the Association of Southeast Asian Nations (Asean).
For the purposes of the index, ‘Competition’ is a measure of a business’s product or market uniqueness, combined with the market power of existing business enterprises and the effectiveness of anti-monopoly regulation. In other words, market entry can be hampered or prevented in markets dominated by powerful business groups.
So, for example, given the situation in the Philippine telecom sector; if an entrepreneurial company developed a unique telecoms product for the Philippines – an innovative signal booster, for example – if the country’s two telecom providers chose to ignore it, it would never even make it into production.
Here are the Asean scores for ‘Competition’. Singapore, 0.64; Malaysia, 0.56; Brunei, 0.45; Laos, 0.33; Philippines, 0.30; Thailand, 0.30; Cambodia, 0.27; Indonesia, 0.24; Vietnam, 0.24; Myanmar, 0.12.
Thankfully, not all sectors are as closed to competition in the Philippines as telecoms – banking, for example is becoming increasingly open to foreign participation. But there’s enough of the protectionist mindset still around to dampen competition. Joint fifth in Asean on this GEI metric is far from impressive, signaling that reforms to open-up the market are needed.
Unquestioningly, ICT plays a crucial role in economic development. Simply put, the greater access to ICT, the greater level of its technology absorption, the greater its benefit for innovative firms and the entrepreneur community. Countries with higher absorption levels, therefore, are at a distinct advantage to those with lower levels.
While this sector is one of many adjudicated by the GEI to determine the ‘Competition’ of the 137 countries on the index, in determining their levels of those countries’ ‘Technical Absorption’ it’s the main one.
Here are the Asean scores for ‘Technology Absorption’. Singapore, 0.74; Brunei, 0.30; Vietnam, 0.20; Cambodia, 0.16; Laos, 0.16; Myanmar, 0.12; Thailand, 0.12; Indonesia, 0.03; Philippines, 0.01; Malaysia, 0.00.
That result is pitiful and stands as an indictment to every government of the Philippines going back practically to the birth of the Internet – the World Wide Web – in 1989. How on Earth can the frontier economies of Cambodia, Laos and Myanmar have greater technology absorption than the Philippines?
More to the point here; how can the Philippines hope to encourage its entrepreneurs and allow them to develop their skills when their access to technology – and their access to innovators around the world – is restricted?
We don’t know who’ll replace Rodolfo Salalima at the DICT, but let’s hope it’s someone who really shakes up this industry and finally brings it into the second decade of the third millennium and not leave it languishing somewhere closer to the last decade of the second. Let’s hope, too, that the PCC will soon find where it left its teeth.