Jourr_ of Philippine Devd_pment NumberTwenty-Nine, VolXVI,No.2, 1989
SCIENCE AND TECHNOLOGY DEVELOPMENT AND PROMOTION IN THE PRIVATE SECTOR: SOME ISSUES AND RECOMMENDATIONS FOR POLICY RESEARCH* Dr. Corazon PB. Claudio**
Debunking our Timidity In this paper, I will discuss mainly the technology aspect of the topic. On science, I have just one point to make--the need for scientific research. We seem to address this need with much timidity. This timidity does not complement our aim to be a newly industrializing country (NIC) by the year 2000. If we are serious about being an NIC In the next decade, we should encourage and support both basic and applied research--now. In fact, we are already late in acting on this need. But perhaps, it's better late than never. It should be our policy to conduct even Justa modest level of activities on basic research If only to attract Filipino scientists to stay in our country rather than enrich, with their knowledge and skills, research laboratories in industrialized countries. Given our limited resources, the challenge before us is to identify priority areas for research so that we may maximize its benefits. A local, unique problem demanding attention or a subject that offers a potentially high comparative advantage in the wodd market are but some possible areas for research. On the technology aspect of this paper, I would like to focus on one particular industry--the Information technology Industry--so that I may treat the topic with some depth. Using this case, I will identify issues, concerns,
*Thisisanupdatedversionofa paperdeliveredduringtheseminar-workshop onS&T, sponsored jointlybythePhilippine InstituteforDevelopment Studiesandthe Department of ScienceandTechnology, 5 May1989heldatthe NEDAseMakatiBldg.,MetroManila.The authorgratefullyacknowledges thesupportof theAsiaFoundation forthe researchonthe information teohnologycaseusedin thispaper. **President,SITECHResources Group,Inc.;Chairperson, S&TCommittee, Philippine Chamberof Commerceandindustry;ProgramDirector, Technology andRiskAssessment andManagement Program, Department of Industrial Engineering andOperations Research, University of thePhilippines' Collegeof Engineering.
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and policyresearchareas that may apply as well to manyother industries and technologies.1 Informationtechnology(IT) belongsto what some refer to as high, new, advanced,frontier,emerging,or superiortechnologies. I chosethis technologybecauseof anothertimiditythatwehave--thetimidityto develop newtechnologiesin favor ofwhat we call indigenoustechnologies(which, in manyinstances,seemto focusontechnologiesthatarerelativelyeasyto developin ourbackyards,for example,soap-making). Many of the newtechnologies,such as microelectronics,lasertechnology,and IT canhelp buildnecessaryinfrastructure and deliverysystems thatwillallowus to develop,promote,and utilizeindigenoustechnologies. These new technologies,therefore, deserveour attentionand policy research. Where PolicyApplies One of the first importanttasks in policymaklngis to identifythe proper domain of policies: This task requiresidentifyingvariablesthat govemment,aspolicymakerand Implementor,can and cannotcontrol.The variablesthat it can control are the proper subjectsof policiesand policy research.Thosethat itcannotcontrolarepotentialsubjectsfor monitoring type of researchas they mayInfluencethe implementationof policies. For ITand othertypesof technologies,someof thekeyuncontrollable oruncertainvariablesaretechnologicalchanges,ma'ketconditions,private sector activity,and labor force stabilityand strength. These uncertain variablesmay be affectedby governmentpolicies.But, to a large extent, they cannot be controlled by government.However, they influencethe successfuldevelopmentand promotionof a technology. We, therefore, needto monitorthem. 2 The principalcontrollablevariablesarethe policy Instrumentsthemselves such as S&T, economic and industrial policies, institutional mechanisms,and capital-laborrelationship. One researchtopic is to identifythesetwo types of variablesfor a particulartechnologyso that we mayknowwhichshouldbe controlledby policiesand whichneed to be monitoredonly.
1. "Corazon PB.Claudio, "Information Technology Development and Promotion: SomeTrends, Strategies Issues andRecommendations," pp.55-57,i20. 2. Op.cir.,p.51.
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Some Important Variables in IT Policymaking I will brieflycommenton two uncertainvariablesthat influencethe developmentand promotionof IT--technological changesand marketconditlons. I willalso discussthe principalcontrollablevariable--thepolicy instruments. Technological changes and market conditions Let us first understandthe way IT has evolved with the help of a three-wavemodelof technologicaldevelopmentin IT (Figure1). The first wave startedin the early60s. It was the time when IT was generally proprietary-- entry into the market was very expensive. The second wave, whichstartedin the 70s, allowedcheapermarketentry but was still a killinggame for many. it was duringthis wave that reverse engineeringemerged. Fromthe eady70s, manycountriesstartedto disassemble electroniccomponentsto understandhowtheir partswork and to copythem. The third wave, whichstartedin the 80s gave riseto the emergence of product integration:many companies started to share their product specificationsunder licensingagreements. Duringthis period, we also started to see thedevelopmentof forwardengineering. In the third wave, technology and product cycles have become shorter. Therewas, thus, littletime to reverseproductsand copythem. By the time one succeededin reversinganything,the restof the wodd would be intoanothercycle. Fortunately,one no longerhad to know everything to participatemeaningfullyIn thewodd market.Thiswas becausetachnology duringthiswavewas alsomoreopen. Forexample,centralprocessors and peripheralsbecame open to vendorsotherthanthose who designed the hardware system. Data processingnetworks also became open to products of third party vendors. The increasingdiffusionof cheaperand more powerfulmachinesnow haveforced suppliersto give uptheiroriginal strategyof lockingin customersthroughproprietaryoperatingsystems. With the openness of the technology, one can now enter at some stagesof the technologicalcycle. One does not haveto start with the end productand disassembleit. Opennessof the technologyallowsone to do some parts of the technologyin a forwardengineeringway.3
3. See Mario D. Ripper's oral presentation at the International Symposium on Teohnology Policyin the Americas, Stanford University,1-3 December 1988, and Edward Steinmueller, "Publio Policy Implications of the Ecenomics of Information Technology Industries,"n.d.
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FIGURE 1 KEY SECTORS FOR INDUSTRIAL DEVELOPMENT AVAILABLE TECHNOLG(tY
AVAILAgLE TECFINOLO(_f VENTURE R & D
RESULTS
R & D NEEDS
R&D SECTOR
INFRRE'rRUCTURE
PRrENT LRRS INCENTIVES
SECTOR
INCENTIVES PROCUREHENT POLICIES; LRBOR LRH5
DEHRND
R & D
RESULTS
"_-uuvERNMEN --I SECTOR HRRKET PROTECTION
INFRASTRUCTURE EDUC. POL.IClI_E
\ EDUCATION
CONSUHPTION
SECTOR
SECTOR HARKET CHARACTERICTICg
* ADOPTED
FROM KAWAMURA
TRAINED
MRNPUHER
TRAINED
HRNP(]HER
& SILVA (1984)
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Industrializedcountrieshaveledthewoddinthethirdwave. Butmany developingcountdesarestillinthefirstorsecondwaveand are, thus,being leftbehindin technologicaldevelopment. It is importantfor us to understandhowa technologyis developing worldwide,suchasIT, toassesswherewe areinthetechnologicalevolution process.This will allow us to know what strategywill make sense. This assessmentisan importantpolicyresearchtopic. Anothermarkettrendfor IT is theinternationalization of the technology. CompaniesintheUnitedStateshavebeenmovingintoAsiancountries. On the other hand, someAsiancountries--Korea,Taiwan,and Japan--as well as Europeancountrieshave beenmovingintothe UnitedStates.4 In SiliconValley, for instance,the JapaneSe,Korean,and Taiwanese com* panieshave beenincreasingin the pastyears. The Philippinegovernmentmay respondto this market trend with policiesthat can attractto our shoressomeof those investments.Butwe must know, through research,how the market is developingand how competitivewe are in attractinginvestmentsand technologytransfer. Anotherinterestingtrend inIT affectsresearchand development.R&D had become more complex, extremelycostly, r/sky, and has involved more actors.As a result,manycompaniesand countriesnowworkcooperatively throughinternationaland regionalnetworksand alliances.An exampleof the cooperativeInitiativesthat have developedisthe formationof regional networksandalliancesInthe EuropeanEconomicCommunity(EEC).Some of these are establishedwith the strategicaim of penetratingrestricted marketssuchas those of India,Brazil,and the countriesbelongingto the Organizationof Oil Producingand ExportingCountries.s In the regioncovedngthe Associationof SoutheastAsian Nations (ASEAN), one cooperative project on R&D is the ASEAN/Australian CooperationProjecton microelectronicsresearch. This projectinvolves the Universityof the Philippines(UP) and other,_chools. The increasinginternational trend towardcooperativealliancesmakes Itdifficultfor me to understandthe conceptof technologicalself-relianceIn
4, Charles Edqulst,"Technology Policy-Conceptual Remarksand European Experiences," n.p. 5. Terutomo Ozawa, 'Japanasa LateStarter in Computer Industry: MajorChara¢* teristi¢_ andPolicy Implications forLDCs," n.p.;andPyung YuIi,"TheRoleof Government Policy andtheDevelopment ofComputer Industry InKorea," n.p. 6. Ed_dst,n. p. ; andPeterSchulze,"Bridging theTechnology Gap:ThePolicy National andCommunity R&D/T-Programs InEurope: Inter-Rrm Cooperation, ESPRIT and theEureka Initiative," n,p,
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IT. If this concept meansdoing awaywith imports, thenwe aregoingagainst the worldwidetrendof mutual,healthyinterdependence.What we should aim for is not so much technologicalself-reliancebut the technological capability,if possible,a uniqueone that willallow us to participate in the internationalmarketin a meaningfuland significantway. This suggested aim impliescontinuingtechnologicalImports;it also means Increasing technologicalexportsof productsthat give us a competitiveedge in the wodd market. ForInstance,we may haveto developIT componentsthat can fit into biggersystemsintegratedby anothercountry.We need notdevelopentire systemsin orderto participateactivelyin world trade. Butthe component thatwe shoulddecide to develop,we shoulddevelopwell.7 Anotherimportantmarketdevelopmentin IT is in labor.Comparative advantage is veering away from cheap labor sinceIT nowrequiresdecreasing labor.Some new IT componentsrequireonlyfive percentlabor. If we continueto dependon cheaplaboras ourcomparativeadvantage,we may notsucceedin worldtrade.To manyf_reigninvestors,tax exemptionsmay be moreattractivethancheap labor. The more important issue of competitivenessin IT seems to be technologicalinnovation.Unfortunately,this means developingcountries whichlackresourcesto innovatemaybe leftbehindinthecompetition._ But what one lacks in quantityof resources,one may perhaps make up in quality.We, thus,need more creativepeoplewho can innovate. We must understandtheseand otherinternationaltechnologicaland market trends in order to compete effectivelyin the world market. We cannot affordto look just inwardly.And, In orderto understand,we must conductcontinuingresearchon thesesubjects. Policy instruments We must first know,what policieshaveworkedand failed elsewhere. We shouldnotreinventthe wheel.But if we shouldadapt policiesthat have succeededIn othercountries,we shoulddo so with due considerationof ourownsocialand politicalenvironment. At leasttwo types of approachesto publicpolicymaklngin IT have been used by other countries. One is a fundamentallyinterventionistapproach;anotherisa laissezfaireora moreliberaltype of intervention.Some of the interventionmeasuresare designedexplicitlyto influencetechnical
7.
Claudio,_/_., n.p.
8. 9.
Claudio,Ibid., n. p.; and Ozawa, n.p. Claudlo,/'bid,, n.p.
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change such as subsidies for R&D. Others are more Implicit such as trade, exchange rate, Industrial, and fiscal policies. Industrialized countries, in general, have adopted interventionist policies, with some periods of laissez fake. 10 Moreover, IT policies In many countries are either explicitly protectionist (using tariffs, for example) or avowedly strategic (adopting subsidies, for example). They put heavy emphasis on Infant industries which tend to protect existing industries on a permanent basis.11PoUciesare also generally reactive rather than proactive. 12 13 Almost all countries support a technology-push approach. Many developing countries are increasingly emphasizing technology transfer. 1_ Which of these policy approaches may better apply in our country is another possible subject for research. Other Issues and Concerns Successful development of policies for any technology requires a deady defined role for government, with set priorities and limits for such role. Policy research should address this issue. For IT, some possible roles for government include providing market entry, removing barriers to entry, providing access to resources and markets, serving as a major purchaser of the technology, and setting up the needed infrastructure. Another issue that we have not paid any attention to is what our Technology and Risk Assessment and Management Program at UP now addresses: risks associated with technologies. 15 These are mainly environmental, ,safety, and health risks as, for example, risks associated with the nuclear power plant. These dsks willtake significant toll in human lives and in our environment unless we address them adequately. In particular, hazardous and toxic risks associated with technologies are now increasing rapidly, is They need to be controlled with appropriate policies. One or two
10. Steinmueller, n.p. 11. Op,tit. 12. Edquist,n.p. 13. Steinmueller, n.p. 14. Gene Weighton,"TheStatusof DP and Semiconductor Industriesin Latin America," n.p.; andPauloB.Tigm"HowdoesLatinAmericaFitintoHighTechnology?, •n.p. 15. CorazonPB. Claudio, "RiskAsses._nant and Management:The Philippine Case,"n.p. 16, Claudio,"RisksofToxicSubstances; CulturalConsiderations, Management and PolicyDevelopment in thePhilippines," n.p,
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legislative initiativeson this topic have been developed but much work still needs to be done. We have to be concerned also with risk transfer in additionto technologytransfer. Somedevelopingcountriesare nowlooked at as haven fortechnologiesthathavebeenrejectedby industrializedcountries.17How to controlrisktransferis one importanttopic for policyresearch. Anotherstudyarea is the diffusion of a technology, that is, how a technologyisactuallybeingapplied.One exampleistheAsiaFoundationsupported researchthat we are now conducting:a diffusionstudy on microelectronicstechnology.We arestudyinghowthistechnologyisbeing appliedinvarioussectorsoftheeconomyand analyzingthe relationshipof that diffusionwith the developmentand implementationof social and economicpolicies,t8 Figure2 showsthe key sectorsthat we are studying and theirlinkages.Our goal isto recommendpoliciesthatwillenhancethe diffusionof microelectronics towardthedirectionthatis mostsupportiveof ourcountry'sdevelopmentobjectivesas, for example,to becomean NIC. Policymakingoftenoverlookssome concernssuchas the following: the role of culture in technologicaldevelopment.And,thereis not onlyone cultureto speak of. We have the urbanand ruralcultures;the culturesof theVisayans,llocanos,and othergroups;and of course,S&Tculturewhich isperhapsthe mostunderdevelopedofthemall.19Theseculturescanhave a biginfluenceonthe developmentand promotionofa technology. Anotherconcernisthe role of women. In thefield9f science,women seem to be doing quite well: 45 percent of scientificprofessionalsare women. Of the total numberof registered engineers,however,only 12 percentare women. Of those in managerialpositions,only eight percent arewomen. The totalindustriallaborforce constitutesabout 75 percentwomen. The percentagemay be higher in the IT industry.If we want to improve productivity,therefore,wemust recognize women. Policiesthat can addresstheirconcernsmustbe devised. The role of S&T in rural development is anotherimportanttopic for policyresearch.All effortsin S&Twillbe in vain unlesswe touch the life of
17.
Claudlo,"InternationalTransferof Risks, "n.p.
18. Cayetano PaderangaJr. and CorazonClaudio, "MicroelectronicsTechnology Diffusion and Economloand Social Policiesin the Philippinesand in Selected Countries Withinand Outsidethe ASEAN,"n.p. 19. Claudio, "Are you Cultured?."n.p. ; and Jose Sionil, "The Philippines:A SocioculturalPerspective,"n.p.
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FIGURE 2 THE THREE-WAVE MODEL
IO/I
_'_
1 M_
i_
1STWAVE
t_"
2NDWAVE
3RD WAvE
IK_
I
I
I
1960
1910
1980
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the common man in rural communities. Policies that will enhance S&T dissemination in rural communities needto be developed. 20 Other important issuesand concernsrelatedto technologydevelopment include how to deal with dislocationsarising from accelerated industrialization, rapid creation and obsolescence of human capital, organizational disruption,increasingtrade friction,and technologytrans21 fers. As we become industrialized,problemsarisingfromtheseissueswill increase.It isa bigchallengeto policyresearchersto anticipateand address them withpolicyrecommendations. Proposed Policy ResearchTopics In summary,somesuggestedtopics for policyresearchon S&T are asfollows: 1. Wheretofocusbasicand appliedresearchandwhat policiescan enhanceour researchcapability. 2. The relationshipbetweennew and old, or low and high technologies. (Forexample,howa "high"technologyenhancesand possiblysupports the use of a "low" technology.Also, the relationship between new technologies and productivity. Studiesof these relationshipsmust be part of technologyassessmentstudies.) 3. The importantcontrollableand uncontrollablevariablesin S&T policymakingand howto monitorthe uncontrollable,uncertain ones. 4. The technologicaldevelopment of a specifictechnologyand where the PhilippinesIs positioned in that development process. 5. The applicationsof forwardand reverseengineering. 6, Internationalmarkettrendsand strategiesaffectinga particular technology. 7. Other countries'policieson S&T--whathaveworked,whathave failed,and howthe policiesare evolving. 8. The diffusionof technologies, 9. Risksassociatedwithtechnologyand risktransfer. 20. Claudio, "InformationTechnologyDevelopmentandPromotions:Some Trends, Strategies,Issuesand Recommendations,"n.p. 21. Raphael Kaplinsky,'IndustrialRestructuringin LDCs:The Roleof Information Technology,"n.p.
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10. The roleof cultureand womenin S&Tdevelopmentand the role of a technologyIn ruraldevelopment. 11. UnresolvedissuesassociatedwithS&T developmentsuch as dislocationsarisingfromacceleratedindustrialization. 12. An integratedapproachto S&Tdevelopmentand promotion. /
The lastitem requiresthat we developS&Twith properregardfor our values,objectives,and politicaland socialconcerns.Thisneedisapparent nowIn the communicationssector.Some investorsare readyto introduce newand superiortechnologiesfortelecommunications.Butsome political and socialconcerns,suchas the socialImplicationof cross-ownershipof media bar suchinvestors'entry intothe market.22 We must relateS&Tpoliciesto otherpolicyinstrumentssuchasfiscal, monetary,regulatory,trade,exchangerate,capitalmarket,investment,and laborpolicies.Wealsohaveto identifymissingorweaklinksin policies. For example,urbandevelopmentpolicies,specificallythosecoveringzoningof land, are often Inconsistentwith other policiessuch as environmental policias.23 'q'echnologyby itself mightbe the least importantin its successfulutilization. It is understandingof all the others and puttingthem togetherthat mightmatterinthe end."
n.p.
22. Claudio, "/_ainstInternational Trends, "n.p.andClaudlo, "Trade-Offs inS&T," 23. C;_,xllo, "ASecond _
atZoning." n.P'
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REFERENCES Creighton, Gene. 'q'heStatusof the DP and SemiconductorIndustriesin LatinAmerica."Paperreadat the InternationalSymposiumon TechnologyPolicy in the Americasat StanfordUniversity,1-3 December 1988• Edquist, Charles. 'q'echnology Policy;-Conceptual Remarks and EuropeanExperiences."Paper read at the InternationalSymposium on TechnologyPolicy in the Americasat Stanford University,1-3 December1988. Kaplinsky,Raphael."IndustrialRestructuringin LDCs:The Roleof Information Technology." Paper read at the InternationalSymposium on TechnologyPolicyintheAmericasat StanfordUniversity,1-3 December 1988. Kawamum,Kazuhiko,and WainerDa SilveiraE•Silva•"On Developingthe •MicroelectronicsIndustry: A Systems Approach."In Systems Research. London: PergamonPressLtd.,1984. Ozawa,Terutomo. "Japanasa LateStarterintheComputerIndustry:Major Characteristicsand Policy Implicationsfor LDCs."Paperread at the internationalSymposiumon Technology Policy in the Americasat StanfordUniversity,1-3 December1988. PaderangaJr., Cayetano W. and C. Pe BenitoClaudio. "Microelectronfca TechnologyDiffusionand Economicand SocialPoliciesin the PhiUppines and in Selected CountriesWithin and Outsidethe ASEAN." • Researchproposal. Manila; AsiaFoundation,1988. Pe Benito Claudio, C. "Information Technology (IT) Development and Promotion:Sor=leTrends,Strategies,Issuesand Recommendations." -In ThePhilippine ComputerSociety Yearbook 1989.Manila: Philippine ComputerSociety,1989. •"Risksof ToxicSubstances:CulturalConsiderations,Management and PolicyDevelopmentin the Philippines."Paper read at the International Conferenceon Risksof ToxicSubstancesin Developing Countries: Implicationsfor Women and Children,in Bangkok, Thailand, November1988. • "RiskAssessmentand Management:The PhilippineCase." Proceedingsof the 2nd US-Japan InternationalWorkshopon Risk Assessmentand Management, In Suita,Japan, October 1987. . AreYou Cultured?"Business Star, 13July 1989. • "AgainstInternationalTrends."Business Star, 13 July1989. . 'q'rade-Offsin S&T."Business S_r, 27 April1989.
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•"InternationalTransferof Risks."Business Star,8 September 1989. • "ASecOndLookat Zoning."Business Star, 11August1988. Ripper,Mario Dias. Oral presentationat the InternationalSymposiumon TechnologyPolicyintheAmedcasat StanfordUniversity,1-3December 1988. Schulze,PeterW. "BridgingTheTechnologyGap: The Roleof Nationaland Community R&D/T-Pmgrams in Europe: Inter-Rrm Cooperation, ESPRITand the Eureka Initiative."Paper read at the International Symposiumon TechnologyPolicyinthe Amedcasat StanfordUniversity,1-3 December1988. _ Sionil,Jose F. ''ThePhilippines:A SocioculturalPerspective."Paperreadat the19thWorldCongressof the InternationalAssociationof Financial ExecutivesInstitutesin Manila,October1988. Steinmueller,W. Edward. "Publi0Policy ImpUcatlonsof the Economicsof InformationTechnologyIndustries."Paper read at the International SymposiumonTechnologyPolicyintheAmedcasat StanfordUniversity,1-3 December1988. • Tigre,Paulo Bastos."How Does LatinAmericaFit Into HighTechnology?" Paper readat the internationalSymposiumon TechnologyPolicyin theAmericasat StanfordUniversity,1-3 December1988. Yu, Pyung II. "The Role of GovernmentPolicyand The DevelopmentOf Computer Industry in Korea." Paper read .,t the InternationalSymposiumon Technology Policy in the Americasat Stanford University,1-3 December1988.