Education and the Technology Economy
Using an Educated Workforce to Create a Philippine Silicon Valley
November 6, 2015
Primary article contributor – Nick Avis
Team Leader following the Philippines – Cameron Torrens
Keywords: Philippines, Philippine Silicon Valley, Educated Workforce, Technology Economy, Venture Capitalists, Outsourcing.
In recent history a significant portion of the Philippine economy has relied on call centres. Lately, the Philippines have been shifting from being a recipient of technology outsourcing to fostering entrepreneurship. Educational institutions and government initiatives are preparing a highly competitive entrepreneurial class ready to establish the Philippines as a technology hub, making the Philippines a source of new talent and investments for businesses.
The Philippines is now estimated to graduate 130,000 students each year with technology and engineering degrees. Many of these students want more than a job in a call centre, but because of the lack of positions an increasing number of graduates are becoming technology entrepreneurs (“technopreneurs”). Investors are starting to notice the potential of young Filipino graduates. One California microchip company, BiTMicro Networks, helped create the Bruce Institute of Technology (BIT) in 2011 to train workers for a growing technology sector. In 2015, the Philippine Government partnered with IdeaSpace Foundation, a non-profit technology incubator, to form an innovation centre with the objective of creating a Philippine Silicon Valley.
Increasingly educated Philippine workers are generally a benefit for the Philippine economy. Higher education, however, does pose a threat to companies already present in the technology sector because these educated workers tend to have a high focus on entrepreneurship. As more entrepreneurs create more start-ups, existing companies are faced with more competition. The risk that entrepreneurship poses, however, is relatively moderate because many of these start-ups are unable to acquire outside funding. Venture capital firms are estimated to have injected only $20MM in the Philippines in 2006 (the only year on which there is data), leaving 61% of start-ups rely on the founder to provide capital. Overall, there are few venture capital firms that currently invest in the Philippines, but that is slowly changing.
In the event that start-ups overcome financing challenges, established businesses can mitigate the risk they pose through two key methods. Firstly, companies should consider investing in or acquiring start-ups. This has the benefit of eliminating competition. Secondly, companies need to improve their human capital and hire more educated graduates, the same people who might otherwise become entrepreneurs. With improved talent, established businesses have the potential to evolve to better compete in the changing economy.
In summary, an educated workforce is creating a changing technology sector in the Philippines. Given enough time, the Philippines may be able to produce its own Silicon Valley. Established companies in the technology sector, however, need to be attentive to ensure they can remain competitive in this changing landscape.
