First Person: Horrendous
by Alex Magno

We asked this question: Are we ready to compete for the mushrooming opportunities for business process outsourcing?

There has been so much talk about how the Philippines might be a player in IT-based industries, about how we could go head-to-head against India, which has become a software superpower of sorts and an attractive base for call centers and other non-voice IT services.

The Foundation for Economic Freedom wanted to know what the numbers are, how do we compare, what was our capacity to absorb the rising opportunities. What policy changes needed to be done? What should we improve on? What human resources do we have?

We invited Jose Xavier Gonzales, president of C-Cubed Services to present a paper from an industry practitioner’s perspective. We invited Florencio Abad, secretary of education, to tell us what was being done to improve the competitiveness of our human resources. In addition we invited, to compose a panel of reactors, Dr. Edita Tan, who has done much work on the economics of our educational systems, Jesus Zulueta and Gary Makasiar, who were both knowledgeable about the state of IT-based industries in the country.

The forum, held last Tuesday at the Development Bank of the Philippines, was very informative but not very encouraging.

Gonzales prepared an excellent presentation, doing a capacity analysis of our human resources. From this paper, we learn that while opportunities for business process outsourcing are abundant and industries such as call centers have become a major source of revenue for the economy, we have just about reached the limits of our capacity to compete for more IT-based investments.

The problem is not limitations on physical plant. With the deregulation of the telecoms sector, we have abundant capacity for data processing and transmission. We have broadband networks and satellite-based internet. We have encouraging policies and special economic zones to support more investments into this sector.

We are seriously limited, however, but the quality of our human resources. For instance, only 2.4 percent of applicants are found acceptable. The overwhelming number of applicants is simply educationally unprepared to meet the standards.

The 2.4 percent accepted by the IT-based industries here require up to two months of intensive training before they are ready to work. In the interim, 25 percent of those accepted drop out. There is, further, a very high turnover rate among our IT workers.

Fully 52 percent of those hired by the IT industries come from the top ten colleges and universities in Metro Manila, led by the University of the Philippines Diliman. In a word, most of our other educational institutions are not training their students well enough to prepare them to meet the skills benchmark that a highly competitive industry such as business process outsourcing requires.

India, our main competitor, has a population of about a billion people. She spends more on education per capita than we do. By sheer population size, she has a much larger human resource pool for IT-based industries. She is far from reaching the limits of supply for most skilled labor.

We will reach the limits of our human resource supply much earlier than India will. Furthermore, India is quickly retooling its universities to produce precisely the talent required by highly competitive IT-based industries.

Secretary Florencio Abad presented a paper rich in detail. Unfortunately, the details were not very encouraging.

In the tests conducted nationwide by DepEd, it was found out that among 4th year high school students, only 6.59 percent had mastery of English (with scores of 75 percent and above). That was the best percentage.

Only 1.75 percent of senior high school students had mastery of science. Only 3.31 percent had mastery of araling panlipunan. A horrendously low .002 percent had mastery of Filipino.

DepEd is doing a heroic job raising the quality of public education in the country by getting the community involved in the schools. But we still have a classroom shortage of about 42,000, serious shortages of well-trained teachers and class sizes in the primary schools of 65.

There is no way a class of 65 pupils could be educated well. The younger the student, the more personal attention is required to get them properly educated.

From the numbers, and considering our crippling budgetary problems, it does not seem likely that we could dramatically raise the quality of public education within the next generation. Therefore, our human resource pool for highly competitive industries will be a serious restriction on our ability to attract investments.
At the tertiary level, we have a serious problem with the proliferation of state colleges and universities. From a handful in the sixties, we now have about 117 SCUs—all desperately under-funded and all short of faculty material.

The proliferation of SCUs is a by-product of the politicization of our educational policy. Pandering to populist expectations for a state college in every province, we only succeeded in creating a plethora of substandard institutions, all demanding greater subsidies from a cash-strapped government and non, save for one or two, really prepared to produce world-class IT talent.

The best solution is also a politically unacceptable one. Peter Wallace suggests, quite correctly, that we liberalize investments in education and privatize around a hundred or so SCUs, leaving only a few well-endowed institutions to be strong centers of science and technology.

We pride ourselves to be competitive in IT industries because we have an English-speaking population. But the survey shows that only 6.59 percent of our students have any real mastery of the language.

We are worse off in mastery of mathematics and science. Computer literacy is problematic. Years of neglect left us with an educational system that trains many incompetently.

So, while the opportunities may be there, and while we may have an abundance of unemployed, our human resource base is woefully unprepared to compete. That is the saddest part.

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Originally published in the Philippine Star on June 2, 2005