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Industry 4.0 and inequality: What could possibly go wrong?

By Timothy Roy C. Medina, Multimedia Editor

THE ARGUMENT for adopting new technology often comes with many utopian promises like flying cars, nuclear power without consequences, social media that brings people together instead of tearing them apart, and so on. Here’s an update in 2019: Self-driving cars, the highest point in the technology’s evolution so far, keep crashing. Nuclear power plants sometimes blow up, while the fuel becomes a target for terrorists or is otherwise difficult to dispose of safely. And, needless to say, have you been reading about Brexit lately?

So it’s only prudent to question the consequences of adopting any new wave of technology, and the Fourth Industrial Revolution is no different. The greater adoption of artificial intelligence, automation and robotics as well as the substitution of algorithms for human judgment raises ethical questions that have troubled people since at least as far back as Isaac Asimov (1920-1992), whose First Law of Robotics states that robots must not harm humans. We don’t even need to imagine killer robots roaming the streets like Terminators — the potential harm anticipated from automated systems can be as mundane as being unable to reach a human operator on a help line, or a minor data privacy leak. Some of the worst-case scenarios may already be with us — unemployment, discriminatory algorithms rejecting credit or job applications, facial recognition false positives that tag innocent people as terrorists.

The question at hand is how new technology affects inequality. Specifically, whether the adoption of new technology creates a privileged few with access to the technology who can weather or even profit from the disruption while many others fall behind — via unemployment caused by mechanization, say. The First Industrial Revolution, which mechanized British factories in the 18th and 19th Centuries, also gave rise to the Luddites, a secret society of textile workers who tried to block the adoption of automated looms by destroying them. The word survives today to describe someone who is comically resistant to new technology, which tends to minimize the tragedy of being thrown out of work. Consider also the false legend behind the word sabotage, which allegedly originated with French manufacturing workers who threw their wooden shoes (or sabots) into factory machinery to destroy it. From language clues alone, we can glean how new ways of doing things can sometimes upend society, which is why some thought needs to be put into anticipating change, getting ahead of the curve, and mitigating the negative effects before they overwhelm society.

Other evidence from history suggests that the industrial revolutions of the past have done little to curb inequality, even in the places where the revolution has taken root most deeply. The First Industrial Revolution that mechanized manufacturing and linked the world by telegraph and steam power also created London, the global center of capitalism that funded factories and railways, but also colonialism. London stayed rich even after the industries went away, leaving large swathes of the industrial north of England hollowed out. The Second Industrial Revolution created mass production which enabled mass markets, the logical consequence of which was outsourcing to the most efficient producer, making coastal China the workshop of the world but leaving the Chinese hinterland underdeveloped and poor. The Third Industrial Revolution gave us the Bay Area, with its staggering concentrations of tech-industry wealth in San Francisco, alongside homelessness and unaffordable rents for the working class.

MEASURING INEQUALITY
The GINI coefficient, a measure of income distribution developed by an Italian statistician named Corrado Gini, is a useful, though imperfect, way of capturing a snapshot of income inequality in any given country, in one convenient score. The basics are that a GINI score closer to zero indicates perfect equality while a score closer to 100 (or 1 in some scales) suggests perfect inequality.

By this measure, the Philippines was among the most unequal countries in Southeast Asia at the dawn of the Fourth Industrial Revolution, behind only Malaysia. The Philippine score of 40.1 in 2015, as calculated by the World Bank, gives us an inequality profile akin to Argentina (40.6 in 2017) or Kenya (40.8 in 2015). The Philippines is also just a touch less unequal than the United States, which at 41.5 in 2016 is the least equal major economy in the world. (For what it’s worth, the Philippines’ other former colonial master, Spain, came in at 36.2 in 2015, lagging many other European Union economies)

The caveat is that it’s difficult to imagine what a typical unequal country looks like because they range all over the map. It would surprise many that a relatively well-off country like Malaysia is actually more unequal than we are. The most unequal country on earth is South Africa (63.0 in 2014), which probably suggests that the rich resources of the country were captured by a privileged few. The flip side is that for some countries that look good on GINI, like Pakistan (33.5 in 2015), the real problem might actually be worse than inequality — almost everyone is poor in near-equal measure.

The problems with GINI are hinted at by the absence of a World Bank GINI score for well-off places like Singapore, who are the inequality index’s conscientious objectors. The government of Singapore officially declines to be included in GINI league tables because it argues that “the full range of Government policy interventions that are unique to the Singapore context” such as low taxes and targeted support for lower income classes make its society more equal than the score indicates. The suggestion that Singapore considers its inequality data to be a bit of a state secret, too embarrassing if it ever leaks out, means that for our purposes, we will need to find a GINI calculation compiled by an organization that is skilled at acquiring state secrets — the Central Intelligence Agency, for instance. The CIA World Factbook lists Singapore’s GINI score at 45.9, which would make it the most unequal society in Southeast Asia by some distance.

This raises the possibility that some very wealthy places can indeed be extremely unequal — Hong Kong’s CIA GINI score is a horrific 53.9, putting income inequality in a rich city that many Filipinos know very well at nearly African or worse than Latin American levels. For the record, the CIA pegs Hong Kong as the ninth-most unequal territory on the planet, behind seven African states, Haiti and the Federated States of Micronesia, and just ahead of Guatemala. By way of contrast, Hong Kong’s mother country, China, had a World Bank score of 38.6 in 2015.

BASELINE CONDITIONS: INEQUALITY IN THE PHILIPPINES
The striking thing about inequality is that the Philippines’ GINI scores over time are relatively stable. The World Bank’s GINI series dates back to 1985, when the Philippines had a score of 41. In 1997 GINI spiked to 46, before settling back to the low 40s in the new century. There is even a hint of a downtrend in inequality since peaking in 1997 — during the Ramos administration, a time we don’t particularly associate with widespread inequality — and even the possibility the score will dip below 40 by the next tabulation.

Think of how much the world has changed since 1985. Very little seems to have impacted on the GINI score since then — not the change of government in 1986, not the acceleration of OFW deployments (which first breached the 1 million mark per year sometime in 2005 or 2006), not the spread of the internet at the start of the 21st century.

Many extravagant claims have been made for the internet since it first became available — that it will make the world “flat,” evening out the availability of information and negating the advantage of centers where information tends to concentrate. All over the world, it is thought by many reasonable and intelligent people that if only small businesses took advantage of the Internet to sell their goods, it will make the countryside more prosperous and spread the wealth out of places like Metro Manila because it won’t matter where your business is located.

One such center of thoughtful planning to mitigate the effects of an unequal world is the Oxford School of Government’s Pathways for Prosperity Commission on Technology and Inclusive Development, of which Melinda Gates is a commissioner. The commission, which estimates that 3 billion people worldwide will remain offline in 2023, has propagated the Big Idea that the main challenge is connecting the offline population depends much on the so-called “last mile” — the final link between a telecom backbone and people’s homes and offices. The commission has found that 80% of the global population lives near some sort of cellular tower, suggesting that the solution would be to build out the infrastructure and develop business models to promote connectivity to the “next 3 billion” while exploring ways to “make it profitable to serve the lowest-income consumers.”

“The fact that the digitally excluded are usually poor, rural, old, less educated or female, compounds the urgency of the situation,” the commission said in its 2018 Digital Lives report. “If unaddressed, digital inequalities will exacerbate existing socio-economic inequalities. Crucially, unlocking these benefits will not only require access to cellular network coverage and an affordable mobile phone, but also the take-up and effective usage of digital technology. And in turn, this will be driven by digital architectures: choices made by governments and businesses.”

The problems of connecting the offline are illustrated by the case of the Philippines, where access is unevenly distributed. The Social Weather Stations polling organization estimated in the first quarter that internet penetration among the adult population is about 46% nationwide, with the equivalent regional number ranging from 64% for Metro Manila to 34% for the Visayas. The nationwide urban-rural gap was 56% to 38%, respectively. Understandably, penetration is highest among younger people — 86% for 18-24 age group, as opposed to 14% for the 55-and-over bracket. Couple this with the astonishing statistic that Filipinos top the global rankings for hours spent on the internet (10 hours and 2 minutes a day in the year to January 2019, as estimated by Hootsuite) and a picture emerges that the internet in the Philippines is dominated by a minority, who moreover spend a disturbing amount of time on it and presumably reap disproportionate benefits from it and whatever new technologies pop up.

And it’s not just the internet either. Cellular technology is often cited as a “leapfrog” opportunity, a means by which a laggard country can surge ahead in connectivity by ditching legacy technology altogether and pushing phones out to every rural community. The particular subset of cellular phones that enable internet access — smartphones — has a take-up rate of about 44% for the Philippines, about half the take-up of leading countries. Think of all the indicators that are a good proxy for prosperity and doing business, such as the possession of a bank account. In 2018, the central bank estimated that the country’s banks had 57.1 million deposit accounts in 2017. Or take automated teller machines. The World Bank estimated that the Philippines had 19.31 ATMs per hundred thousand adults in 2009-2013, lagging Southeast Asia by a wide margin and suggesting that the country’s peers in this indicator are Angola and Paraguay.

FEAR OF AN UNEQUAL PLANET
If we assume wealth is a good predictor of how well a region will take to new technology, then the distribution of gross domestic product ought to forecast roughly how well the regions will adapt to the Fourth Industrial Revolution. According to Gross Regional Domestic Product data from 2018, the National Capital Region (NCR) was by far the Philippines’ most productive region, accounting for 37.5% of the national total. The next-richest region was Calabarzon with 14.8%. The poorest region, the Autonomous Region in Muslim Mindanao as it was then known, accounted for less than 1%.

Globally, another way to look at the problem is to list the things that the Philippines is good at, and try to imagine what sort of technology is coming up to render the Filipino competitive advantage obsolete. The Business Process Outsourcing (BPO) industry’s worries about the future are among the best-documented, largely because AI is being developed that can eliminate BPO jobs in the Philippines, which numbered just under 600,000 in 2016. Oxford Business Group reckons that the industry accounted for 6% of the economy in 2015. The industry itself estimated in 2015 that it generated revenue of $22 billion, closing in on overseas worker remittances ($25.8 billion) as the country’s main source of foreign exchange. Automated banking help lines are the least of its problems; hundreds of thousands of back office jobs hang in the balance while AI starts to be applied to skilled white-collar tasks like credit analysis, legal and accounting functions, and regulatory compliance.

There are legitimate reasons for AI to replace humans in such jobs — AIs are getting to be more accurate than human judgment in applications that are repetitive and rules based, the ideal conditions for robots and AI to thrive. Machines can definitely do things faster already. In medical diagnostics, for instance, an AI can evaluate a blood test in hours or even minutes, thereby eliminating the need to return to the clinic in a day or so for the results, particularly in countries like the Philippines where health care professionals are routinely attracted overseas by better pay, leaving their homeland with a worker shortage. With the Philippines about to implement a Universal Health Care Law, and key medical specializations growing scarce on the ground, the need to turn to AI for assistance is very real.

Worker shortages, or workers who become too well-paid and less cost-effective, are often the motive behind much new tech, which is part of the reason why Japan, with a rapidly aging population, is so invested in robotics. Japan, in fact, modified its immigration law this year to massively expand its worker recruitment from Southeast Asia, suggesting that automation can’t solve all problems.

Sometimes worker shortages aren’t the main drivers of tech decisions — efficiency is — and in competitive capitalist economies that has led companies to seek out advantage in low-wage countries, or to bring in immigrants from those countries. The downside is that when the tech becomes available to outweigh the cost advantage of low wages and the troublesome nature of operating overseas, the very same companies have shown a willingness to bring the jobs back to the rich world, a process known as “reshoring.”

One such technology — 3D printing — has been cited as a direct threat to manufacturing in poor countries. A consumer in the rich world who needs a certain product might simply print a copy, thus bypassing an entire global supply chain that pays the wages of millions of workers in poor countries. By doing so, the rich-world owner of a 3D printer trades off the cost of investing in such a printer for the convenience of owning objects made to his specifications, with no need to wait at the end of a long supply chain that stretches across the world. Home 3D printing also means every home will be its own factory. Which raises the question of whether many of the “reshored” manufacturing jobs will ever return to the rich world.

THE THREAT TO JOBS IN THE PHILIPPINES
Whatever the reason for going native and automated, many of the things that Filipinos do well — nursing, the merchant marine, and so on — are also threatened by technologies that could potentially wipe out these jobs, including robot nurses and self-driving ships. When they invent harvesters that can pluck delicate fruit from trees without damaging them, that might be it for the mango industry as well. It’s no accident that TESDA, which has to configure its courses for what is sees as the future of work, said it is conducting a survey of the training needs of two industries, suggesting that it believes these industries, construction and BPOs, might be most subject to change.

Of the two, the need to innovate and retrain the work force in construction is clearly shortage-driven. In late 2017, the Department of Trade and Industry (DTI) estimated that the construction work force was short of about 2.5 million workers, which opened a lot of eyes because many people assumed you can pull anyone off the street and make him a construction worker. The CIA World Factbook estimates that the Philippines has the 15th largest labor force in the world of 42 million, so workers shouldn’t be in short supply. But construction work is harder than it looks — some trades, like masonry and handling heavy equipment, require specialist training — and what’s more, there is an entire construction industry in the Middle East siphoning off our best workers with offers of much better pay. The worker shortage underlies the entire controversy about Chinese construction workers in the Philippines, illustrating the potential for such disruption to upend society, particularly with a government so invested in infrastructure. Given a choice between expensive Chinese workers who had to be imported, housed and fed, and cheap Filipino workers who might be scarce on the ground, the Chinese contractors went with the added expense. Construction hasn’t even been as automated as it can be, so you can imagine the degree of displacement when the machines finally come for the jobs.

Meanwhile, the BPO industry is much more sensitive to political developments. A recent case was the election of US President Donald J. Trump, who scolded US companies at the outset of his term for hollowing out US heavy industry, much of which is located in electorally important Midwestern states, by manufacturing in China or elsewhere. The uncertainty about Trump’s policies (and over Philippine tax policies) kept US investment in the Philippines on hold for a time. The new US policy direction was also accompanied by immigration restrictions to ensure that US citizens captured most of the benefits of newly reshored jobs. Many other countries that traditionally relied on immigrant labor are also tightening the screws, including Saudi Arabia, which is pursuing the “Saudiization” of its work force as a hedge against some distant future when oil might no longer be driving the world economy’s engine, adding a political dimension to the future employment prospects of Filipino construction workers.

THE CENTRALITY OF ETHICS IN APPLYING NEW TECHNOLOGY
A research group at Oxford University estimates that 40% of European jobs are under threat from artificial intelligence, and 50% of US jobs, which provides a useful benchmark. If these highly automated economies still stand to lose that much work, what more for economies that depend on performing labor-intensive tasks? Ian Goldin, a professor of globalization and development studies at the university, has expressed fears that AI threatens economic growth in much of the developing world.

“I am becoming increasingly concerned,” he wrote in an analysis for the BBC, “that AI will, in fact, block the traditional growth path by replacing low-wage jobs with robots.” He cited the automotive industry, where half the work force has been replaced by robots.

It’s not hard to see why, because the most advanced countries are incentivized to innovate. The history of innovation tells us that inventors stand to get rich on patents, and in more recent years on taking an immature technology to market by organizing a company to harness with an IPO as the end goal. Companies, on the other hand, have an interest in doing things more efficiently, without necessarily realizing the consequences, and often become a new technology’s biggest champions. During the so-called Jasmine Revolution that swept the Arab world, platforms like Twitter or Facebook reaped the best possible PR from reports that the revolutionaries used social media to organize their protests, thereby allowing them to position their technology as a force for good and for spreading freedom across the world. Oppressive countries responded by learning how to use the new technology to their advantage — China by blocking and censoring, Russia by allegedly going on the offensive and interfering in other countries’ elections.

PICKING UP THE PIECES
Often it is left to society, including governments, to pick up the pieces afterwards, long after the worst of the social impacts have become apparent. We are seeing the consequences play out right now in the US and the UK, open societies whose vulnerabilities online may or may not have been exploited by outside powers in recent years. It is actually a positive sign that some of the very same people who profited from previous generations of technology (such as the aforementioned Melinda Gates) are anticipating the consequences of new tech, and are acting accordingly.

As this article was going to press, news broke that Blackstone Group LP CEO Stephen A. Schwarzman, a billionaire, made a donation of 150 million pounds to Oxford University to bankroll a Humanities Center, a gift that was reckoned as the most generous cash bequest in the University’s near millennium of existence. Hidden in the fine print was that the Center, due to open in 2024, will also house an Institute for Ethics in AI.

This would be a minor footnote in the history of philanthropy, except for the fact that in 2018, Mr. Schwarzman also made a $350- million donation to help fund the Massachusetts Institute of Technology’s new college of computing. At the time of the donation, MIT President L. Rafael Reif said in a statement: “As computing reshapes our world, MIT intends to help make sure it does so for the good of all.” Forbes, reporting on the donation, reported that “In most universities, the study of artificial intelligence is centered in engineering and computer science departments. The new MIT school will seek to cultivate AI scholarship across disciplines, including the sciences and the humanities.”

“There is no more important opportunity or challenge facing our nation than to responsibly harness the power of artificial intelligence so that we remain competitive globally and achieve breakthroughs that will improve our entire society,” Mr. Schwarzman said in the statement.

So just to be clear, there is no doubt that a number of thoughtful and intelligent people are anticipating some sort of social upheaval from AI and other new technologies, and seem to have decided that, when possible, the technologies need to be applied humanely.

Gov’t confident in PHL’s future as investment destination

By Janina C. Lim, Reporter

ACCORDING to the United Nations Conference on Trade and Development’s (UNCTAD) 2019 World Investment Report, released in June, global investment flows in 2018 fell 13% to $1.3 trillion, marking the third consecutive year that global flows have fallen.

It may not be a coincidence that this period of decline was rife with rapid policy shifts, geopolitical tensions and beginnings of the latest industrial revolution — the fourth one by the reckoning of economic historians — which is among the challenges UNCTAD recognizes that economies will have to face sooner than later.

With the technologies ushered in by the Fourth Industrial Revolution (FIRe), we are now seeing profound shifts in various industries, reshaping our patterns of consumption, production, storage, distribution and management.

In particular, companies in developed economies such as the United States are increasingly tapping various technologies that are redefining how they achieving economies of scale, thereby doing away with the need to move production to countries where wages are low.

“That means you don’t need to have it made outside the United States. That’s happening slowly. So that’s a challenge to all countries that are currently manufacturing and exporting,” American Chamber of Commerce of the Philippines, Inc.’s (AmCham) Senior Adviser John D. Forbes said in a phone interview.

The challenge is something that needs to be confronted by special economic zones (SEZs), which generate a significant portion of the Philippines’ exports of both goods and services. The performance of even one or two zones can significantly affect a country’s foreign direct investment (FDI) and export results, UNCTAD said.

In the report, the Philippines had the second-most number of SEZs in the world, totaling 528 at the end of 2018, well behind the 2,543 in China.

Despite widespread use of SEZs, FDI inflows to the Philippines last year fell 25.75% to $6.46 billion, UNCTAD said.

AmCham’s Mr. Forbes attributed the decline mainly to the uncertainties in the investment environment last year. These include the proposal to alter the fiscal incentive structure, which succeeded in the House of Representatives, causing investors to balk at expanding their investments while delaying new investments to relocate operations fleeing China to escape the consequences of the United States-China trade war.

The uncertainty cost the electronics industry $1 billion worth of investment.

“These companies are all advanced in technology. Sayang lang kasi (What a shame because) in the nature of the electronics industry, if you don’t bring in new products, pretty soon, your product line will become obsolete and eventually over time they may consider shutting down. It may happen over one year or two years, depending on what products they have. But for sure, without new investment, we’ll just be running on legacy products,” Semiconductor and Electronics Industries in the Philippines Foundation, Inc. President Danilo C. Lachica said in a phone interview.

Mr. Lachica said fiscal incentives remain a “big motivation” for investors, especially in the Philippines where power and logistics costs are much higher than in other Southeast Asian neighbors like Vietnam.

He noted, however, that a country’s technological competitiveness is also a consideration for foreign locators.

“That’s a concern. In fact, there was one company that talked to me and wanted to start an R&D center in Asia. It evaluated factors such as the capability of universities, clusters, technology. They were debating whether to put it in Vietnam or the Philippines,” Mr. Lachica said.

“Good news is they did not put it in Vietnam. Bad news is they did not put it in the Philippines. They put it in Singapore,” he added, noting the massive number of science and technology-driven universities in the city state as being the main attraction.

Mr. Lachica estimates the facility would have taken in $10 million to $20 million in initial investment. But an R&D facility means more than investment.

“The thing about setting up an R&D facility is not so much for the investment but the trickle-down effect because what happens when you have an R&D company (it will produce investment in) new products… in country. So imagine, they have an operation in the Philippines and the new products could have been (produced) in the Philippines,” Mr. Lachica said.

He estimates that less than 20% of its 340 member firms, a mix of foreign and locals businesses, are now operating with Fourth Industrial Revolution technologies that allow fully automated interfaces controlled from one central data system.

Asked to name electronic firms’ main concerns about the Philippines’ technology landscape, he listed the incentives available for R&D centers, the strength of the universities, and availability of students in science and technology.

EDUCATION AND DIGITAL CONNECTIVITY
AmCham’s Mr. Forbes agreed with the need to encourage Filipinos to specialize in science and technology.

According to the “Towards 2030” report published in 2015 by the United Nations Educational, Scientific, and Cultural Organization (UNESCO), the Philippines invested 0.3% of its gross domestic product in higher education in 2009, “one of the lowest ratios among ASEAN.” Meanwhile, the number of full-time equivalent researchers per million inhabitants stood at just 78 in 2007 while the level of national investment in R&D was 0.11% of GDP that same year. UNESCO said these levels are “low by any standard.”

“One clear necessity is for government to increase, I mean we are increasing but it needs to happen fairly quickly, is the emphasis on STEM (Science, Technology, Engineering and Mathematics) education,” Mr. Forbes said.

He added, this, alongside the promotion of the creative economy will help the Philippines take gains in the FIRe.

“One area where I think the Philippines has a lot of advantage in the fourth revolution is creative industries,” Mr. Forbes said, noting the country’s creative economy is now estimated to be approaching $1 billion in revenue.

“In creative intelligence and creative innovation, the Philippines is competitive, although not yet as sophisticated as Thailand or Singapore, but they have great potential of being able to compete successfully and the machines cannot be creative,” Mr. Forbes said.

He also said the government has failed to provide enough digital access for students and must address the root cause of poor access by building more cell towers and ensuring market competition in Internet services.

Mr. Forbes said adding to the problem was the non-passage of certain bills that could have provided wider digital access to the public at a lower cost.

“PSA (Pubic Service Act), open access, amendments to the NTC (National Telecommunications Commission) law, were all passed by the House… but they were not passed in the Senate. They could have helped in broadening telecommunications (access). I think the business groups want to see those bills prioritized in the next Congress,” Mr. Forbes added.

GOV’T NOT CONCERNED ABOUT FDI IMPACT
The UNCTAD report said SEZs will need to adapt their value propositions to include access to skilled resources, high levels of data connectivity and relevant technology service providers.

Although some stakeholders perceive the Philippines to be progressing slowly in some of these areas, regulators are unfazed by the risks from technological upheaval on the country’s attractiveness as an investment destination.

“Remember, they came to the Philippines because of several other reasons,” Trade Secretary Ramon M. Lopez said in an interview at his office in Makati City.

“We have special ecozones, the basic infrastructure, they know it’s being aggressively pursued now, they appreciate this. They know we’re pursuing other reforms to open up more sectors to foreign equity,” he added.

Philippine Economic Zone Authority (PEZA) Director-General Charito B. Plaza is of the same view, calling the labor force the Philippines’ “biggest advantage” in attracting investment.

However, both agree that Filipino workers should undergo continuous retraining and upskilling to win the race against the machines.

In the business process outsourcing industry, this means outsmarting machine learning technologies which threaten to drastically cut the need for low-skill jobs.

The Contact Center Association of the Philippines (CCAP), the biggest employment generator of the country, issued in March a statement assuring the public of its continuous work in engaging professionals to deliver complicated tasks that require experience or specialized expertise, involving with abstract reasoning and situational responsiveness and autonomy.

“The industry is investing heavily in training for both entry-level and tenured positions,” CCAP President Jojo J. Uligan was quoted as saying.

Based on internal research by CCAP, mid- and high-skilled jobs in the contact center sector account for 85% of positions.

Market research firm Frost & Sullivan has estimated that about 73% of the global business process management industry will be in mid- and high-skilled jobs by 2022. For that year, the consultancy also forecasts that tasks that require basic skills in the global BPO industry will decline by 29%.

Mr. Lopez, also the chairman of the Board of Investments, the biggest investment promotion agency in the Philippines, believes humans will remain relevant in the artificial intelligence (AI) revolution that is currently taking place.

“Kakailanganin pa rin ng tao (We will still need people) to operate those technologies… those developing AIs are people also,” Mr. Lopez said.

He added that there is even hope that the Philippines will be an “AI center of excellence” that can develop its own technology, noting that over 10% of graduates here are in the science, math and technology field while Filipinos have excelled in Silicon Valley.

To further develop the country’s technological competitiveness and attractiveness for investors, Mr. Lopez cites the DTI’s inclusive, innovation-led, industrial strategy or i3s. The strategy includes setting up I3 zones where universities and industry hubs can collaborate on innovation initiatives.

The I3 program offers fiscal and nonfiscal support to promote local manufacturing of key products that are heavily imported such as pharmaceutical products or medical devices while furthering collaboration among industry, the academe, other government agencies and stakeholders in building the inclusive innovation ecosystem.

The I3 centers now total five — one each in the Bicutan area, Regions 5 (Bicol), 7 (Central Visayas), 10 (Northern Mindanao) and 11 (Davao Region). The DTI hopes to have such centers initially in each region, and then each province.

PEZA is now working with a university to assess the possibility of developing certain ecozones, particularly in Baguio, Cavite, Pampanga and Cebu, to be “green, smart and high-tech.”

“They’ll review these ecozones and we’ll bid them out to developers. We are going to invite the BPOs, the IT industries, the KIST (knowledge, innovation, science and technology) kasi sila maglalagay ng (because they have the potential to build) high-tech capacities,” Ms. Plaza said, adding that she hopes the bidding to be conducted within the year.

Ms. Plaza is also inviting educational institutions, particularly those that own large sites, to invest in the development of KIST parks, an ecozone that encourages schools to have a portion of their properties leased by potential locators, preferably those industries the schools can work with to develop new technologies.

“So hopefully makahabol tayo sa (we can catch up with the) Fourth Industrial Revolution,” Ms. Plaza added.

Both investment promotion agencies are also working on enhancing the digital infrastructure available in these ecozones in coordination with the Department of Information and Communications Technology.

In all, Mr. Lopez said that the Philippines lags a number of countries in embracing technology.

“We recognize the shortcomings in digital technology preparedness. But other countries are more advanced, that’s why we’re catching up,” he said.

Nevertheless, Mr. Lopez firmly believes the Philippines has huge potential to advance in tech, citing the increasing number of science and technology graduates as well as government’s efforts to introduce STEM at the early education level.

Meanwhile, he added that the country’s ongoing move to legislate policies that will open sectors to foreign investment will also help attract investors who can bring more new technology into the country.

The UNESCO report said that applying science to underpin future innovation and development is likely to remain a challenge for the country until the level of investment rises.

“This will include leveraging FDI in areas like electronics, in order to move closer to the higher end of the scale for value-added goods in the global value chain,” according to the report.

As such, SEIPI’s Mr. Lachica is asking legislators to really think through the impact of the proposed changes in tax incentives for SEZ locators.

“We really have to think through the tax reform aspect…. If the incentives of FDIs are throttled back, it is a concern,” Mr. Lachica added.

Agriculture: low productivity and high production costs

By Vincent Mariel P. Galang, Reporter

THE PHILIPPINE agriculture sector has always been weighed down by low productivity and high production costs, because it has long lagged in adopting technology.

“The role of technology, the role of innovation is perceived to be very crucial, critical, and catalytic in view of agricultural productivity. It’s just really sad to see that our country is lagging behind our ASEAN neighbors in a lot of global measures,” Cynthia Villegas-De Guia, planning officer and assistant head of program development division of the Bureau of Agricultural Research (BAR), told BusinessWorld in an interview.

She noted that global innovation index compiled by Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO) has the Philippines scoring 31.6 points in 2018, behind ASEAN neighbors like Malaysia (43), Thailand (38), Vietnam (37.9). Among the core ASEAN countries, the Philippines was ahead of only Indonesia (29.8).

According to the total factor productivity (TFP) index, which measures agricultural productivity relative to inputs such as investment, resources, capital, and labor, the US Department of Agriculture (USDA) estimates that from 2005 to 2015, the Philippine score grew by only 0.64%, well behind the corresponding growth rates of Vietnam (2.21%), Thailand (2.16%), Indonesia (2.12%); and Malaysia (1.8%).

She said that Filipinos know the importance of technology and innovating on paper, but are behind in practical application.

“Even the R&D investment the Philippines (is behind). In 2018, among the ASEAN countries, we were at par with Indonesia at 0.1% of Gross Domestic Product (GDP),” she said, adding that the equivalent investment in Thailand, Vietnam, Japan, and South Korea go as high as 4%.

BAR, an arm of the Department of Agriculture (DA), was established to lead and coordinate the national agriculture and fisheries research and development (R&D) effort. The general appropriations act (GAA) allocation for R&D at BAR fell 0.03% to P1.175 billion in 2019.

“Pag sinasabing ganito ’yung kahalagahan ng R&D pero hindi namin ma-feel kasi maliit yung budget ng national government (Even if we say that R&D is important, it can’t be felt because the budget allotted by the national government is small), and at the same time the rules and regulations that we have right now are not very in favor on the implementation of R&D. It actually hinders the creativity of researchers,” she said.

On the matter of agricultural mechanization, Rodolfo P. Estigoy, chief of the applied communications division of PhilMech, cited data from the Regional Network for Agricultural Machinery (RNAM), which found that the Thai level of mechanization in 2011 was 4.2 horsepower per hectare (hp/ha) against the Philippine level of 1.23 hp/ha. Other Asian countries, like Japan, South Korea, and China have achieved levels of mechanization of 18.87 hp/ha, 9.38 hp/ha, and 8.42 hp/ha, respectively.

BRIDGING THE GAP BETWEEN AGRICULTURE AND TECH
Given all these signs that the industry is lagging, the government and private sector have been developing ways to improve farmer incomes.

The Philippine Center of Postharvest Development and Mechanization (PhilMech) is the DA arm focused on generating and extending postharvest and mechanization technology.

“Technology can increase farm yields through the use of high yielding varieties of palay (unmilled rice). Technology can save postharvest losses, thus preserving the precious harvest of farmers. It can efficiently perform farm and on-farm operations thus reducing production cost,” Mr. Estigoy said in an e-mail.

“PhilMech believes that with the use of new technologies, specifically the rice mechanization technologies, farmers can be competitive… the production cost will be lowered and postharvest losses will be reduced, saving the would-be lost harvest of the farmers,” he added.

The cost of rice production in Philippines is currently at P12.72 per kilo, against P6.22 for Vietnam and P8.86 for Thailand.

SL Agritech Corp. Technical Consultant Frisco M. Malabanan said hybrid rice should be further tapped by rice farmers.

“I think this is the way for the Filipino rice farmers to be competitive in the world market because by adapting the new technologies, particularly in rice production, like hybrid rice, they can, of course, increase their production. They can reduce their cost of production and at the end of the day they can have a decent return on investment. Further, they can sustain their palay production,” Mr. Malabanan said in an interview.

He is also a member of the Rice Board of Rice Productivity Advocacy, Inc.

“We started this a long time ago way back in 2002, and based on the data we collected over so many years, commercial production particularly in Central Luzon and other parts of the country, the production increase on the average is more than 30% versus ordinary rice technology,” he said.

In Nueva Ecija, he said, farmers using hybrid rice on average are achieving harvests of eight metric tons (MT) annually, from four MT. During dry season, when they maximize the use of the seed, farmers are able to attain an average yield of nine to 10 MT.

Hybrid rice can cost as much as P45,000 to P55,000 per hectare in the province, but average incomes can hit P50,000 to about P100,000 per hectare, depending on the season. The comparable numbers for traditional seed are P40,000 to P45,000 per hectare, generating income of P25,000 to P30,000.

Meanwhile, BAR touted technologies for rice and corn farmers that can help them make planting and farm management decisions.

One is the Rice Crop Manager (RCM), which was launched in 2013 in collaboration with the DA, Philippine Rice Research Institute (PhilRice), and the International Rice Research Institute (IRRI). This is a location-specific tool which gives rice farmers recommendations and farming advice in a one-page printout.

The system also allows the collection of data that will help users improve the tool, while giving DA data on rice production to guide its interventions and decisions at the barangay or municipal level.

From November 2013 to November 2016, across 10 municipalities in the Philippines, yield increased by an average of 370 kilograms (kg) following recommendations from the RCM. In terms of income, there was an average increase of P4,337 per hectare per season. There was also an average increase of 24,000 MT of milled rice for every 100,000 hectares per season. Over 500,000 hectares over two rice-growing seasons, the system improved yields by about 240,000 MT of milled rice.

Corn farmers can use site-specific nutrient management (SSNM) for maize, developed in partnership with International Plant Nutrition Institute (IPNI), BAR, and the University of the Philippines Los Banos (UPLB). This tool was developed in trials from 2005 to 2015.

“It considers the timely application of fertilizers at optimal rates to fill the gap between the nutrient needs of a high-yielding crop and the nutrient supply from naturally occurring indigenous sources, including soil, crop residues, manure, and irrigation water. Further, it aims to sustain higher yields while assuring soil fertility restoration,” according to project briefing material.

“Through SSNM across 107 locations, in 2010 to 2011 the corn yield can be increased by 1.2 tons per hectare and profit by P12,00 per hectare per cropping,” Ms. Villegas-De Guia said.

With all these implemented along with other kinds of technology, Mel Coronel, president of the Nueva Ecija Rice Millers Association, said members of the association have found that work is more efficiently done compared with labor-intensive traditional methods.

“Bumilis ang trabaho sa bukid compared sa tao. Mas consistent din daw ang trabaho… Mabigat kasi ang investment sa equipment… pero kung pag-uusapan natin yung efficiency, mas efficient ang equipment (Work is faster compared to manual labor. Work is also consistent… But investment required is a big burden. But in terms of efficiency, using equipment is more efficient),” he said through a phone interview.

BELIEF IN TECHNOLOGY
“(Technology) is a very important investment in agriculture. Digitalization is the way to go right now. Technology is a very important component of Philippine agriculture, and we believe in it,” Agriculture Secretary Emmanuel F. Piñol said in an interview.

He also hopes that by the end of the President’s term, “We should be able to maximize the employment of technology by at least 50-60% compared with current levels.”

Ms. De Guia emphasized the importance of working to achieve the common goal, to improve the lives of farmers.

“I’m hoping for… really bridging what we are seeing as a gap right now. Being proactive in addressing the missing linkages, kasi nakita na natin, gawan na natin ng paraan (because we see the problem, and it’s up to us to solve it)… instead of doing things in a fragmented and isolated manner, let’s work together,” she said.

Sports analytics in the Moneyball era

By Michael Angelo S. Murillo, Senior Reporter

BROUGHT to the fore by the 2003 book Moneyball: The Art of Winning an Unfair Game by Michael Lewis and the 2011 film inspired by it starring Brad Pitt and Jonah Hill, sports analytics has seen its use in major sports grow exponentially, including in the Philippines where some teams are using it to enhance their game.

Using data, statistics, and information systems to facilitate informed pre- and in-game decision-making, sports analytics continues to evolve, providing a fresh perspective while shaking up conventional knowledge about how to properly play a sport.

Moneyball was about the Oakland A’s, a baseball team, for two very good reasons: first, baseball is uniquely suited to quantitative analysis, generating statistics that were easy to compile even before the computer age: batting average, earned run average,runs batted in, and so on.

It helped that every pitch is a different game state; every batter either advances or makes an out, changing the game state with every at-bat. The advent of computers and the Internet made even amateur analysis possible, taking form in the first fantasy sports leagues, called Rotisserie Baseball by its first practitioners, who were a small group of mostly media industry types in New York City.

In fact, one of the great heroes of Moneyball was Bill James, an amateur baseball statistician from Kansas who worked as a night watchman at a pork and beans factory. His groundbreaking analytical pamphlets made advanced baseball statistics fashionable and brought to light the work of an obscure group of analysts whose work later came to be known as Sabermetrics, named after the Society of American Baseball Research.

The second reason baseball was so suited for alternative strategies was that the Oakland A’s were a notoriously low-budget team in a league dominated by high-payroll clubs like the New York Yankees and Boston Red Sox. The Oakland general manager, Billy Beane, had a disastrous playing career even though he looked every inch the baseball player to a scout’s eye — he could run fast, throw hard, bat for percentage and power.

When he proved to be wanting in the mental aspect of the game, leading him to flame out while less physically gifted players stuck it out, it triggered in Mr. Beane a revolt against the game’s conventional wisdom, of which he was also a victim. Thus began a search for players with skills that were undervalued by the rest of the league, who were by extension cheap and therefore affordable for Oakland. It reached a point where the A’s roster consisted of oddballs and rejects, the logical conclusion of Mr. Beane’s single-minded exploitation of what Mr. Lewis called “market inefficiencies.”

AS APPLIED TO BASKETBALL
For Filipinos the practice of analytics is more evident in basketball, traditionally a pound-it-into-the-paint sport dominated by big men, who had a better chance of scoring the nearer they were to the basket. It was a long-standing approach to the game that was disrupted in recent years by teams like the Golden State Warriors, which now represent the sport’s state of the art.

The revolution took some years after the introduction of the National Basketball Association three-point line in the 1979-1980 season (after it had been pioneered by the rival American Basketball Association). It took a radical rethink by innovators like Mike d’Antoni while he was with the Phoenix Suns and Daryl Morey, General Manager of the Houston Rockets, before teams took concepts like spacing and the three-point line to their full potential, opening up driving lanes, rendering slow, traditional big men obsolete, and reworking game strategy more into what it looks like today.

In the Philippines, while use of sports analytics is acknowledged to be still in its infancy, it has nonetheless made in-roads with more teams and organizations recognizing its value and potential. Even though advanced basketball statistics are harder to track because of the game’s free-flowing nature, the disruption of traditional beliefs, such as the reliance on big men, suggests many other old ways of thinking are subject to disruption.

In the Philippine Basketball Association, the teams using sports analytics with designated personnel for it are the Barangay Ginebra San Miguel Kings and Alaska Aces.

While they recognize that it is not be-all and end-all of what they are doing,they believe it complements their attempts to succeed in Asia’s first play-for-pay league.

“Sports analytics for me is the marriage of sports and statistics. With the emergence of data analytics, the people saw the effects of statistics on sports,” said Jam Lipae, Barangay Ginebra analytics consultant in an interview with BusinessWorld.

While sports analytics is applicable to all sports, Mr. Lipae, a product of Ateneo de Davao who currently teaches mathematics at De La Salle University while doing analytics work for the Kings, said it certainly can be put to good use in basketball, especially in the PBA where the field has become more competitive.

“Analytics is good to apply in basketball because in a competitive field like in the PBA you are out to outdo the competition be it team-wise or individually. That is where analytics comes in as it provides data to gauge yourself vis-à-vis the others and, in turn, allow you to make the necessary decisions or adjustments,” said Mr. Lipae.

He said that most of the time he does his work manually, then making use of certain apps and videos to collate his data.

With Barangay Ginebra for four years now, Mr. Lipae said how teams use analytics in the PBA varies, depending on what they want to focus on.

He said that the team started compiling hustle charts — which tracked nontraditional statistics like dives, deflections and challenged shots — and the plus/minus rating, among other things not seen in old-fashioned box scores, then progressed to other statistics like number of passes and dribbles.

To understand why tracking these statistics is important, you need to arrive at an insight that diving for the ball sometimes saves possessions, which are valuable — you can’t score if you don’t have the ball — as are deflections (which could lead to changes in possession). Challenged shots, as opposed to leaving a shooter open to make an attempt with no pressure and in rhythm, tend to lower the shooter’s percentage significantly, even if the defender doesn’t block the shot or discourage the shooter from making an attempt. Passes and dribbles aren’t tracked for their own sake either — ball movement stats like these give coaches a snapshot of whether teams are stretching defenses until they reach breaking point.

He went on to say that analytics can be seen in how Barangay Ginebra coach Tim Cone sometimes comes up with his player combinations on the floor.

He cites a Barangay Ginebra game against the Meralco Bolts in the PBA Commissioner’s Cup on May 26, where the Kings turned things around in the second half after a dismal performance in the opening 24 minutes, eventually winning, 110-95.

Mr. Lipae said Mr. Cone and the rest of his staff discussed things at halftime and looked at the numbers to determine which combination of players would have a better impact to start the third quarter.

Using the plus-minus rating of players both offensively and defensively, the team came up with guards Sol Mercado and Scottie Thompson, forwards Aljon Mariano and Japeth Aguilar and import Justin Brownlee.

The combination did pay off as the Kings outscored the Bolts, 38-17, in the third frame to turn an 11-point deficit, 54-43, at the half to an 11-point advantage, 82-71, entering the fourth quarter.

It was turnaround they would use the rest of the way to book the victory.

In the postgame press conference, Mr. Cone acknowledged the role that analytics and his coaching staff played in the turnaround victory which he said was already a lost cause at the half.

STEP-BY-STEP PROCESS
Paulo Layug, Alaska’s analytics coach, said the team’s approach is more than just collecting numbers but a step-by-step process.

“People think it’s just numbers but you have to understand the game also. For me, I use data; I watch the whole game and break down the possessions based on different categories, what type of shot, what type of play, who shot it, where on the court, who passed and so on. I have a system where I encode the data. That’s the first step,” he said in a separate interview.

“Then analyzing the data comes next, looking at different trends. I use these data then give them to the coaches so they can prepare a game plan. They select which data they want to focus on. The third step is application,” added Mr. Layug, a Management Economics graduate from Ateneo de Manila who worked as a foreign exchange trader before being involved in analytics with Alaska.

He agrees with Mr. Lipae that use of analytics is team-specific, relative to what the ball club wants to achieve.

“Our system is customized to what we want to achieve. One of the things we like to do is press, so we look at how long our opponent takes to cross the half-court and how effectively we disrupt their offense,” the Alaska analytics coach said.

Both Messrs. Layug and Lipae said the use of analytics does not translate to outright wins for their respective teams, seeing what they do as just a “tool” for coaches and players to use.

“I don’t like to say that when you use analytics you automatically win. Like in business you look at different ratios — liquidity ratios, profitability and so on — that’s how I look at data. You just use data to see how your team is performing. So for me analytics is not the direct answer but just a tool that coaches and players use to improve themselves individually and as a team. It can be used for scouting, game-planning and improving their skills,” Mr. Layug said.

“Coaches’ ideas and numbers, that is analytics. Analytics will not decide. It is still the coaches who decide. The numbers are there to be the guide,” Mr. Lipae, for his part, said.

Barangay Ginebra and Alaska have been among the consistent top-half teams in the league in the last five years, with the former having won three championships in the last eight conferences.

COMPETITIVE EDGE
It was therefore a no-brainer to apply analytics to games where statistics are baked into the sport, such as esports, which cannot be played without a certain amount of computing power. So it’s no surprise that esports teams are also making use of analytics. Esports have seen steady growth and acceptance in recent years and are slated to be part for the first time in the Southeast Asian Games here later this year.

A number of esports teams have tapped into analytics to give them the competitive edge, be it in tournaments here at home or abroad.

“Analytics is already an integral part of esports especially at the highest levels of competition where knowledge of the game and your opponents are the key to victory. I think it’s safe to say that all the esports teams in the Philippines I know of are using analytics whether they realize it or not. It would be virtually impossible for an esports team to qualify for a high-level competition without having a form of analytics incorporated into their strategy,” said Jab Escutin,co-founder of esports team Bren Esports in an interview.

“I think analytics comes naturally to esports so it wasn’t really a decision we had to make. I think the decision was mainly on how to improve our data gathering and how we can properly incorporate it in our game plan,” he added.

Mr. Escutin, whose team,under Bren Epro, is a steady fixture in The Nationals, the country’s first and only franchise-based esports league, as well as in competitions abroad, said that like any organization or team that uses sports analytics theirs also involves “a lot of effort.”

“A lot of effort goes into analytics and I think the game developers themselves understand this that’s why they incorporate as much information as they can into the game. From the amount of damage a character can make up to video replays and summaries, all of that information is already available in the games we play. So it’s only a matter of transferring the data onto an Excel sheet or even something as simple as pen and paper depending on what our coaches are comfortable using,” said Mr. Escutin.

APPRECIATION AND ACCEPTANCE
Despite the pickup that sports analytics has gained in the Philippines, Messrs. Lipae, Layug and Escutin said appreciation and use of it are still a way off as compared to those in other countries, especially in those with readily available technology and equipment.

They said “acceptance” of it is very important in furthering its growth.

“Sports analytics here is growing but the challenge is understanding it in a wider scope, which at this point we have not fully achieved yet,” said Mr. Layug.

However, he is optimistic that in the next five years further use of it among PBA teams as well as in other leagues would be seen with the advent of new coaches who are open to learning and adapting it.

“Continued information on it would help the growth of analytics, inspiring more young people to take it up and be part of the system. Education and training for the players and coaches, too, would go a long way,” said Mr. Lipae.

The two PBA analytics experts said they do not see sports analytics “disrupting” or taking away employment from team personnel though they understand the resistance to it initially.

“Of course, there is some resistance but you don’t have to worry too much because it is so specialized. Teams will just be adding analytics coaches like teams now have coaches for strength and conditioning and other areas,” Mr. Layug said.

Mr. Escutin said success enhances further acceptance of sports analytics, particularly if teams make sustained runs at the top of their league.

“Analytics is the only thing that separates a skilful team from a consistently winning team. I can see a lot more teams formally incorporating analytics into their strategies specially when competing at the highest levels of Philippine esports,” he said.

“I think having teams like ours succeed consistently with proper analytics and preparation shows new and existing teams what they can do to improve their game. Like with traditional sports, when you see a team succeeding you want to emulate what they do or use so I think it’s only natural that analytics will be a part of Philippine esports,” Mr. Escutin added.

Analytics may still be in the process of finding a permanent spot in Philippine sports but for people championing its use there is no denying its upside to enhance the state of things.

“Getting data is still a challenge at the moment and we don’t have the technology and equipment here yet for the tedious work that goes with it. But it’s here and it’s going to be the norm sooner than later,” Mr. Layug said.

For Mr. Lipae, analytics adds a dimension to effective performance analysis which should translate to exciting games and competition.

“Analytics gives a different and positive perspective in sports as it involves not only intuition, making the games themselves, and how they are being approached, exciting,” said Mr. Lipae.

As the technology improves, games that were once thought to be too free-flowing to analyze statistically — like football — are also opening up to analytical approaches. It is already possible to track game states in basketball, where start-ups are employing high-tech cameras to analyze the impact of even minor shifts in court position, such as whether a three-point shooter is standing in the corner during a drive.

To properly interpret such data, you need to understand that the corner three is among the most efficient shots in basketball, because it’s the shortest distance to the goal of any three-pointer, and that defenses need to guard the corner three or else leave themselves open to a relatively easy shot.Which suggests that the world may be drowning in data points, but it still takes a sharp human understanding of game strategy to make use of them properly.

Business schools keep a finger on the pulse of technological innovation

By Arjay L. Balinbin, Reporter

BUSINESS SCHOOLS strive to keep a finger on the pulse of technological innovation because such changes in technology could herald how business might be done in the future, and their students must be prepared to adapt and thrive in rapidly-changing environments.

This means that schools, more than honing students in the areas of macro and microeconomics, statistics, accounting, finance, operations, marketing, organizational behavior and human resources, should also focus on the development of future-ready skills that will enable them to deal with a volatile, uncertain, complex, and ambiguous world.

As such, BusinessWorld sat down with two officials from the Aboitiz School of Innovation, Technology, and Entrepreneurship (ASITE) of the Asian Institute of Management (AIM).

ASITE head Christopher P. Monterola, who also serves as the executive managing director of AIM’s Analytics, Computing, and Complex Systems (ACCeSs) Laboratory, said that one obvious need that business schools should address is technology.

“Technology is not just changing, it is accelerating. If you try to look at the idea of innovation, majority of it is driven by technology. Specifically now in the context of Industry 4.0, this technology refers to about 80% AI (artificial intelligence) and the other 20% on blockchain and cloud computing. So if you would like to have a meaningful business curriculum, the students should be weaponized to understand the trends of technology,” he said.

Academic Program Director Erika Fille T. Legara of the Institute’s Master of Science in Data Science (MSDS) program said that a high-level familiarity with AI and data science is now a necessity as most companies are technologically-driven.

“We have actually seen this in some executives. If you talk to them, they are now very familiar with data engineering, data science, and AI. I think that when you are at the forefront, it is much more difficult for those who lag behind to catch up, so we always encourage them to be quick,” she said.

According to a survey by the MIT Sloan Management Review and the IBM Institute for Business Value of nearly 3,000 executives, managers and analysts across more than 30 industries in 100 countries in 2011, “top-performing organizations use analytics five times more than lower performers.”

In the case of ASITE, Mr. Monterola said the school’s MSDS program is “three times oversubscribed.”

Most sectors, including banks, financial, manufacturing, retail, logistics and supply chain management companies, media, the academe, and start-ups, are very much involved in data science, according to Ms. Legara.

Because their needs are never constant, Mr. Monterola said, it follows that schools should collaborate with them when updating or designing their curricula.

“The center of data science in particular is domain expertise. You should be working with a domain expert, so it is a natural thing for us to be working with them if we want this to be successful,” he added.

One of the biggest problems of many companies when hiring data scientists, according to Ms. Legara, is that despite that they are technically gifted, many of them lack knowledge on business value.

“A lot of companies feel really frustrated because… most of the data scientists, when they join a company, they are clueless on how to make the data, the results, meaningful to the business, to the company, so that they can take action… We need good people who are not only brilliant in these things but also can articulate and understand business value,” she said.

FUTURE-READY LEADERS
Being a future-ready leader refers to one’s ability and comfort level in dealing with uncertainty, Mr. Monterola noted.

“We call this a VUCA world — volatile, uncertain, complex, and ambiguous,” he added.

At ASITE, he said, some of the most valued skills are critical thinking and innovation. “This is the core of any academic course. All of a sudden this idea is now changing because of the technology. Say for example in AI, when you talk of critical thinking, you are no longer looking at just two to three possible scenarios. Through machine learning and through AI, you are now looking at 100 possible scenarios and the probability of these all scenarios happening.”

Ms. Legara said that to prepare students to be future-ready, the school “makes sure that in all courses, even in mathematics and data science, there is a lot of problem-solving involved.”

“I think this is based on experience that if you are always given a problem-solving task with no exact or definite answer, you are required to be more creative… If these are what you eat or solve while you are in the program, you are more or less ready for the real world and even if the technology changes and even if the rules change, you can still adapt,” she said.

On the educational philosophy that the school subscribes to, Ms. Legara said: “We are very big on practitioner-oriented teaching, particularly experiential learning.”

She said the biggest aspect of ASITE’s curriculum is what the school calls “capstone projects.”

The projects are defined by the industries that provide the school with potential research questions that students can work on.

“We got something like 25 proposals [previously]. And note that they bid, they bid to be the cast on that students will be choosing… It will not be just students who will be working; there will be mentors like our full-time data scientists here, who are mostly PhDs too,” Mr. Monterola said.

“What is beautiful here is that the value is already inherent because the company would give a problem that has a very defined value for them, so you don’t have to think much about the value but how to solve the problem,” he added.

THE CHALLENGE
Getting qualified full-time educators remains a challenge for the school, according to Ms. Legara.

“So definitely limited… We do have a hard time getting full-time ones. But we are very agile. We can get practitioners teaching as guest lecturers,” she said. “Full-time faculty, it’s tough, but we do have a lot of supporters. They provide real-world perspectives.”

She said other business schools that plan to innovate may face the same challenge, because it is a continuing problem “not only in the Philippines but all over the world.”

Mr. Monterola said, “One of the things that we are trying to incorporate in our curriculum here is blended learning because some of the best lectures, especially for technical subjects, are those that can be found on Youtube. So we will no longer duplicate those, but we have to augment those with real-world experience…”

PARTNERSHIPS WITH GOVERNMENT
Mr. Monterola said among the plans that ASITE is pursuing is to give AI skills to all students in the Philippines.

“We have discussed this with the Department of Education on how we can incorporate AI in the K-12 program. The materials that we will be using there, which I hope will be more appreciated by our students, are cases defined by our engagement with various industries in the country,” he said.

For her part, Ms. Legara said: “We are also going around the country in our own way. We have different partnerships right now. We also have our partnership with the Freedom of Information (FoI) program. We have volunteer students from the MSDS program to not just talk about data science but also about Industry 4.0 in general.”

She added that the school has started discussing with government agencies and even private companies that are willing to fund the textbooks to be deployed across the country.

“We will train teachers with real-world problems and try to make sure that the way we created these textbooks will be something that can be understood by our students. Why are we doing this? In five years time, conservative estimate, probably the BPO (Business Process Outsourcing) industry which constitutes 1.2 million of our employees… if they do not upskill, about 80% of them will lose their jobs because of AI. They are a very strong contributor to our GDP (Gross Domestic Product). In fact, almost a lot of these 1.2 million are classified as above average in salary scale. You can imagine what will happen if they lose their jobs,” Mr. Monterola said.

He added that the school is also in talks with the Department of Trade and Industry on the creation of a center of excellence for data science, which will target the micro, small and medium enterprises and the agriculture sector.

“If we prioritize these sectors, we can increase significantly our GDP… These are the people who are in the laylayan ng lipunan (fringes of society)… So I hope those things will materialize,” he said.

Founders, funders, and bayanihan in the fourth industrial revolution

By Santiago J. Arnaiz, SparkUp Editor

WHEN Keller Rinaudo founded his drone-based delivery start-up Zipline, it was with the lofty dream of building “an instant, automated logistics system for the planet.” It was 2014 and, at the time, AI-powered robots were commonplace only in the warehouses of the world’s tech giants: Alibaba, Amazon, and the like. But Mr. Rinaudo felt that the technologies of the future were being wasted on delivering tennis shoes and pizza. Instead, he believed “the long-term impact of that technology is providing universal healthcare to every person on the planet.”

Today, Mr. Rinaudo oversees the largest commercial autonomous logistics system in the world, delivering emergency medical supplies and relief packages to remote communities. Like his drones, Mr. Rinaudo is constantly travelling to far flung regions, finding new ways to partner with local governments and private institutions, taking his futuristic solution to as many places as possible.

“People in Rwanda today say ‘Yeah, of course we have drones that deliver blood. How else would you solve that problem?’” Mr. Rinaudo said. “It’s amazing how fast it goes from science fiction to totally boring.”

While the team is headquartered in California, Zipline’s operations are halfway across the world in Rwanda, Ghana, and — following a meeting last month with the Department of Health and Department of National Defense — the Philippines.

It’s across the Philippine archipelago that Mr. Rinaudo believes Zipline will truly come into fruition as a game-changer in autonomous logistics. With their drones, Zipline will be able to send payloads of vital cargo across various bodies of water, instantly connecting remote islands otherwise considered unreachable in emergency situations.

The Philippines is a vast country, with an equally vast array of social ills, borne out of generations of band-aid solutions and neglect. Infrastructure gaps, wealth inequality, disproportionate allocation of private and public funding — all these and more constitute a nation rife with complex, interlocking problems.

But where there are problems, there are also opportunities. Just as Zipline hopes to address Philippine infrastructure gaps with artificial intelligence and robotics, the fourth industrial revolution presents a nearly bottomless toolkit with which enterprising firms might tackle the issues that plague our country.

And it’s in that intersection of emerging technologies and societal need that we’re seeing the rise of a new breed of enterprising pioneers: Start-ups.

LEADING THE CHARGE
As of 2017, Impact Hub Manila CEO Report 2018 found that Metro Manila alone was home to over 500 registered start-ups. In the same year, global investors funneled over $100 million into Philippine start-ups, outpacing the growth of the community’s Singaporean and Indonesian counterparts.

Since then, the local ecosystem ballooned, with more than half the current roster of start-ups founded in the last two years. Earlier this year, global business ranking report Start-upBlink found that the Philippine start-up ecosystem jumped up 16 slots to 54 out of 100 countries surveyed.

Today we see dozens of case studies of independent, homegrown companies that have leveraged their innovative business models to raise significant institutional funding, create thousands of new jobs, and quickly achieve liquidity.

Coins.ph, a regional success story that made headlines after its $72 million acquisition by Indonesian tech giant Go-Jek, drew massive support by allowing users to invest in cryptocurrencies. FlySpaces, another homegrown company, is now Southeast Asia’s leading provider of serviced office and co-working spaces, with locations all over the region. Similarly, Edukasyon.ph is now one of the fastest growing ASEAN-based education technology start-ups, with over one million monthly users covering more than 40 percent of Filipino students with internet access.

“The Philippines has incredible potential to be a leading start-up hub,” said Katrina Chan, Director of QBO Innovation Hub, a public-private initiative supported by the Department of Science and Technology, Department of Trade and Industry, IdeaSpace, and J.P. Morgan. “We are starting to see more elements come into place — increased investment activity, growing public -private support, rising interest in entrepreneurship — which makes me believe that the Philippines can live up to its promise and… rival the biggest names in the region in the next few years.”

Whether homegrown or foreign, start-ups are thriving in the Philippines and, in turn, the community is helping the Philippines thrive. But in order to understand how to best bolster that growth, it’s important to first understand what exactly that community looks like.

THE START-UP ECOSYSTEM
Pop culture is saturated with hero stories of visionaries reshaping entire industries with their revolutionary ideas. One imagines the founder leading a scrappy team of developers, bootstrapping their projects out of garages and studio apartments. While the reality of start-ups in the Philippines is not nearly as romantic, it is, at least, infinitely more interesting.

Today, there are at least 20 major incubators and accelerators offering mentorship and seed funding opportunities to start-ups in metropolitan cities across the country. Additionally, there are at least 30 angel investor and venture capitalist groups actively seeking new Filipino start-ups to fund and help scale.

And it doesn’t stop there. Many schools have launched their own business accelerator programs, to complement their management and entrepreneurship curriculums. Institutions like Ateneo de Manila University and the Asian Institute of Management boast robust accelerators, while modern schools like MINT College connect their students to the start-up world through partnerships with global networks like Impact Hub.

As with any major societal venture, the government plays a key role in creating the scaffolding against which entirely new industries are being built. Earlier this year in May, the Senate passed on third and final reading the Innovative Start-up Act, which aims to create a more conducive environment for start-ups to grow in the country.

“These are start-ups that provide unique and relevant solutions to our problems, from daily hassles, like finding a taxi during rush hour, to improving the delivery of healthcare, providing support for our farmers, and addressing unemployment,” said Senator Paolo Benigno “Bam” Aquino IV, the bill’s primary author. Under this act, start-up founders can expect tax breaks and expedited processes for securing business permits and certifications.

According to the Senate, the measure also includes a provision for the establishment of a P10 billion “Innovative Start-up Venture Fund” that entrepreneurs can apply for through the Department of Science and Technology.

Elsewhere in the executive branch, start-ups have found even more direct partners in offices such as the Department of Trade and Industry and the Department of Information and Communications Technology. Through their affiliate agencies both national and local, these departments have created innovation centers, competitions, workshop programs, and grassroots projects all directed towards equipping Filipinos with the tools needed to respond to the nation’s needs through entrepreneurship.

A COMMUNITY EFFORT
While the self-organizing founders of the local start-up scene have benefited greatly from academic and government support, it’s in strategic and funding partnerships with corporations that many of these founders have been able to take their businesses to the next level.

“Corporations really want to work with start-ups,” said Minette Navarete, vice chairman and president of Kickstart Ventures. Kickstart Ventures is one of the country’s leading venture capital firms, a subsidiary of Globe Telecom backed by Ayala Corporation and SingTel.

According to Ms. Navarete, large corporations benefit from the creativity and excitement that start-ups bring to the table. Whereas corporations like Globe Telecom and Ayala have the resources to fund large ventures, start-ups are agile enough to develop and scale solutions at a pace traditional firms just can’t keep up with. Far from the narrative of disruptor versus disrupted, corporations in the Philippines play a vital role in creating spaces for start-ups to flourish.

Building the Philippine start-up community is a tripartite effort that calls on the government, the academe, and private institutions across the spectrum to work together in unprecedented new ways. To pull that off requires no shortage of creativity and open-mindedness — a paradigm shift towards collaboration that, if properly structured, could see not only the start-up community, but the nation as a whole, flourish.

In choosing to expand into the Philippines, Zipline’s founder Keller Rinaudo echoed what many start-ups have already known about the local ecosystem. It’s not just the wealth of opportunity that firms like his can capitalize on, but the spirit of collaboration that permeates every facet of the local start-up community.

With the government’s scaffolding of legislative and executive support, the academe’s thrust towards equipping the next generation of business leaders with the business and tech know-how to thrive, and the entrepreneurial spirit that drives Filipino founders forward into the fourth industrial revolution, it’s no wonder why firms across the globe have their eyes on the Philippines.

“Many people think the next big technological applications of our time will come out of places like Japan or the United States,” Zipline’s Mr. Rinaudo said. “But it’s precisely the [countries] that embrace innovation that end up leapfrogging ahead of even developed nations.”

Industry 4.0 and the future of telecommunications

By Bjorn Biel M. Beltran, Special Features Writer

GOING from the age of homing pigeons and the telegraph to the age of virtually instant face-to-face interaction in the span of a century, there is perhaps no better symbol of technology’s explosive growth in the information age than telecommunications.

Where there was once slowness and inefficiency in sending and receiving messages, now there is a constant upgrading of fast and and secure communication. Companies like Apple pride themselves on the security and privacy of their messaging apps, while the ubiquity of other services ensure that anyone can be contacted instantly anytime, anywhere with an internet connection, even astronauts orbiting the earth on the International Space Station.

“Technology, media, and telecommunications (TMT) companies have been at the epicenter of the change wrought by Industry 4.0. They have pioneered many of the smart technologies and high-speed connectivity at its core, making digital innovation possible,” international services firm Deloitte wrote in a report on its website.

With so many technologies proliferating, it is difficult to imagine what the future of telecommunications will look like at the dawn of the Fourth Industrial Revolution. How much more can technology improve from the information age, with its immense economic and sociopolitical impact?

Let us count the ways.

THE 5G WORLD
Mobile internet has virtually transformed all facets of contemporary life. Its effects can be felt in the entertainment industry with the advent of streaming audio and video, the financial sector with fintech and mobile banking apps, food service through online food delivery, and transportation in the form of ride-hailing apps like Uber and Grab.

In an always-online world, the demand for faster, more affordable, more convenient internet services grows along with it. Enter 5G technology.

The International Mobile Telecommunications-2020 (IMT-2020 Standard), the set of standards and requirements issued by The International Telecommunications Union (ITU), set the course for the developing technology in the coming year. The rollout of 5G is expected to connect people, things, data, applications, transport systems, and cities in smart-networked communication environments through a network capable of supporting a huge amount of data much faster, more reliably, on an extremely large number of devices, and processing very high volumes of data with minimal delay.

Through 5G, innovative applications such as smart homes and buildings, smart cities, 3D video, work and play in the cloud, remote medical surgery, virtual and augmented reality, and massive machine-to-machine communications for industry automation and self-driving cars are not only much more feasible but much easier. Particularly after such technologies were challenged by the limitations of 3G and 4G networks.

According to the ITU, 5G technology promises to accelerate the achievement of all of the United Nations’ 17 Sustainable Development Goals (SDGs), from affordable and clean energy to zero hunger.

“Expectations of 5G are high, with many assuming it will deliver a transformative promised land — an improved end-user experience, new applications, new business models and new services riding swiftly on the back of gigabit speeds, improved network performance and reliability,” the ITU wrote in its Setting the Scene for 5G: Opportunities & Challenges report.

“5G networks and services, standing as they do on the shoulders of successful 2G, 3G and 4G mobile networks, are forecast by independent economic studies to deliver very significant economic gains.”

In the Philippines, the technology is on its way with Globe Telecom, Inc.’s launch of its fixed service Air Fiber 5G, making it the first provider to launch a 5G-powered service in the Philippines and Southeast Asia, and third in Asia after South Korea and Japan.

A NEW KIND OF INTERNET
An interconnected society in the era of 5G may enable an even bigger role for the technologies currently dominating tech. The cloud, the Internet of Things, and artificial intelligence, Deloitte wrote, are expected to have the largest impact on telecommunications organizations over the next five years as emerging specialized technologies — such as quantum computing and nanotechnology — loom over the horizon.

“Cloud, IoT, AI, and mobile technologies are vital parts of the networked physical-digital universe, helping organizations collect and process vast volumes of data and become smarter digital enterprises. IoT-enabled sensors take measurements and generate streams of data. Mobile technologies have an important role to play, too,” Deloitte wrote in its report.

“Smartphones, tablets, and wearable devices can function as sensors, collecting and sending diverse data such as location, acceleration, images, video, activity information, and even health measurements like heart rate and blood sugar. And mobile technologies provide connectivity — not just for phones but for devices such as manufacturing equipment, home appliances, office whiteboards, wearables, and medical tablets.”

The Internet of Things, particularly, can open the door to limitless possibilities. As the convergence of multiple technologies, including real-time analytics, machine learning, commodity sensors, and embedded systems, IoT can foster further innovation in the smart ecosystem space, particularly in the development of smart homes, buildings, and cities.

Through embedded sensors, artificial intelligence, machine-to-machine communication, and real-time analytics, IoT can potentially, for instance, detect when your smart car is running low on fuel or is in need of repair, automatically and autonomously send it to a refueling station, show you routes to the nearest service station, or even contact your manufacturer to send a mechanic — all without any human input. Such ecosystems could be expanded to smart cities with massive network infrastructures, monitoring entire transport systems and utility grids, with machines communicating with each other through a vast network to ensure efficiency, security, comfort, and convenience.

“The connected universe is getting smarter, with developers infusing AI capabilities such as machine learning into IoT platforms and applications, into cloud services, and even into physical devices at ‘the edge’ of the network. AI and IoT are a synergistic pair. [The International Data Corp.] predicts that by 2019, “all effective” IoT efforts will make use of AI, since data alone has limited value unless it’s mined for insight,” Deloitte added.

“Conversely, AI thrives upon volumes of data: As AI systems ingest new data and scenarios, they evolve and improve over time, inferring new knowledge. A virtuous cycle emerges: Connected devices and systems generate data, and that data is analyzed for insights that are piped back into the systems to drive informed decision-making and intelligent, autonomous action.”

The value that this kind of technology can deliver to enterprises and customers is immense, with IoT and mobile technology enabling completely new revenue streams and service-based delivery models, as well as more efficient operations. The role of AI, by extension, will become an integral part of business operations, essential for better decision making and the development of smarter products. Cloud computing, which before was utilized chiefly for the purpose of lowering costs and increasing efficiency, can now be used to rapidly innovate products and services, build new business models, and reinvent customer relationships.

ON THE BORDERS OF NEW REALITIES
Just like when over the top (OTT) media services, livestreaming services like Spotify and Netflix, revolutionized the entertainment industry, augmented and virtual reality is predicted to rise in a more interconnected world.

The World Economic Forum projects simulated environments generated by AR and VR technologies to transform a variety of industries, from straightforward applications like video games and virtual tourism to medical research and journalism.

Through virtual reality headsets or multi-projected environments to generate realistic images, sounds and other sensations that simulate a user’s physical presence in a virtual environment, VR systems can simulate detailed maps of the cells in a cancer tumor that can be explored and analyzed, or else, as with the New York Times’ VR mobile app, experience “a new kind of video that gives you a sense of depth in every direction so you feel like you’re actually there.”

Simulated reality, however, poses new and uniquely fraught challenges to society at large.

For instance, it is no secret to Filipinos that online gambling sites and virtual casinos have sparked an explosive influx in Philippine Offshore Gaming Operators (POGOs). Chinese nationals seeking workarounds for China’s gambling ban have flocked to burgeoning gambling hubs in the Philippines, prompting an increase in Chinese workers to cater to them and driving up residential and office property prices in the process. The demand is expected to drive gambling revenue in the Philippines to $4.1 billion this year, up from just over $1 billion in 2016, according to the government.

Proxy betting, a practice that uses computer tablets and headsets to communicate with gamblers watching games from abroad on cameras, contributes a sizeable chunk to these numbers. Interestingly, the practice is outlawed in most countries because of the anonymous nature of the remote gambling, but it is legal in the Philippines.

That so much money can be found in offering a method of circumventing national law speaks to how much potential a purely digital world far removed from national boundaries and regulations can offer. Imagine how emergent technology can play a part in all of that, for better or for worse.

Transformation toward sustainability

By Mark Louis F. Ferrolino, Special Features Writer

A BUSINESS-AS-USUAL approach can no longer get the job done. Companies need to recognize sustainability as part of their business model to survive and thrive.

According to Bonar Laureto, executive director of the Philippine Business for the Environment, a non-profit organization that supports sustainability management initiatives, a sustainable company needs to be configured to conduct business ethically, managing the impact of its existence, deliver value to society, and be future-ready.

“For a business to be called sustainable, all of these have to be present. If you’re missing one of these, it will collapse, it can harm your business. If you’re missing corporate governance, for instance, you can go in a certain direction that could bring about your demise. All of these things are non-negotiable. You can’t just talk about sustainability from one lens,” Mr. Laureto told BusinessWorld in an interview.

Over the past decades, several studies have shown that integrating sustainability practices in business operations provide significant benefits. These include a higher chance of attracting investors and engaging talent, according to Mr. Laureto.

Many investors today are using environmental, social and governance (ESG) metrics to evaluate companies in which they might want to invest. These are sets of standards that consider how a certain company performs as a steward of nature, how it manages relationships with its stakeholders, and how it deals with executive pay, audits, internal controls and shareholder rights, among others.

According to global investment manager Schroders, the volume of passive strategies using ESG metrics and exclusions as stand-alone investment criteria has surged in recent years. BlackRock also projects that global ESG exchange-traded fund assets will rise to more than $400 billion by 2028 from $25 billion in 2018.

Meanwhile, companies that focus on sustainability practices are also believed to have better employee engagement, as validated by several studies. A survey by a blockchain-based clean energy platform Swytch, for instance, revealed that employees of all generations seek companies that have programs set in place to be more sustainable.

In terms of employee retention, the survey showed that nearly 70% of the respondents believe that a strong sustainability plan will affect their decision to stay with a company for the long term. In fact, about 30% have left a company due to its lack of a corporate sustainability agenda.

“Globally, those companies that are publishing sustainability reports are actually increasing over the years. A lot of companies are making these data available because it’s about attracting the right investors and the right talent,” Mr. Laureto said.

In the Philippines, the Securities and Exchange Commission (SEC) now requires publicly-listed companies (PLCs) to submit their sustainability reports starting next year.

With the issuance of the Sustainability Reporting Guidelines, the SEC, according to its Chairperson Emilio B. Aquino, has high hopes that PLCs will be made aware of sustainability and make it a part of their priorities.

Mr. Laureto said this measure should not be perceived as an additional reporting burden. “[If] you want to succeed in the Philippine market, [if you] want your company more competitive, you disclose your ESG performance because investors are looking for these,” he said.

THE EPITOME OF SUSTAINABLE BUSINESS
A Filipino company that actively embodies sustainable practices in its operations is Energy Development Corp. (EDC), a world leader in geothermal technology and the country’s largest 100% renewable energy company. EDC has a long history of pioneering sustainable practices, and is committed to improving people’s lives by ensuring that its businesses grow, along with the environment, its employees, and other stakeholders.

Last year, EDC generated economic value of P40.8 billion, with 58% or P23.7 billion distributed to the economy through operating spending, employee wages and benefits, payments to capital providers, taxes, and community investment.

To manage and reduce the environmental impact of its operations, EDC continues to monitor and manage its greenhouse gas emissions and other significant air pollutants, as well as its waste generation and water withdrawal. Through one of its environmental stewardship programs, BINHI Greening Legacy, EDC was able to restore denuded forests, identify, collect and start propagating 96 threatened native tree species, and protect biodiversity.

This initiative captures 3.96 million tons of carbon dioxide each year, and EDC’s effective emissions management mechanisms, has allowed the company to maintain its carbon-negative status, one that absorbs and sequesters more carbon than it produces based on the Intergovernmental Panel on Climate Change’s (IPCC) norms.

Apart from caring for the environment, EDC has likewise implemented several corporate social responsibility (CSR) programs which aim to empower various stakeholders and partner communities toward becoming proactive agents of their own development. Every year, EDC’s strategic CSR programs benefit around 44,496 individuals from 20,000 households in 47 primary partner barangays across all areas where it operates.

The company also aligns its efforts with the Sustainable Development Goals (SDGs) of the United Nations as a general framework to end poverty, protect the planet, and achieve prosperity for all. EDC’s primary focus has always been to ensure access to affordable, reliable, sustainable, and modern energy for all (SDG 7). In the process, the company has also been promoting gender equality (SDG 5); decent work and economic growth (SDG 8); industry, innovation, and infrastructure (SDG 9); responsible consumption and production (SDG 12); climate action (SDG 13); and life on land (SDG 15).

Through its various CSR efforts, EDC, on the other hand, has been contributing to the fight against hunger and poverty (SDGs 1-2); ensuring access to clean water and sanitation (SDG 6); enhancing good health and well-being (SDG 3); and providing access to quality education without discrimination (SDG 4).

However, the company’s journey to being sustainable doesn’t end here. As Mr. Laureto said, sustainability is not a point but a journey.

“There’s no such thing as a sustainable state because a sustainable business model means a company that continually improves on its sustainability performance,” he said. “It will never end.”

EDC said it strives to keep finding ways to provide clean, renewable, reliable power through the geothermal energy it has been specializing in for almost 40 years, and works to also enhance its impact on the environment and on the communities that it serves.

DRIVING FORCES LEADING THE WAY TO SUSTAINABILITY
More and more companies are making the leap to operate in a more sustainable way; it is fast becoming a strategic imperative rather than an option.

The increasing threat of climate change is pushing companies to transition away from business as usual. As Mr. Laureto said, the public is more critical about what firms are doing because it suffers the consequences in the form of more severe natural hazards caused by changing climate.

“In the past, being a good businessman was easier. You just have to sell the products to your customers, get paid for it, make profits, and do the cycle again. Nobody cared about whether you were polluting the river, whether you have so many plastic wrappers and packaging going into the ocean, nobody cared about that. [But] the world today has changed. The stakeholders are very much informed that if you do something bad to the environment or to the stakeholders, social media will pick up, [and] it will destroy you,” Mr. Laureto said.

According to EDC, if carbon emissions are not curbed, 74% of the world’s population and 47% of its land area will be exposed to lethal temperatures by 2100.

“With every passing year, it’s becoming increasingly tougher to deny that our climate is changing faster than previously imagined due to human activity,” EDC Chairman and CEO Federico R. Lopez said in the company’s 2018 Performance Report.

He noted that human activity is warming the Earth 5,000 times faster than the most rapid natural warming occurrence in the past, and species are going extinct faster than at any period in geologic history.

“We urgently need to overhaul how we relate with the Earth if we want to keep it habitable for humans in the decades to come. We don’t have a choice,” Mr. Lopez said.

In addition to climate change, other forces that are driving companies to incorporate sustainability as part of their strategy, as identified by Mr. Laureto, include the entry of younger generations into the workforce demanding corporate sustainability, the growing number of investors who use ESG metrics, the increasing resource scarcity, and the enactment of some government regulations that affect how businesses operate.

INDUSTRY 4.0 AS ENABLER OF SUSTAINABLE DEVELOPMENT
Now that the most recent industrial age, better known as Industry 4.0, is starting to unfold, emerging opportunities toward sustainable development and sustainability are being identified.

“There’s a lot of application to how enterprises can become sustainable with the application of technology brought by Industry 4.0,” Mr. Laureto said.

In agriculture, for instance, Internet of Things (IoT) solutions can help farmers enhance productivity and efficiency. With the help of sensors, farmers can determine what parts of the land have poor nutrients and identify which type of fertilizer they should apply.

“That reduces the cost of the farmers, and it absolutely could increase productivity,” Mr. Laureto said. “Less expense, less environmental impact.”

Mr. Laureto also said the application of technologies brought about by Industry 4.0 is not limited to enhancing sustainable operations across diverse industries but also in addressing key social issues, including poverty, hunger, and access to clean water and health care services.

Despite the benefits of being a sustainable business, some firms are still reluctant to make strong commitments to sustainability. One main reason for this, according to Mr. Laureto, is that it comes with upfront costs.

“The perspective of sustainability as a cost rather sustainability as an investment is one of the biggest barriers,” he said. “There’s an upfront cost to it, unless the managers see it through a long-term point of view.”

The existence of some government policies and regulations also restrict firms from embracing sustainability practices. Citing an example, Mr. Laureto said: “Companies want to minimize the use of packaging in general by putting up refilling stations, [but] FDA (Food and Drug Administration) has a policy against refilling.”

“The objective of reducing waste and the investment that the company will make is hindered by the policy,” he added.

In this case, the government, he said, should create an enabling policy which will remove the barriers that prevent companies from incorporating sustainable practices in their operations.

“Enabling policy is critical so that private sector can come in. Government doesn’t have to do anything for the private sector, except that they make doing business easy and they enable them to come in, enable them to invest, remove the barriers,” Mr. Laureto said.

By and large, sustainability is not only a matter of strategy for businesses to stay relevant and achieve long-term growth — it is for everyone — to improve the life of every member of society. As Mr. Laureto puts it: There’s no economy to speak about without sustainable development.

“Our economic activities and the things that we do are highly dependent on maintaining natural capital and ensuring that resources are used wisely,” he said.

Generation Z and the increasingly automated work environment

A GROWING NUMBER of members of Generation Z, born roughly between the mid-1990s and early to mid-2010s, is entering the workforce. For businesses, it’s becoming increasingly important to get a good grasp of what makes these young people tick, in order to attract, onboard, and retain them.

One of the more recent attempts to understand this cohort was made by local firm Acumen Brand Strategy Consultants. In 2018, Acumen conducted a study involving hundreds of participants from two digital generations: Generation Z, also known as the centennials; and Generation Y, the millennials. Though mistakenly lumped with the millennials, centennials are a distinct group.

In May at the BusinessWorld Economic Forum 2019, Pauline Fermin, managing director of Acumen, presented some of the study’s key findings. “Digital devices, digital media and the Internet are fully integrated into their lives and even their definition of being,” she said. The formative years of many Gen Zers were shaped by the rapid digital evolution in the 2000s that brought about smartphones and social media, among other innovations. They were exposed to and began using these technologies at a young age.

Unsurprisingly, all the Gen Z participants of the study said they use the Internet. A majority of them use it for more than four hours a day. Meanwhile, 45% said they get bored when they’re offline. On social media, the study found, the top accounts Gen Zers follow are those of their friends, family, celebrities and companies. Thirty-two percent of the Gen Z participants want their followers and/or friends on social media to react immediately to anything they share.

“The principles of technology are now basic expectations when it comes to life: high speed, high availability, constant accessibility and human-optimized machines, convenient, easy, seamless,” Ms. Fermin said. Curiously, she noted that Gen Zers recognize that they have weaknesses in terms of communication and interpersonal skills. Some 38% of the centennial participants in the Acumen study said they can express themselves better online than in person.

Gen Zers are highly in touch with everything — good and bad — that’s happening around them. “Technology is their visa,” Ms. Fermin said. These people also “find anchor in purpose and authenticity.” Ms. Fermin said, “They seek meaning beyond what’s [on] the surface. They’re disillusioned when it comes to false information or empty words.”

Drawing on its study’s findings, Acumen came up with ways for businesses to effectively engage centennials. “As leaders, if we want to attract, manage, retain and draw out their full potential, we must first strive to have intergenerational understanding within the work environment,” Ms. Fermin said. In addition, when teaching and coaching, “leaders will have to adapt to their worldview and baseline in order… to effectively build the necessary on-the-job capabilities,” Ms. Fermin said.

Acumen also recommends that businesses be digitally enabled and their workflows re-configured. They ought to support work-life unity to retain Gen Z talent, too. Centennials, Ms. Fermin said, “expect seamless, frictionless fusion of personal passions, priorities and professional growth.”

Gen Zers are moving into the workplace at a time when businesses are embracing automation and artificial intelligence, which has raised fears about widespread job losses and questions about what skills new and old workers should learn to survive and thrive in an automated work environment. At the same BusinessWorld conference, Kristine Romano, Philippine managing partner of McKinsey & Co., said artificial intelligence and automation will change how we work.

In her presentation, she noted that some activities are more automatable than others. For instance, 78% of predictable physical work (e.g. welding and soldering on an assembly line and packaging objects) is automatable, while only 25% of unpredictable physical work (e.g. construction and raising outdoor animals) is automatable. Work activities that are less susceptible to automation include ones that involve stakeholder interaction, applying expertise and managing others. “On average, six out of 10 jobs have at least 30% of work activities that can be automated,” Ms. Romano said.

“Because so much of the tasks in the workplace will be automated, it becomes even more important for employees to hone their critical thinking and complex problem-solving skills,” as well as “[j]udgment and decision-making, creativity, ability to work with others, emotional intelligence — human skills and skills which for the moment humans are still better at than machines,” Rizalina Mantaring, president of the Management Association of the Philippines, told BusinessWorld in an e-mail.

For the vast majority of the centennials that are still studying, educational institutions play a critical role in helping them develop the skills they will need when they transition to an increasingly automated work environment. “Much of what we learn today will be obsolete in five years. Students should also be prepared for a lifetime of continuous learning, hence the most important thing students may get out of their education is to learn how to learn,” Ms. Mantaring said.

For the Gen Zers that have just entered the workforce and their co-workers that belong to older generations, it will be wise to invest in learning new skills. “The key is lifelong learning, to be able to cope as the world changes,” Ms. Mantaring said.

Ms. Mantaring said that companies will need to retrain their employees through programs that can be done in-house or in partnership with specialist or training institutions. But she noted that skills don’t get “baked in” until they are applied, so it will also be important for companies to provide their employees with opportunities to participate in projects or new initiatives. “Companies can help allay fears of job displacement by proactively retraining at-risk employees for new roles, although there is a limit to how many can be retrained and how much retraining can be done,” she added.

Even high-ranking people in any organization affected by automation will have to upskill. Ms. Mantaring, who also chairs Sun Life Financial Philippine Holding Co., Inc., said businesses of the future will need so-called “super managers” who are empathetic, skilled at mentoring, creative innovators and data-driven decision makers.

“Complex problem-solving, critical thinking, creativity and people management will perhaps be the most important skills as the routine administration work which makes up more than half a typical manager’s tasks will be left to machines. Business leaders need to be able to envision the future, and for this they need a deeper understanding of the technologies driving their businesses — artificial intelligence and data analytics are probably basic now. They need to be able to make that leap to see how technologies disrupting other industries can be applied to their own,” Ms. Mantaring said. – FATV

BPI pursues digital financial inclusion for Filipinos

Financial inclusion has long been a goal of the Bank of the Philippine Islands (BPI). But only recently has the Bank imbued this pursuit with a conspicuously digital twist.

BPI President and CEO Cezar P. Consing said BPI’s digital transformation efforts are founded on the idea of serving as many Filipinos as possible, including the underserved and unbanked Filipinos across the nation.

He said it is not only about ramping up investments in technology over the next few years, but, more significantly, increasing access to a wide range of financial products and services for every Filipino.

“Digitalization will make financial inclusion truly sustainable. Because digitalization reduces the cost to serve, it will allow us to bank a much greater proportion of the population, including those who may not have the means to leave a lot of money in their deposit accounts,” Consing added.

In this narrative of digital financial inclusion, BPI is increasing its focus on the lower-middle and lower-income consumer segments, which are growing at a very fast rate. These segments require affordable and accessible banking services. BPI uses its microfinance arm, BPI Direct BanKo, Inc. (BanKo), to serve them.

BanKo promotes financial inclusion primarily by serving self-employed micro-entrepreneurs (SEMEs). The Bank provides SEMEs with affordable and appropriate products and empowers its clients with financial advice and solutions that promote the growth and expansion of their enterprises.

Launched in 2017, BanKo makes loans to SEMEs, such as a stall operator in a public market, a beauty salon operator, and a neighborhood bakery. In its two years of operations, BanKo has already made over Php 4 billion in loans to almost 60,000 micro-entrepreneurs.

“BanKo has already made a significant impact on the lives of thousands of Filipino micro-entrepreneurs who previously had limited financing options. And BanKo was specifically created for that, for a greater purpose—to contribute to the nation’s prosperity by reaching out to a wider sector of the population,” said Mr. Consing.

BanKo will have 300 branches by end-2019. At the same time, BanKo will be the first digitalized bank in the country truly focused on financial inclusion, with a robust, secure, agile, and scalable cloud-enabled system that supports basic loans, deposits and mobile wallets, and which provides access to digital channels and payments. In addition, BanKo clients can access their accounts through 1,700 partner agencies.

“BanKo is being fitted with full digital capabilities. It will be a good example of the marriage of branch and digital, and the marriage of digitalization and financial inclusion,” he added.

Increased Engagement

For its clients, the bank’s digital transformation journey has already resulted in the launch of the next generation of the BPI Online and BPI Mobile app. The latest platforms allow for funds to be transferred via the use of a QR code and feature the use of one-time PINs for security. The growth of active users of BPI Online and BPI Mobile makes BPI the bank with possibly the highest digital adoption rate in terms of number of users.

“Digitalization will empower our clients, as they will be able to bank with us at any time wherever they may be, and in a manner that addresses their particular requirements,” said Consing.

But in promoting financial inclusion, the Bank also recognizes the fact that it also needs to include clients who would rather be served in the branches.

Hence, there is a need to balance the Bank’s presence in the digital space and its physical branches. So as the Bank continues to build its digital presence, it is also expanding its physical presence in a strategic way. This means increasing the branch count for BPI and its subsidiaries – BPI Family Savings Bank and BanKo.

“We want to reach more Filipinos. Digitalization will be the key to this initiative, but branch banking will remain essential,” Consing said.

Strengthening the legacy of BusinessWorld

By Bjorn Biel M. Beltran, Special Features Writer

AS THE WORLD continues to face disruption due to the dogged pace of innovation and technology, uncertainty has become the only certain thing in business. Longstanding institutions like the retail and hospitality industries are being transplanted by tech giants like Amazon and AirBnB, while industries such as media are struggling to adapt in an era of hyper-connectivity and information.

Yet, despite the turbulent landscape, BusinessWorld, the Philippines’ oldest business newspaper founded on July 27, 1987 by the late respected journalist Raul L. Locsin, has further cemented its position as the most trusted source of news, analysis, and insights by the country’s business community.

The newspaper has mostly achieved this by holding true to its purpose of serving its readers with reliable, accurate coverage of the news and issues relevant to the Philippine business landscape.

Miguel G. Belmonte, president and chief executive officer of BusinessWorld, said in an interview that the company made certain key adjustments to its business model to secure its development in this new environment. Much of how the newspaper delivered its reportage, however, remains the same.

“We have very high respect for our editorial team. We did not put any or much effort there or make changes in that department. But we realized, with all the challenges the newspaper and the publishing industry has been facing lately, for the past two years, that we really have to make some changes to our approach or strategy when it comes to advertising,” Mr. Belmonte said.

Since assuming control of the company, media conglomerate Mediaquest Holdings, Inc. issued a number of personnel and leadership changes aimed at ensuring BusinessWorld’s future. Such changes have been largely successful, with the past three years of the paper’s circulation showing positive profits.

“I think that’s one of the biggest accomplishments that we’ve managed here in BusinessWorld since joining the company. But the paper itself, the product itself still continues to be what I believe what it was already when we joined the company. So we’re just continuing its tradition and legacy [of integrity and excellence],” Mr. Belmonte added.

Through the expansion of its online component, www.bworldonline.com, and the launch of SparkUp, a platform catered towards startups and young entrepreneurs, BusinessWorld is also building on that legacy by delivering its signature brand of news and insight to new audiences.

Offering a new way to get insights from experts and to connect with the Philippine startup community, BusinessWorld aims to reach out to the generation shaped by the digital era through relevant targeted content in a multimedia platform designed for the next generation of businessmen.

Perhaps the most successful of the company’s new initiatives, however, is its introduction of the BusinessWorld Economic Forum, which is held annually since 2016.

“When we launched our Economic Forum three years ago, it has placed BusinessWorld at the forefront of the business community,” BusinessWorld Executive Vice-President Lucien C. Dy Tioco said in an interview.

Mr. Dy Tioco said that as emerging technology such as artificial intelligence, automation, blockchain, and the like continue to disrupt and transform the global landscape, there is a notable lack of authority with regards to how businesses should proceed into the future.

Digital transformation, he said, brought about a tidal wave that left everyone gasping for breath. Even before anyone could recover and find solid ground, a new wave of change comes in and sweeps them away again. A reputable, trustworthy voice is needed to serve as the buoy from which companies could get their bearings.

“Everyone is busy undergoing digital transformation. Everyone is still studying and trying to embrace what and how things have changed. And it’s not an easy route, going from how you were, from a traditional business to a digital one while trying to understand a digital audience. It’s like going back to the drawing board,” Mr. Dy Tioco said.

“Everyone is really on the learning curve, especially in the business community. The Economic Forum enables BusinessWorld to be at the forefront of that curve, because we come from a credible standpoint. So organizing events like this solidifies our status as a reliable business source, and increases our relevance in the changing landscape,” he added.

On its fourth year, the BusinessWorld Economic Forum has become the country’s most anticipated event for gathering thought leaders, industry experts, business executives, government policymakers, innovators, academicians, technology providers and more to discuss the myriad realities and concerns that are transforming the landscape of Philippine business. This year, more than 700 participants came together to explore the theme, “The Future of Business: Next-Wave Disruptions & Opportunities”, highlighting the promises and dangers of technology and how these will impact businesses over the next 10 years.

BusinessWorld has also expanded the reach of its conferences and fora by tackling important and timely topics through the BusinessWorld Cybersecurity Forum, the BusinessWorld Stock Market Roundtable, and the upcoming BusinessWorld Industry 4.0 Summit.

“That will be the thrust of BusinessWorld. In terms of trying to help the business community and the economy, how to ensure that in the next 10 years, as the newer technologies come in, we’ll do our best to equip everyone with all the relevant knowledge: about the newer technologies, the impact of these technologies, how it’s going to affect our daily lives, and how it’s really going to change how we do business,” Mr. Dy Tioco said.

Such initiatives serve only to strengthen the legacy of what BusinessWorld has built throughout its 32-year history. Since its foundation in 1987, BusinessWorld has clung to its tenets of integrity and quality in all its content. It is through those same pillars that the company aims to move forward into the future.

As the world continues to evolve into the digital age and people all over the globe are awash in a deluge of information, quality reporting only becomes more valuable. Roby A. Alampay, BusinessWorld’s editor-in-chief, once said in an interview that it is the job of the news industry to give the people the tools to analyze information and to help them understand their place, especially in today’s changing world.

In an age where Filipinos have become reliant on social media websites like Facebook and Twitter to get their news, newspapers have become secondary. As primary sources such as government websites and official proclamations are easily accessible, publications in the news industry must find new ways of providing value to their readers.

Mr. Alampay believes that in essence, the needs of BusinessWorld’s readers have not changed with the times. Despite the sweeping changes to how readers get their news, he said, the value of understanding business, economics, and even politics, has not faded away.

“[The changing times] force the news business to go more into analysis, to go more into understanding the bigger picture, to try and paint a bigger image for everyone,” he said.

“Facilitating more engagement between the audience, and the sources, and the news organization itself. That’s what’s changing all of us.”

Even with the introduction of events like the BusinessWorld Economic Forum, and the expansion of BusinessWorld’s online presence through its website and SparkUp, facing the future remains undoubtedly a challenging prospect. But it is a challenge that the company will gladly face.

“The challenge makes us excited, I always say,” Mr. Belmonte said. “The challenge is one of the things that makes our blood circulate. And otherwise, the job would be quite boring.”

SparkUp levels up

IN 2017, BusinessWorld Publishing Corporation launched SparkUp, a multimedia platform designed for business-minded millennials. Since then, SparkUp has established itself as a go-to source for stories about trending, novel and promising business concepts, fascinating profiles of start-ups and their founders, and tips for many young and would-be entrepreneurs.

SparkUp has now begun catering to a broader audience as a news and knowledge-sharing hub for the Philippine start-up community: millennials who run their own businesses or are planning to put up one to older start-up founders to investors and venture capitalists to the demographic cohort that comes after the millennials, also known as Generation Z.

This shift was driven to a large extent by the scant attention traditional media generally pays to the dynamic local start-up scene.

“The start-up community is an underserved community. While there are many start-ups springing from different parts of the country, there’s no singular platform they can refer to,” said Lucien C. Dy Tioco,BusinessWorld executive vice-president, who conceived SparkUp.

The initiative to reposition SparkUp came from its new editor, Santiago J. Arnaiz. “We realized that there was a big opportunity to be a hyperlocal publication that caters to Filipino start-ups,” he said.

Adopting the identity of “a news and knowledge-sharing hub for the Philippine start-up community,” he noted, “turns SparkUp into what it really was supposed to be, which is a platform to inspire, inform, and educate.”

Both the old and new readers of SparkUp can expect the same high quality of reportage that the platform has come to be known for. And though it’s become more start-up-focused, SparkUp continues to publish other business stories from which readers can draw insights they can apply in their own fields. One of the most read articles published on its Web site this year, “BTS’ Bangtan Universe and the power of transmedia storytelling,” is primarily about marketing.

And the diversity of forms that the published pieces take is something readers can always enjoy: hard news about the latest and the hottest in the start-up scene; profiles of noteworthy start-ups; listicles; long-form articles taking an in-depth look at weighty topics; explainers on trending and evergreen subjects; posts written by contributors; case studies, and more. (All the best articles published on SparkUp’s Web site are compiled into a print magazine that comes out biannually. The issues also contain exclusive content.)

The platform is also exploring the possibility of assembling comprehensive, searchable, and sortable databases of start-ups and their founders, investors and grant providers, which will no doubt come in handy for the casual and regular visitors to its Web site.

SparkUp will also be more video-centric, documenting start-up events and workshops in particular. “Video is a big part of our editorial push,” Mr. Arnaiz said. Podcasts are also being produced in collaboration with several SparkUp partners, he added.

In addition to publishing engaging stories, SparkUp stages events that bring together its readers and notable figures not only in the local start-up community but in other fields as well.

One of these events is the Spark Series, a string of seminars conducted in different universities in Metro Manila during an academic year. It features different industry experts who give students new insights into topics that matter to them. The theme for this year’s Spark Series is “Imagining the Future of Work.”

SparkUp Summit is the platform’s flagship event held annually. It’s a whole-day conference on ideation, entrepreneurship, and innovation, featuring motivational keynote speeches and thought-provoking and insightful panel discussions. The second SparkUp Summit will be held later this year.

A new series of intimate gatherings for the start-up community is being cooked up by SparkUp, and it’s called SparkUp Convos. “It will hook up start-ups with venture capitalists,” Mr. Dy Tioco said.

SparkUp Convos, which will soon be rolled out, is envisioned to be a platform where guests can have free-flowing conversations, share ideas, network, and start building partnerships and projects. Each session will be industry-specific; the first three sessions are about food and beverage, technology, and retail.

SparkUp, Mr. Arnaiz said, will try to keep growing as the needs of the local start-up community change. “We want to be as dynamic as the forces that drive the start-up community forward,” he said. “We’re trying to stay as close as possible to our community, have as many grassroots connections as possible, so that we feel the shift of needs as soon as it happens. We want to be able to respond. We want to be dynamic in that way.”

He continued, “Readers can look forward to a dynamic platform that’s up to date in terms of the news cycle, that is constantly innovating in terms of ways it can educate and share knowledge.” — FATV

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