Potential Business Models for the Delivery of Internet-Based Information Services to Micro and Small Enterprises in the Philippi

Potential Business Models for the Delivery of Internet-Based Information Services to Micro and Small Enterprises in the Philippines Potential Business Models for the Delivery of Internet- Based Information Services to Micro and Small Enterprises in the Philippines

Ronald T. Chua

with contributions by Alexandra Overy Miehlbradt

Development Alternatives, Inc.

June 1999

This work was supported by the U.S. Agency for International Development, Bureau for Global Programs, Center for Economic Growth and Agricultural Development, Office of Microenterprise Development, through funding to the Microenterprise Best Practices (MBP) Project, contract number PCE-0406-C-00-96-6004-00. Ronald T. Chua is a professor of the Asian Institute of Management (AIM), an international graduate management school based in Manila, Philippines. Prof. Chua teaches entrepreneurship in AIM’s Master in Business Management Degree Program. He also offers various courses in microfinance and social entrepreneurship. Building on his field-based research, he regularly conducts public courses in microfinance for practitioners. He leads the Philippine training team under the Consultative Group to Assist the Poorest's (CGAP) Asian microfinance capability building initiative. Prof. Chua's research includes work on Philippine microenterprises, microfinance institution performance, and impact. He is co-author of “Transaction Costs of Lending to the Poor,” published by the Foundation for Development Cooperation in Australia. He has conducted studies for the Asian Development Bank, Australian Agency for International Development, the International Labour Organization, and the German Agency for Technical Cooperation. Prof. Chua has provided consultancy in post-employment entrepreneurship development programs for big private corporations undergoing organizational restructuring in the Philippines.

Alexandra Overy Miehlbradt is a consultant in microenterprise development currently based in Colombo, Sri Lanka. She has over five years of field-based experience in the design, management, technical development and evaluation of business development services programs for microentrepreneurs, principally in South East Asia. Prior to becoming a consultant she spent four years with Save the Children as a technical advisor based in the Philippines. In this role, she helped the organization develop its global BDS strategy focused on women microentrepreneurs. Ms. Miehlbradt has a Master’s Degree in Public Policy from the Kennedy School at Harvard University, a B.S. in Management from the Wharton School of Business and a B.A. in International Development from the University of Pennsylvania. i

ACKNOWLEDGMENTS

The authors of this series of reports would like to extend many thanks to Marshall Bear for his work, guidance, and encouragement throughout the conception, implementation, analysis, writing, and editing of the study. Together with Clifton Barton, Mr. Bear was the driving force behind the study and helped us every step of the way. The authors also owe a debt of gratitude to Dr. Ned Roberto from the Asian Institute of Management, the marketing specialist for the study, who guided the marketing research aspects of the study from start to finish. Thanks also are due to AV Research, which carried out the survey and tabulation for its work and patience during the many phases of the survey. Acknowledgments are due to Manolita Gonzales, Luzviminda Villanueva, and Maurino Bolante who provided research assistance for the Laguna SeCen and Internet models case studies. The authors are also very grateful to all the representatives from MSEs who gave their time to answer the survey questionnaires.

Thanks to the managers and staff of the RCPI/Bayantel Public Calling Office in Southern Mindanao for their time and help with the survey. Particular thanks are also due to the RCPI/Bayantel national management of the PCOs for agreeing to serve as a case study and for its support of the information gathering. Thanks to the management and staff of the Laguna Small and Medium Enterprise Service Center, the leadership of the Laguna Chamber of Commerce and Industry, the heads of the Chamber sectoral associations, and SwissContact for their time and help in the Laguna SeCen case study. Thanks to the management of ASSIST, the Philippine Chamber of Commerce and Industry, the Philippine Export Board, and the APEC Center for Technology Exchange and Training for SMEs for their time in providing the information used in the Internet models case. Thanks to the cellular phone company managers and the staff of the Department of Trade and Industry in Southern Mindanao for their help in gathering information. Thanks also to Hunter Consulting for its work in quantifying the opportunities for MSEs in the telecommunications industry.

The authors gratefully acknowledge the suggestions and support from Robin Young of Development Alternatives Inc. (DAI), and Kate McKee and Anicca Jansen of the U.S. Agency for International Development. Thanks to MBP staffers Nhu-An Tran for the help with editing and formatting the papers and Matt Buzby for his administrative support for the study.

Lastly, thanks to our families who patiently and enthusiastically supported us throughout the work on this study.

Although there was help and guidance from these sources, the authors accept responsibility for the design, implementation, and analysis of the study as well as any shortcomings or errors therein. ii iii

TABLE OF CONTENTS

EXECUTIVE SUMMARY ix

CHAPTER ONE OVERVIEW OF THE STUDY 1 MBP STUDY HYPOTHESIS...... 1 KEY RESEARCH QUESTIONS ...... 2 RESEARCH DESIGN...... 3 GUIDE TO THE PAPERS...... 5 Synthesis Paper...... 5 Case Studies of Bayantel PCOs and the Laguna SME Service Center ...... 6 Internet-Based Information Services ...... 6 METHODOLOGY ...... 8

CHAPTER TWO THE MARKET FOR INFORMATION SERVICES IN THE PHILIPPINES 9 CONSUMER DATA ON DEMAND FOR INFORMATION SERVICES...... 9 THE SUPPLY OF INFORMATION SERVICES FOR MSES...... 11

CHAPTER THREE PROFILES OF INTERNET-BASED MODELS FOR INFORMATION SERVICES 15 ASSIST—EASIBOARD...... 15 Institutional Background...... 15 Products and Services...... 15 Issues and Findings...... 17 PHILIPPINE CHAMBER OF COMMERCE AND INDUSTRY ...... 18 Institutional Background...... 18 Products and Services...... 18 Issues and Findings...... 20 PHILIPPINE EXPORTERS CONFEDERATION ...... 20 Institutional Background...... 20 Products and Services...... 21 Issues and Findings...... 22 APEC CENTER FOR TECHNOLOGY EXCHANGE AND TRAINING FOR SMEs ...... 23 Institutional Background...... 23 Products and Services...... 23 Issues and Findings...... 25

CHAPTER FOUR A MODEL FOR INFORMATION BROKERING 27 iv v

LIST OF FIGURES AND TABLES

Figure

1 Defining Information Needs by Type of Enterprise...... 11

2 ASSIST EASIBoard Internet Model ...... 16

3 PCCI Business Link Model...... 19

4 ACTETSME Information Exchange Framework ...... 24

5 Information Flow for an Information Service Provider...... 28 vi vii

LIST OF ACRONYMS

ACTETSME APEC Center for Technology Exchange and Training for SMEs APEC Asian Pacific Economic Cooperation ASSIST Agricultural Statistics and Marketing Information Services BAS Bureau of Agricultural Statistics BDS Business Development Services CSO Civil Society Organization EASIBoard Easy Access to Statistical Information Bulletin Board GTH Gifts, Toys, and Housewares ICT Information and Communication Technology ISP Internet Service Provider MBC Mindanao Business Council MBL Mindanao Business Link MSE Micro and Small Enterprise NFA National Food Authority NMDMS National Membership Database Management System NSCB National Statistics Coordination Board NSO National Statistics Office PCO Public Calling Office PCCI Philippine Chamber of Commerce and Industry PHILEXPORT Philippine Exporters Confederation PSA Philippine Statistical Association SeCen Service Center SME Small and Medium-Sized Enterprise SWOT Strengths, Weaknesses, Opportunities, and Threats USAID United States Agency for International Development ZDH Zentralverband des Deutschen Handwerks (German Confederation of Small Business and Skilled Crafts)

EXECUTIVE SUMMARY

BACKGROUND ON MBP RESEARCH

New information and communication technologies (ICTs) are rapidly transforming business practices in many parts of the world. In industrialized countries, new ICT developments are altering internal operations of companies, as well as external relationships with buyers, suppliers, and customers. They are producing fundamental changes in the ways in which marketing and distribution networks function. They also are giving rise to new types of business services and changing the ways in which firms access and use existing services.

This study of Internet-based information services is one of a series of papers published by the Microenterprise Best Practices (MBP) Project on the subject of ICT. There are two key reasons for MBP’s research initiative on the provision of ICT services to micro and small enterprises (MSEs):

1. ICT services could be a critical and crosscutting tool for MSE development. The hypothesis here is that communications, like microfinance, is a basic commodity service that is needed and demanded by a broad range of MSEs, and thus can be delivered at the same level of scale and outreach as microfinance.

2. Examining the provision of ICT services to MSEs could provide lessons to the BDS field on how to commercialize other business services.

DEMAND AND SUPPLY OF INFORMATION SERVICES IN THE PHILIPPINES

This study examines the potential for using modern information and communication technologies to provide marketable information services to MSEs. Consumer data on the demand for information services showed a low awareness and usage of Internet access services by MSEs. Nevertheless, there appears to be potential market demand for information services that could make use of the Internet. When presented with the benefits of gaining information on suppliers, buyers, and competitors, respondents to the surveys (conducted as part of the MBP series of papers) indicated that they would be interested in buying the service.

Those MSEs that were interested represent the higher end of the MSE spectrum in terms of size and sales. Moreover, mainly growth-oriented MSEs and those involved in manufacturing are interested in information services. A possible reason is that these MSEs have gone beyond day-to-day business survival and can focus on business development, particularly on identifying new markets, better suppliers, and new technologies.

The type and quality of information demanded also vary with the enterprise’s scale of operations. Enterprises operating within a larger geographic scope with a larger production or service capacity, or operating in multiple locations, may need more broad and macro data x compared with an enterprise serving the local economy. A large enterprise has both the need and capacity to interpret a variety of information, whereas a small enterprise will need information to be processed to be understandable and useful.

Very few Philippine business development service providers use Internet-based models to provide services to MSEs. The four institutions profiled in this study use the Internet, but their reach to MSEs remains limited. Government and nonprofit institutions interested in using the Internet to assist businesses are focusing on establishing the technological and human infrastructure needed for connectivity and sharing information among organizations. It is unlikely that the private sector will develop appropriate information services for MSEs in the short term because the market for information services from larger businesses is growing fast and is arguably easier to supply.

MODELS OF INTERNET-BASED INFORMATION SERVICES

Four institutions in the Philippines are profiled in this study. Each model is analyzed for its potential to reach MSEs with marketable Internet-based information services.

Agricultural Statistics and Marketing Information Services Project

In 1995, the Agricultural Statistics and Marketing Information Services Project (ASSIST) established EASIBoard (Easy Access to Statistical Information Bulletin Board) to provide the business community with easy access to on-line news, research, and business information through an information databank. The organization focuses on big agribusiness firms because these businesses tend to be among the first to recognize the importance of information and they are usually equipped with the latest computer hardware and software, as well as Internet access.

A key stumbling block for EASIBoard in reaching MSEs is that ASSIST relies mainly on the Internet for making services available to customers and for advertising. ASSIST has no outlets that are accessible and attractive to MSEs, and no way to promote its product with MSEs. In addition, most of EASIBoard’s information is macro in nature—national and regional statistics—rather than the specific data demanded by MSEs.

Philippine Chamber of Commerce and Industry

The Philippines Chamber of Commerce and Industry (PCCI) is a member-based, nonprofit, nongovernmental organization of business enterprises. PCCI is developing a business link system that will serve as the backbone for Internet/network access to members in remote areas. Members would have access to computers and the Internet through common service facilities in provincial centers or PCCI offices. Database products of this business link system include a computerized product catalogue, a membership mailing system, a documentation center, and virtual trading services through e-commerce. xi

Although it is too soon to evaluate performance and outreach to MSEs, the model does have several features that could be attractive to MSEs. The membership database could provide the type of specific business matching services that would be useful to MSEs—for example, finding new buyers and suppliers even in a limited geographic area and local economy. The local chambers provide a network of outlets accessible to MSEs. Local chambers may have the capacity to raise MSE awareness about available services and provide easy access to the information from the system in a user-friendly form, rather than just access to hardware.

Philippine Exporters Confederation

The Philippine Exporters Confederation (PHILEXPORT) is the largest organization of exporters in the Philippines, with 3,000 members and 38 affiliated industry associations. The organization’s Internet-based services to members, non-members, and prospective buyers include product advertising, e-mail, Internet access, processing inquiries, and website subscriptions for buyers.

PHILEXPORT’s services have the potential to be very useful to small exporters. However, demand is low. PHILEXPORT attributes this to a low level of awareness of the Internet and its potential. Even though PHILEXPORT offers subsidized rates for member services, small businesses do not yet see the need to purchase such services. In addition, these services still suffer from some inefficiency, and this inhibits their marketability. However, the advertising services have the potential to offer small exporters valuable exposure to foreign buyers at a reasonable price. PHILEXPORT’s services are not appropriate for microenterprises because they do not export directly.

Asia Pacific Economic Cooperation Center for Technology Exchange and Training for SMEs

The Asia Pacific Economic Cooperation (APEC) Center for Technology Exchange and Training for SMEs (ACTETSME) is the electronic vehicle of the APEC Network for Small and Medium-Sized Enterprises (SMEs). It is meant to serve as a central broker of information on technologies, markets, human resource development, and productivity of SMEs in the Asia Pacific region. Each APEC member country contains “focal points” to provide information about SMEs to the network and to facilitate the flow of information from ACTETSME to SMEs. The main medium for information exchange is through the ACTETSME website, which SMEs can access through the Internet facilities of the focal point institutions. In the Philippines, there are six focal points.

The ACTETSME model appears to have the potential for reaching SMEs with relevant, preprocessed information. However, it is too early to say whether the focal points will be able to successfully reach significant numbers of SMEs and whether their personnel have the skills to promote the service and to locate and package information for SMEs and even MSEs. xii

CONCLUSION

If information services are to be provided to MSEs appropriately, the services must provide processed information that customers demand in a timely way. To do this well, an information provider must have sufficient personnel of reasonable skills to locate needed information and package it in a user-friendly manner, either verbally or in writing. Consequently, personnel costs would be higher and volumes lower than for a telecommunications business. A business-focused organization such as a chamber of commerce and industry, or a business-focused nongovernmental organization might make the best service provider. This organization either could source information directly from the Internet or could work through other more specialized information providers such as those profiled above.

As Internet-based services are currently focused on larger enterprises, it is likely that the market will need a jump start from donors to start supplying to MSEs. The results of this study show that there is potential for building this market. Both demand and supply exist, although they are weak. Donors might, for example, subsidize the initial costs of raising awareness, which are likely to be the most significant investment needed to build a market. Donors also might help providers refocus their services to meet the demand for service features from MSEs. These two efforts would start to bring the demand and supply of Internet-based services closer together. 1

CHAPTER ONE OVERVIEW OF THE STUDY

“Revolutions in communication have often been at the center of changes in society.”1

In many developing countries, ICTs are beginning to open up a range of new possibilities for supporting business development efforts, including those geared to the needs of micro and small enterprises (MSEs).2 ICT developments are giving rise to new types and combinations of business services that appear to be both effective, from the customers’ point of view, and financially viable, from the suppliers’ perspective.

MBP STUDY HYPOTHESIS

The Microenterprise Best Practices (MBP) Project3 decided to study the provision of ICT services for MSEs for two key reasons:

1. Researchers hypothesized that ICT services could be a critical and crosscutting tool for MSE development.

In the last several years, many practitioners have been designing custom business development services for different types and subsectors of MSEs. The hypothesis of this study was that ICT services, like microfinance services, are both needed and demanded by a broad range of MSEs. The development of appropriate ICT services could function as an effective tool for MSE promotion in a variety of circumstances for a wide range of MSEs. There are several parallels between microfinance and ICT that point toward this possibility:

1 World Bank, World Development Report, 1998, p. 56. 2 In the study, MSEs were defined as those enterprises employing 25 or fewer workers, including family members. The number of workers was used as an indicator of business size because of the expected difficulty in estimating business assets, particularly for micro and small enterprises. 3 Microenterprise Best Practices (MBP) is a USAID-funded global research project managed by Development Alternatives, Inc. (DAI), Bethesda, Maryland.

Chapter Two—The Market for Information Services in the Philippines 2

§ Communications, like microfinance, is a commodity service with multiple users and end uses. All businesses small and large must communicate with suppliers and customers. Communications, like microfinance, also has a range of uses for individuals. Growth in delivering customer-oriented microfinancial services increased when providers pursued a mass market appeal. This also appears to be the case for ICT services.

§ Microfinance institutions provide a basic service that customers are willing to pay for. Like microfinance, communications is a basic service; the benefits of increased access and availability are dependent on the end user. Communications may lend itself to the levels of outreach and commercialization that microfinance enjoys.

§ Like finance, ICT tended to reach populations and markets that were more profitable, while more remote, poorer areas were not getting access. Recently, technology developments have driven the costs of delivering ICT services down substantially, and many governments have deregulated ICT markets, which has increased competition. This study aims to determine whether these developments could open up access to ICT services for more MSEs.

2. Researchers expected that looking at the provision of ICT services to MSEs could provide lessons to the business development services (BDS) field on how to commercialize other business services.

Increasingly, donors and practitioners are looking toward commercialization of BDS and the development of BDS markets as key strategies for sustainably reaching large numbers of MSEs with the business services they want. There are cases of some types of ICT services being successfully provided to MSEs on a large scale and on a commercially sustainable basis, particularly in the private sector. These cases can provide lessons for how to sustainably reach MSEs with other business services. Most businesses cannot generate sufficient revenues from a single service, so they offer a mix of services. By analyzing how private sector and nongovernmental organization (NGO) suppliers determine their service mix and adjust it over time, we can learn how suppliers survive and grow in changing markets. By looking at a service in demand and learning how ICT suppliers stimulate demand for additional, related services, we can learn how the private sector builds demand for services.

KEY RESEARCH QUESTIONS

This series of papers seeks to address the above two issues by examining the Philippine experience in the provision of basic and higher value-adding ICT-based business services to MSEs. The study examined the access, uses, and benefits of ICT-based business services delivered to MSEs by both private and not-for-profit service providers through a series of institutional case studies and accompanying consumer research.

Microenterprise Best Practices Development Alternatives, Inc. 3

Three key questions guided the case study research efforts:

§ How does telecommunications access affect the business operations of MSEs? The aim of this question was to determine if telecommunications services are a critical need for MSEs. Knowing the impact of telecommunications access to MSEs can help donors determine if these services should be a priority in MSE development programs.

§ What are viable business models for delivering ICT services to MSEs? The aim of this question was to determine how to promote the delivery of ICT services to MSEs on a commercially viable basis. The answers to this question provide donors and practitioners with lessons not only on how to deliver ICT services to MSEs but also how to commercialize other business services as well.

§ What are the emerging Internet-based models in use by business support institutions? The aim of this question was to determine if and how modern ICTs, specifically the Internet, can help practitioners to more effectively and sustainably deliver business services that MSEs demand. This information can help donors and practitioners determine if modern ICTs are a priority for MSE programs and how they might be used.

The ICT sectors in many developing countries are changing rapidly as governments attempt to leapfrog into the Information Age with modern systems. According to International Telecommunications Union estimates,4 the total value of telecommunication privatization between 1984 and 1996 was $158.5 billion, of which 53 percent, or $86 billion, was invested in the Asia Pacific region. Given the dynamic growth of this sector, this study also posed the question: What are the emerging business opportunities for MSEs as suppliers or supporters of basic communications and information services? The analysis of business opportunities for MSEs explains if and how the ICT industry in the Philippines is an investment opportunity for MSEs. This information can help donors and practitioners understand how MSEs can profit from the ICT revolution, not only as customers but also as providers.

RESEARCH DESIGN

The first two questions above are answered in the institutional case studies of two telecommunications service providers, Bayantel Public Calling Offices (PCOs) and the Laguna Small and Medium Enterprise Service Center (Laguna SeCen). The cases contrast Bayantel, a diversified private sector telecommunications company providing, among other services, basic telecommunications access through storefront “phone shops,” with the Laguna SeCen, a subsidized, technically supported, multiservice business center offering telecommunications and administrative services alongside a wide range of business development services for micro, small, and medium-sized enterprises (MSMEs).

The Bayantel PCOs were chosen for study because they are profitably providing basic telecommunications and related services to low-income people, including MSEs, throughout

4 ITU World Telecommunication Development Report, 1996/97.

Chapter Two—The Market for Information Services in the Philippines 4 the Philippines. This business model is reaching a large number of customers and is financially viable. An examination of the company shows why it has been successful in these two key business elements. Choosing a private sector model also offered the opportunity to learn more about providing services to MSEs when profit is the bottom line.

The Laguna SeCen was chosen for study because it embodies the “one-stop shop” model for MSE service provision. Studying the SeCen provided insights as to how the appropriate mix of services for this type of business model can be determined and how ICT services might fit within that mix. Having designated the SeCen as a profit center less than two years before the study, this organization is at a common point for NGOs in the provision of BDS: early in a drive to become more demand-led and sustainable. The study of this model enabled researchers to analyze common hurdles that NGOs face when they try to commercialize business services.

In the case studies, researchers assessed both the demand for and the supply of ICT services from these institutions. The demand analysis looked at current and potential customers’ awareness, use, satisfaction and benefits from a range of ICT services. The supply analysis consisted of a detailed examination of the two institutions: their business strategies, strengths, and weaknesses. Looking at demand and supply in the context of the overall market, the authors recommend a future direction for each of the institutions studied in delivering ICT services to MSEs.

These case studies are instructive for BDS practitioners or donors interested either in providing ICT services to MSEs specifically or in commercializing business services in general. Bayantel PCOs and the Laguna SeCen are facing the same issues as other business service providers around the world:

§ Who should be my target customers?

§ What should be my service mix?

§ What service features do MSEs want and how do I know?

§ How do I make my services more attractive than the competition?

§ How do I build my customer base?

§ How do I tailor my organization to sustainably, and even profitably, meet MSE demand for business services?

The case studies illustrate how each institution is answering these questions in a dynamic and changing market. The consumer research provides insights into how well each institution is succeeding and what changes they could make to be both more profitable and more effective in reaching their target MSE customers. The contrast between the two institutions provides

Microenterprise Best Practices Development Alternatives, Inc. 5 insights into how the private sector and NGOs often approach these questions differently. Donors or practitioners interested in developing BDS markets can find lessons in these different approaches on how to improve the effectiveness of both the private sector and NGOs in meeting MSE demand for services.

The third question above on Internet-based services is answered in a case study that profiles four Internet-based information service providers and analyzes the potential of these models to provide information services to MSEs. Although the study concludes that none of these providers is yet reaching MSEs on a significant scale or a sustainable basis, the analysis of their strengths and weaknesses shows why MSEs are not interested in their services and highlights some common mistakes that organizations make when offering modern ICT services to MSEs. The contrast of these organizations’ supply of Internet-based information services with the demand from MSEs for information services suggests ways that donors and practitioners could experiment with sustainable, demand-led, Internet-based information services for MSEs. This case study will be of particular interest to donors and practitioners interested in using modern ICTs in the delivery of business services to MSEs.

The question on investment opportunities for MSEs in the ICT industry is answered through an analysis of current MSE participation in the sector in one area of the Philippines, complemented by national level research on the ICT industry, its growth, and the emerging opportunities for MSEs. The analysis describes the various MSE business models currently operating in the ICT sector and estimates the number of MSEs nationally who currently operate each type of business. This information will be particularly useful to MSE programs interested in promoting business start-ups.

GUIDE TO THE PAPERS

Synthesis Paper

The synthesis paper presents an overview of the study findings. Chapter Two describes the context of the case studies. This enables the reader to understand the macroeconomic situation affecting consumers and the case study institutions and allows for comparison to other countries. Chapter Three summarizes the opportunities for MSEs in the ICT industry.

Chapters Four, Five, and Six address the key issues that guided the study. Chapter Four presents the highlights of the institutional case studies. It contrasts the two institutions’ strategies for building a customer base by comparing their clients, competitive situations, and marketing strategies. The chapter concludes with an overview strengths, weaknesses, opportunities, and threats (SWOT) analysis of each business model and recommendations for how new ICTs could contribute to each institution’s customer-building strategy.

Chapter Five answers the question, “What can the business models studied teach us about good practice in the commercialization of business development services?” The author outlines suggestions for how BDS providers, in either the private or NGO sectors, can assess demand for BDS from MSEs, choose an appropriate mix of services, determine a target

Chapter Two—The Market for Information Services in the Philippines 6 market, and tailor their organizations to meet demand. This chapter includes data from the study on the relative importance of different types of business services to MSEs. These data are particularly relevant to donors or practitioners starting new MSE programs.

Chapter Six addresses the question, “What should be the service mix and delivery mechanisms for the provision of ICT services to MSEs in the future?” The chapter suggests if and how both basic telecommunications services and higher value-adding ICT services can sustainably be offered to MSEs on a large scale. The chapter summarizes findings on the benefits to MSEs of telecommunications services and the demand for higher value-adding ICT services. In the chapter, the author proposes appropriate mixes of ICT services for providers and suggests what roles NGOs and donors could play in the promotion of ICT services for MSEs.

Case Studies of Bayantel PCOs and the Laguna SME Service Center

The case studies on the Bayantel PCOs and on the Laguna Small and Medium Enterprise Service Center provide details on each institution’s business strategy and customers. Each case study describes the institution’s background, services, customers, competition, business strategy, operational systems, and financial information.

The Bayantel PCOs case study includes the results of a survey of 100 MSE customers. The results show the kinds of MSEs that use PCOs, details on MSE awareness and usage of services at PCOs as well as ICT services from other providers, MSE satisfaction with services from PCOs, and the benefits that MSEs perceive from using telecommunications services.

The Laguna SeCen case study features the results of in-depth interviews with some of the SeCen’s customers and a survey of 100 MSEs in the surrounding town that represent the SeCen’s potential ICT service customers. The findings contrast the current customer demand for various business services with that of the potential customer pool for the expansion of ICT services.

Both case studies include results from consumer research on the potential demand for more modern ICT services, such as e-mail and Internet access. Based on a comparison of customer demand and the institutions’ supply of ICT services, the authors analyze each business model’s strengths, weaknesses, opportunities, and threats within the context of the market. The case studies conclude with recommendations for changes that would help the organizations expand their services.

Internet-Based Information Services

This study of Internet-based information service provision focuses on analyzing the market for Internet-based information services from MSEs in the Philippines. The study examines

Microenterprise Best Practices Development Alternatives, Inc. 7 the potential for using modern information and communication technologies to provide marketable information services to MSEs.

Chapter Two describes the nature of demand for Internet-based information services from MSEs based on the results of the consumer research surveys. This chapter also gives an overview of the use of the Internet by MSE support organizations and the provision of Internet-based information services in the Philippines.

Chapter Three profiles four institutions in the Philippines that use the Internet to provide information services to businesses: the Agricultural Statistics and Marketing Information Services Project (ASSIST), the Philippine Chamber of Commerce and Industry (PCCI), the Philippine Exporters Confederation (PHILEXPORT), and the Asia Pacific Economic Cooperation (APEC) Center for Technology Exchange and Training for SMEs (ACTETSME). In three cases, the institutions also get information about other businesses from the Internet. Each model is analyzed for its potential to reach MSEs with marketable Internet-based information services.

Chapter Four contrasts the features of information services supplied by the organizations profiled with what MSEs demand, based on the results of the consumer surveys. The authors conclude that none of the four business models is appropriate for delivering Internet-based information services to MSEs, and they propose an alternate model.

Specific objectives of the study of Internet-based models were to:

§ Describe networks of support organizations that use Internet access to provide broad- based services to MSEs;

§ Identify potential models for improving the ability of network members to provide services to MSEs;

§ Describe the institutional arrangements of these models; and

§ Explore the possibility of transforming current models into marketable services.

Specific questions asked of the case study institutions were:

§ Why does the organization/network think the Internet is a valuable tool to strengthen networks and provide services to MSEs?

§ What are priority content areas for translation into marketable services?

§ What are major constraints to the use of Internet-based models?

An attempt was made to identify organizations that met the criteria of being a network organization providing some services to MSEs with the help of the Internet. The search effort revealed, however, that very few business development network organizations use the

Chapter Two—The Market for Information Services in the Philippines 8

Internet to provide services to members. The few that do are relatively new entrants in the field. Some of them were still developing and test launching their services. Furthermore, their MSE reach has remained small. The models, therefore, are reviewed for their potential as business models rather than evaluated for their actual reach and services to MSEs. A review of the potential of e-commerce for MSEs is not part of the scope of this study.

METHODOLOGY

Demand for and benefits from ICT services were assessed using private sector consumer research tools. A survey of MSEs modeled on a marketing Usage, Attitude, and Image study was conducted to assess MSEs usage, behavior, and satisfaction with a range of ICT services and the impact of those services on their businesses. The survey included product concept tests for modern ICT services for which usage is currently low so that potential demand for these services could be gauged. Using private sector marketing research tools, the product concept tests introduced MSEs to the services and gathered feedback on their interest in purchasing them.5 Three hundred MSEs were surveyed, 100 from each of the case studies and 100 MSE cellular phone users.

The supply analysis was conducted through the two institutional case studies. Information was gathered through site visits, interviews with management at different levels, interviews with franchise owners in the case of the PCOs, interviews with other key persons, inspections of the competition, and examination of the organizations’ records to the extent possible. The models for the delivery of Internet-based information services were examined by interviewing the management of four business support organizations that use the Internet to provide services to businesses.

To determine the potential for MSEs as suppliers or supporters of ICT services, the study drew on information gathered from the Bayantel Public Calling Office case study and interviews with cellular phone company executives. A private sector market research firm that focuses on the telecommunications industry conducted complementary macro data research on business opportunities for MSEs.

To understand the context of the telecommunications industry, researchers relied on interviews with key informants in the industry and on various government and private publications. Interviews with representatives from key government agencies were conducted to understand the situation of MSEs in the Philippines. The interviews were supplemented with a review of government and private publications on MSEs in the Philippines.

5 For more information on these consumer research tools see the MBP publication “Technical Note: Using Market Research Tools for the Design and Improvement of Business Development Services” by Alexandra Overy Miehlbradt.

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CHAPTER TWO THE MARKET FOR INFORMATION SERVICES IN THE PHILIPPINES

CONSUMER DATA ON DEMAND FOR INFORMATION SERVICES

Consumer data were gathered through two surveys of MSEs conducted as part of this series of papers: one of Bayantel PCO customers in southern Mindanao6 and the other of registered MSEs in Calamba, Laguna.7 These surveys provided insight into the actual and potential demand for Internet-based information services from MSEs. The surveys measured awareness and usage of the Internet and other modern information and communications technologies by MSEs. In addition, the surveys introduced modern information and communications technology services to MSEs through product concept tests on e-mail, Internet access, and Web page development and hosting.8 Data also were gathered through in-depth interviews with key sectoral association members of the Laguna Chamber of Commerce and Industry. These associations are groups of small and medium-sized enterprises (SMEs) in the same industry—specifically, novelty items, footwear, metal craft, cut flowers, processed food, and garments.

The results of the consumer data analysis on Internet-based services are summarized below. For additional details on the survey results, see the consumer data section of the Bayantel PCOs and Laguna SME Service Center (SeCen) case studies.9

Both surveys revealed a low awareness and usage of Internet access services by MSEs. In Calamba, only 36 percent of MSEs were aware of the Internet. Of the Bayantel PCO customers, only 35 percent were aware of Internet access services, while only 1 percent of MSE customers had used the Internet. In Calamba, only 5 percent of MSEs had access to the Internet through a dial-up service, and only 8 percent had ever used the Internet through a paid facility.

Nevertheless, there appears to be a potential market for information services that could make use of the Internet. Seventeen percent of MSE PCO users and 8.5 percent of Calamba MSEs that were unaware of Internet service said they would definitely be interested in buying the service when presented with the benefits of gaining information on suppliers, buyers, and competitors. Those MSEs that were interested represent the higher end of the MSE spectrum in terms of size and sales.

6 Mindanao is the southern most group of islands in the Philippines. 7 Laguna is a province south of and adjacent to Metro Manila. It is part of Calabarzon, a region of five provinces around Metro Manila earmarked as a growth center of the Philippines. Calamba is a first-class municipality of Laguna Province and the site of the Laguna SME Service Center—the subject of another case study in the series. 8 A product concept test introduces respondents to a product or service with which they are not familiar by describing the product and its benefits. Respondents are then asked questions about their interest in buying the product. This technique is used frequently by private sector companies to assess potential consumer acceptance of new products. 9 These studies are available from the MBP project website at http://www.mip.org.

Chapter Two—The Market for Information Services in the Philippines 10

Interviews with Laguna Chamber of Commerce and Industry sectoral association representatives showed that these entrepreneurs, who generally own small and growing businesses, showed greater interest in information services than MSEs in the surveys. The sectoral association members are generally in production rather than trade, where the majority of the survey respondents operate. The sectoral association members also tend to target wider markets, including export, than average MSEs. This finding supports the hypothesis that mainly growth-oriented MSEs are interested in information services and that manufacturers are more interested than traders. A possible reason is that these MSEs have gone beyond day-to-day business survival and can focus on business development, particularly on identifying new markets, better suppliers, and new technologies.

Both the consumer surveys and interviews indicate that MSEs are more concerned about access to the right information than access to information facilities. For example, after having been exposed to product concept tests on the use of the Internet as an information source, only 6 percent of surveyed Calamba MSEs considered Internet dial-up and usage a “must have” item for their businesses. However, 25 percent of Calamba MSEs and 64 percent of MSE PCO users feel that they must have information services for their businesses.

In other words, MSEs do not necessarily want access to the Internet either through dial-up facilities from their own computers or through common service facilities. Instead, they want useful, timely, reputable information for business development that can be generated from Internet sources. They also want the information in a user-friendly manner that suits their business culture, usually oral and informal, rather than written and formal.

The surveys and interviews also point to challenges concerning appropriate content. The information made available by the four institutions profiled below may be appropriate and useful for larger firms, but it is either inappropriate or may require further processing before it can be useful to MSEs. The challenge is to match the information requirements of various MSE types with the appropriate “information product,” most of which should not be delivered through the Internet.

To illustrate, enterprises with limited geographic reach, such as local economy-based microenterprises, may have information requirements that differ from those of a more growth-oriented, small exporter. The business information needs of a neighborhood variety store will certainly differ from those of a handicraft manufacturer that exports to the United States. Key information needs for the variety store may include prices at the neighboring competitor and the cheapest sources for store merchandise. In many instances, this information, usually very specific, may be obtained directly through observation. In contrast, a handicraft exporter may find broader information on international market trends more important. In fact, the handicraft exporter may find an analysis of market trends more useful than simply time series data on imports and exports of handicrafts.

A comparison of enterprises at different levels of growth indicates that the type and quality of information needed may change with the enterprise’s scale of operations. Enterprises operating within a larger geographic scope with a larger production or service capacity, or operating in multiple locations, may need more broad and macro data relative to an enterprise

Microenterprise Best Practices Development Alternatives, Inc. 11 focused on the local economy. Whereas a large enterprise has both the need for and the capacity to interpret a variety of information, a small enterprise will need information to be processed to be understandable and useful. The relationship among enterprise scale of operations and markets, the consequent type of information needed, and the degree of information processing and analysis needed is shown below. This diagram suggests that the skill requirements of an information service provider may change depending on its clients.

Figure 1: Defining Information Needs by Type of Enterprise

Enterprise Scale Type of Information Processing Needs of Enterprises and Markets Information Large/Non-local Unprocessed Broad

Micro/Local Preprocessed Specific

THE SUPPLY OF INFORMATION SERVICES FOR MSES

Very few Philippine business development service providers use Internet-based models to provide services to MSEs. Although the four institutions described below use the Internet, their reach to MSEs (as differentiated from SMEs, which are larger) remains limited. Even their reach to SMEs is low.

The nongovernmental organization (NGO) ASSIST experimented on a limited scale with providing information to MSEs with donor assistance. However, when faced with the need to make a profit, ASSIST turned away from MSEs to serve the fast-growing demand from larger businesses. PHILEXPORT is providing small enterprises with important exposure to foreign buyers, but low demand for its services indicates that small businesses are either are unaware of the service, do not see it as valuable, or do not like the way the service is provided.

Government and nonprofit institutions interested in using the Internet to assist businesses, including those profiled in this report, are focusing on establishing the technological and human infrastructure needed for connectivity and sharing information among organizations. Although progress has been made, there is still some way to go.

A baseline survey10 of the information and communication technology needs and capacities of Philippine civil society organizations (which also included business development service providers) offers insights into the situation of most Philippine NGOs concerning the use of information and communications technologies. Although the survey covered a broad range of

10 “Electronic Landscapes: Access to ICT Resources within Philippine Civil Society Organizations—A Baseline Survey on Information and Communication Technology Capacities and Needs,” conducted by the Foundation for Media Alternatives, 1998.

Chapter Two—The Market for Information Services in the Philippines 12

civil society organizations and NGOs, the findings are equally applicable to business development service suppliers. In terms of access to facilities and equipment, the survey revealed that more than 92 percent owned or had access to computers. Approximately 70 percent had access to the Internet and e-mail services.

A forum of civil society organizations hired to process the results of the survey identified three main issues hindering the development and use of information and communications technologies: access, cost, and technical expertise.

Access refers to problems related to the availability of information and communications technology infrastructure, and information structure facilities to civil society, to promote connectivity. The PCCI project addresses this problem by putting in the hardware and software necessary for effective electronic networking among members. Even if the service providers have the facility, there is still the challenge of making these facilities available to MSEs. Again, the PCCI business link envisions area-based associations setting up and managing computer centers accessible to MSEs in remote areas.

Cost refers to the needed investments and expenses to set up, maintain, and sustain the information structure. There is no financial information on the four models described in this document to indicate whether they are self-sustaining. It is clear, however, that all four models were “jump started” with donations, grants, or contributions. Whether these services can sustain themselves from user charges remains to be seen.

Technical expertise refers to the availability of skilled personnel to set up and maintain systems. This issue is not a major concern of the four organizations reviewed because they either had the skills in-house or subcontracted the responsibilities to third parties. However, it is a concern of other NGOs.

Based on the consumer research analysis, the principal focus on connectivity is misplaced. Although connectivity is a necessary condition for Internet-based information services, it is by no means sufficient. The institutions profiled in this paper are trying to provide services to SMEs primarily on-line. Consumer data indicate that this approach will not work for MSEs because they want information content rather than access to on-line information. Instead, the institutions must provide information in an MSE-friendly medium. The study did not find business development service suppliers that sell Internet-based information to MSEs, either in oral or in written form.

It is unlikely that the private sector will develop appropriate information services for MSEs in the short term because the market for information services from larger businesses is growing fast and is easier to supply. Although this study could not conclusively show that information services would improve the competitive position of MSEs, since the number of MSEs currently accessing information services is too low, the demand for information from higher end MSEs with non-local markets indicates they expect information to benefit their businesses.

Microenterprise Best Practices Development Alternatives, Inc. 13

There is the potential for a donor to support the initiation of market-oriented information services targeted toward MSEs in the Philippines. There is also a need to push current and future providers to establish market-based services that meet MSE demand, both in content and in service features. Only such a service has the potential to become financially sustainable and achieve significant outreach to MSEs.

Chapter Two—The Market for Information Services in the Philippines

CHAPTER THREE PROFILES OF INTERNET-BASED MODELS FOR INFORMATION SERVICES

ASSIST—EASIBOARD

Institutional Background

ASSIST is an NGO that grew out of the USAID-funded Agricultural Statistics and Marketing Information Services Project, implemented in cooperation with the Philippine Bureau of Agricultural Statistics and completed in 1995. ASSIST is the business side of the Philippine Statistical Association, a group of professionals and experts in statistics and related fields. ASSIST aims to be the “social and business information and insight provider and implementation advisory for major industries, government, and non-government organizations in the Philippines.” ASSIST offers two main services:

§ Information services through its Internet-based EASIBoard; and

§ Statistical consultancy and technical assistance to business and government organizations.

In 1995, ASSIST established EASIBoard to provide the business community with easy access to on-line news, research, and business information through an information databank. EASIBoard was designed based on a survey of specific needs of big agribusiness firms belonging to the top 1,000 corporations of the Philippines and on ASSIST’s work with government statistical bodies involved in agribusiness. ASSIST focused on big agribusiness firms because its management expected these businesses to be among the first to recognize the importance of information technology. These businesses also are equipped with the latest computer hardware and software and usually have Internet access.

Products and Services

EASIBoard offers several products: on-line subscriptions for data/information packages, data retail (customized data requirements), research papers, on-line advertisements, information brokerage or business matching using ASSIST’s database of agribusiness suppliers and producers, and information technology services. To obtain the required information, ASSIST entered into agreements with the Bureau of Agricultural Statistics, National Food Authority, National Statistics Office, and National Statistical Coordination Board for direct system links to their data. These agencies charged ASSIST basic fees for the link-up. ASSIST acquires the data one week before the agencies release it to the general public.

Chapter Three—Profiles of Models for Internet-Based Information Services 16

ASSIST’s on-line information service includes a continuous feed of the latest news, research, and business information, sourced from government and private statistical institutions (see Figure 2). As of October 1998, EASIBoard’s data holdings included mainly agricultural and agribusiness statistics—specifically, production levels and distribution per region and province; trade and price statistics; labor, industrial, and economic statistics; and demographic and social statistics. The statistical series were presented in commodity groupings, whereas other data were grouped by type of activity generating the information.

Each commodity grouping is shown in the following format: (1) brief description/introduction to the commodity group; (2) information generated (parameters, classification, disaggregation, and frequency); (3) source of and activity generating the information; (4) data currently available; and (5) commodity listing. The on-line data service is ASSIST’s most saleable service.

Figure 2: ASSIST EASIBoard Internet Model

DATA PROVIDERS EASIBoard/ SUBSCRIBERS (mainly government ASSIST (big, medium, small agencies) businesses, general public) § Advance access § General format § Download to own § Visually appealing computer § Statistically validated § Hard copy for those data series without Internet § Accessible 24 hours on connections the Internet § Publications § Customized data packages upon request

Although data are obtained from government statistical bodies, EASIBoard has several added features:

§ EASIBoard’s data packages are formatted differently from those of the agencies. EASIBoard format is visually appealing both on hard copy and on computer screens.

§ EASIBoard validates the data generated from the agencies based on statistical formulations, historical data or data series, and the factoring in of recent economic conditions. ASSIST coordinates the validation process with the agencies through a technical working group with representatives from both ASSIST/Philippine Statistical Association and the agencies. If ASSIST finds discrepancies in data, it brings these discrepancies to the attention of the originating agency and the working group. ASSIST makes corresponding revisions and validations before public release of data.

§ Subscribers can access information 24 hours a day, 7 days a week on the Internet and can download data, making the service very convenient.

Microenterprise Best Practices Development Alternatives, Inc. 17

§ ASSIST also provides customized data packages. Customers can provide their requirements to ASSIST and receive a customized package of the relevant information.

ASSIST leased space from an Internet service provider to house EASIBoard. Actual content is processed at ASSIST and uploaded to the service provider. Subscribers access EASIBoard through the Internet at its website, www.psa.assist.org.

On-line subscriptions cost P4,000 (US$100) for the one-time membership fee and a minimum deposit of P6,800 (US$170) for consumable use on downloading time. Subscribers replenish their deposit when it gets low. Subscribers must have a computer, modem, and Internet access. EASIBoard currently has 13 large company subscribers that make up 70 percent of its client base. The remaining 30 percent are individual users, NGOs, and smaller businesses. ASSIST staff estimated that EASIBoard revenues accounted for about 30 percent of ASSIST revenues, while technical and consultancy services still accounted for the bulk of revenues. EASIBoard is viewed as a teaser to ASSIST’s statistical consultancy and technical assistance services.

EASIBoard has demonstrated there is a demand for business information services, at least among larger agribusiness firms. Unfortunately, EASIBoard is not accessible to most MSEs because of the hardware requirements and the price. ASSIST experimented with methods for delivering statistical information to small farmers and agribusinesses while it was funded by USAID. However, because ASSIST has been required to depend on its own revenue for financing, it has focused on serving the needs of larger businesses.

Issues and Findings

From ASSIST’s perspective, the constraints to more intensive use of EASIBoard lie in the following:

§ There is often a delay in the generation of information by authorized government agencies. ASSIST relies mainly on a government network for “official” agribusiness data. Delays affect the timeliness of the information to its customers.

§ There is very little awareness about ASSIST services. Awareness is mainly generated from the Internet facility.

§ Some users find the costs of services for retail data expensive. ASSIST’s costs factored in the maintenance of data by the Internet service provider as well as its own costs.

EASIBoard is an example of taking unprocessed government data and processing it for customers for specific uses. This idea could be attractive to MSEs. However, a key stumbling block for EASIBoard in reaching MSEs is that ASSIST relies mainly on the Internet for making services available to customers and for advertising. ASSIST has no outlets that are accessible and attractive to MSEs and no way to promote its product with MSEs. Although

Chapter Three—Profiles of Models for Internet-Based Information Services 18

EASIBoard does provide written reports on request, it usually relies on the on-line medium for delivery of its products, a method that is not compatible with the MSE culture. In addition, most of EASIBoard’s information is macro in nature—national and regional statistics—rather than the specific data demanded by MSEs.

PHILIPPINE CHAMBER OF COMMERCE AND INDUSTRY

Institutional Background

The Philippine Chamber of Commerce and Industry is a membership-based, non-stock, nonprofit NGO of business enterprises. As of April 1997, PCCI had 1,783 members consisting of industry associations, local chamber affiliates, regular members, and sustaining members representing all industry sectors. Membership is open to all business enterprises, local chambers, and industry associations. An estimated 60 percent of PCCI’s members are SMEs.

Products and Services

PCCI has begun work on its business link system. PCCI envisions an electronic business link that will serve as the backbone for Internet/network access to members in remote areas. Members would have access to computers and the Internet through common service facilities in the provincial centers or PCCI offices. Access would be enhanced by a hyperlink to ACTETSME. The business link model components are outlined and summarized in Figure 3.

The National Membership Database Management System (NMDMS) is a centralized electronic business database management system. The database is still being completed. NMDMS stores data on all PCCI members (contact details, business lines, products, and services) and makes the information available through the Internet. NMDMS will contain data on approximately 10,000 business establishments nationwide. The establishment of the system was funded by the German Confederation of Small Business and Skilled Crafts (ZDH).

TradeAccess is a Boston-based, commercial Internet business information service provider specializing in on-line services for businesses and trading. TradeAccess is marketed as the premier resource for on-line business with China, India, Korea, Malaysia, the Philippines, Thailand, and Sri Lanka. TradeAccess works exclusively with governments and industry associations to provide databases and electronic commerce services in these seven countries.

TradeAccess provides direct marketing, facilitation services, supplier identification, vendor management, and supplier evaluation. Depending on the type of service, prices range from US$500 to $2,000.

Microenterprise Best Practices Development Alternatives, Inc. 19

TradeAccess houses the PCCI website, and PCCI gets a portion of the fees generated on TradeAccess services from the PCCI website. PCCI’s share of revenue ranges from 15 percent to 75 percent, the larger share coming mainly from downloading of information or statistics.

Trade Point Philippines Facility aims to provide a one-stop electronic access to a broad range of trade-related information. It accepts business inquiries on-line and either processes them or forwards them to the relevant country, provided it has a similar facility.

Pilot Mindanao Business Link (MBL) is a local electronic network of chambers in Mindanao. MBL is managed by the Mindanao Business Council and linked on-line to the PCCI website. Initially, seven cities were included in the project. Entrepreneurs in these cities and surrounding areas can go to their local chambers with inquiries, post business offers on the website, and transact with potential business and trade matches through the Internet. MBL is a component of the Growth with Equity in Mindanao Program of the national government and USAID.

Figure 3: PCCI Business Link Model

Davao Cagayan de Zamboanga Iligan Gen. Santos Oro City

Butuan Cotabato Mindanao Business

Link

NMDMS E-Commerce

PCCI Central

Library/ Trade Inquiries/ Technical Referrals Assistance

Other Regions/Provincial Chambers & Links (ACTETSME, TradeAccess, etc.)

At the time of this study, PCCI also was developing the following services, to be lodged as database products of the PCCI business link system:

§ Computerized product catalogue; § Membership mailing system;

Chapter Three—Profiles of Models for Internet-Based Information Services 20

§ Documentation center (library services); and § Virtual trading services through e-commerce.

PCCI’s services are geared toward the development and growth of local businesses. Although chamber members are given priority, services also are extended to non-members through the outreach projects of regional and provincial chambers and industry associations.

Issues and Findings

As of September 1998, only 10 of approximately 142 local chambers had Internet capabilities—that is, hardware and software facility plus trained personnel. Many SME members do not have the computer hardware and software to access Internet services. However, PCCI officers feel that members are highly aware of information technology because PCCI has been conducting training and seminars on information technology since 1995.

PCCI is still establishing the business link system so it is too soon to evaluate performance and outreach to MSEs. The business link model has, however, several features that could be attractive for MSEs. It gathers business information from a wide range of sources but has the potential to provide very specific information. The NMDMS, for example, could provide the type of specific business matching services that would be useful to MSEs—for example, finding new buyers and suppliers even in a limited geographic area and local economy. The local chambers provide a network of outlets accessible to MSEs. Local chambers may have the capacity to raise MSE awareness about available services and provide easy access to the information from the system in a user-friendly form, rather than just access to hardware. Once hardware is in place, PCCI will need to improve the quality of human resources in the local chambers to provide this service.

PHILIPPINE EXPORTERS CONFEDERATION

Institutional Background

The Philippine Exporters Confederation is the largest organization of exporters in the Philippines, with 3,000 members and 38 affiliated industry associations. PHILEXPORT serves its members through 16 regional chapters throughout the country. Members currently account for at least 70 percent of the country’s total export earnings.

Microenterprise Best Practices Development Alternatives, Inc. 21

Products and Services

PHILEXPORT provides services to exporters that range from information and consultancy to marketing and financing. The services include:

§ An Export Service Center;

§ Specialized training programs, seminars, and workshops;

§ A special trade and investment promotion program;

§ Information collection and dissemination;

§ Support to regional and provincial chapters and sectoral associations;

§ A one-stop export documentation center;

§ A bonded warehousing operation; and

§ A trade and investment policy analysis and advocacy support project and other policy advocacy programs.

PHILEXPORT provides Internet-based services to members, non-members, and prospective buyers. These include the following:

§ Advertising. Members and non-members can lease a page on PHILEXPORT’s website to advertise their products. Web pages can include the company’s profile, contact details, product details including product photos, capacity, delivery time, and terms of payment. This service costs P1,500 (US$37.50) per year for members and P2,000 (US$50) for non- members. These are subsidized rates designed to increase demand.

PHILEXPORT’s website can accommodate 500 advertisers at any given time. Of this capacity, roughly 10 percent of these advertising slots are paying advertisers. Most of these paying companies are in the gifts, toys, and housewares industry. Approximately one-half of these paid advertisers are small companies, and the other half are medium- and large-scale companies.

PHILEXPORT uses the remaining slots to advertise its members on a rotating basis for free. To increase the number of paying advertisers, PHILEXPORT provides an orientation to the service at quarterly membership meetings and regularly sends letters and ad proposals to its members.

§ E-mail. PHILEXPORT offers e-mail service to its members and clients. For the use of an e-mail facility, PHILEXPORT charges members P2 (US$0.05) per minute and non- members P3 (US$0.08) per minute.

Chapter Three—Profiles of Models for Internet-Based Information Services 22

§ Internet access. PHILEXPORT provides members with Internet access on the organization’s computers for P80 (US$2) an hour for members and P100 (US$2.50) per hour for non-members.

§ Processing inquiries. The Export Service Center of PHILEXPORT accepts and processes inquiries on-line through its website.

§ Website subscriptions for buyers. PHILEXPORT manages a separate website aimed at prospective buyers of Philippine exporters’ products. Subscribers can gain access to various levels of information on Philippine exporters through this website. For US$6 per month, buyers have access to a list of e-mail addresses of Philippine exporters. For US$20 per month, buyers gain access to a directory of exporters with links to descriptions of the exporters and their products. US$40 per month buys access to the same service but with graphics, or buyers can purchase access to a full-featured website with more comprehensive information about exporters.

In addition, PHILEXPORT provides a Web link service to those who already have a Web page by including the company in its Web page index. The cost of this service is US$25 per month.

Subscriptions to any of these services are for a minimum of three months. A subscriber is immediately enrolled in the buyer’s assistance program, where all inquiries are forwarded to the relevant company’s e-mail address. Since February 1996, 36,500 inquiries have been processed.

Issues and Findings

PHILEXPORT’s services have the potential to be very useful to small exporters. However, demand is low. PHILEXPORT attributes this to a low level of awareness of the Internet and its potential. Despite the subsidized rates for member services, small businesses do not yet see the need to purchase the services. In addition, the services still suffer from some inefficiency, and this inhibits their marketability. Small businesses are unlikely to use the Internet access service because PHILEXPORT offers access only to computers and a connection to the Internet. Nor are small businesses likely to send inquiries to PHILEXPORT on-line. However, the advertising services have the potential to offer small exporters valuable exposure to foreign buyers at a reasonable price. PHILEXPORT’s services are not appropriate for microenterprises because they do not export directly.

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APEC CENTER FOR TECHNOLOGY EXCHANGE AND TRAINING FOR SMEs

Institutional Background

The APEC Center for Technology Exchange and Training for SMEs was established in September 1996 by the Asia Pacific Economic Cooperation countries.11 The objective of ACTETSME is to accelerate technological transfer and development in the Asia Pacific region so that member economies are more productive and competitive in both domestic and international markets. As a center for information, it focuses on technologies, markets, human resource development, and productivity of SMEs in the Asia Pacific region.

The center promotes technology exchange and training among SMEs in the APEC region by providing relevant, authoritative, and accessible information to firms, organizations, and agencies mandated to promote and assist in the development of SMEs. ACTETSME can be considered a network of networks. ACTETSME is meant to serve as a central broker of information useful to SME development among the APEC economies. The main medium of information exchange is through the ACTETSME website (www.actetsme.org).

Products and Services

ACTETSME is the electronic vehicle of the APEC Network for SMEs. In each country, two coordinators (one government and one private sector) promote the participation of designated SME-focused organizations and agencies. These agencies, or “focal points,” are expected to provide information about SMEs to the network and to facilitate the flow of information from ACTETSME to SMEs both with and without Internet access. SMEs can utilize the Internet facilities of the focal point institutions (both government and private) linked to ACTETSME. The costs to SMEs are the hardware and software to get an Internet connection. Those without this capacity can gain access to information by going to a focal point.

The focal points maintain databases of geographic trade profiles and SME business contacts. Focal points are supposed to establish electronic links among themselves and other SME support institutions. The focal points then provide information to SMEs on business matching (referrals to suppliers or buyers) and industry reports, surveys, and statistical information (see Figure 4). In the Philippines, the six focal points are government and private institutions that support the growth of SMEs.

11 APEC is a 21-member regional group established to promote trade and economic advancement among member countries.

Chapter Three—Profiles of Models for Internet-Based Information Services 24

Figure 4: ACTETSME Information Exchange Framework

ACTETSME

Electronic data Electronic form of data Focal points

Electronic data

SMEs

By the end of 1998, the ACTETSME website had the following pages:

§ Guide for SMEs—a guide for SMEs in the APEC region;

§ Technology Opportunities—information on technology offers and requests from the Asian and Pacific Center for Transfer of Technology of the Economic and Social Commission of Asia and the Pacific;

§ Let’s Do Business—information on business matching and on buying, selling, joint ventures, and other business opportunities;

§ APEC Network of Networks—information on APEC member economies (profile, policies, practices, business visa rules, and relevant links);

§ Search Engine—a database of links and contact information on human resource development, finance and credit, markets, technology, and general information;

§ Events—announcements of events that can be useful to SMEs;

§ APEC Links—links to APEC-related websites;

§ Women in Business—information and a list of women business leaders who actively forge business cooperation and advocate for women’s issues; and

§ TIPS — Technological Information Promotion System.

Microenterprise Best Practices Development Alternatives, Inc. 25

Issues and Findings

The ACTETSME model appears to have potential for reaching SMEs with relevant, preprocessed information. ACTETSME already processes a wide range of information so that it is relevant for SMEs. The focal point institutions act as SME-targeted outlets that could process requests for information and provide specific information packages to SMEs in a user-friendly form. Links to other SME-focused organizations could provide additional outlets to increase outreach.

However, it is too early to say whether the focal points will be able to successfully reach significant numbers of SMEs and whether their personnel have the skills to promote the service and to locate and package information for SMEs and even MSEs. The mechanisms for providing information to SMEs are not yet clear. The main focus appears to be promoting SME access on-line, through either the SME’s own computer or a computer at a focal point. It is not yet clear if and how focal points would charge for services and how the system might become commercially sustainable. To date, the outreach of ACTETSME to SMEs has been limited.

Chapter Three—Profiles of Models for Internet-Based Information Services

CHAPTER FOUR A MODEL FOR INFORMATION BROKERING

If information services are to be provided to MSEs appropriately, the services must provide processed information that customers demand in a timely way. To do this well, an information provider must have sufficient personnel of reasonable skill to locate needed information, and they must package it in a user-friendly manner, either verbally or in writing. The personnel must have the skill and disposition to broker sources and users of customized information. Although the information service provider would need access to the Internet and other sources of information, the staff must be able to provide the right information to each customer. Therefore, personnel costs for an information provider would be higher, and volumes most likely would be lower, than for a telecommunications business.

Potential difficulties for an information provider, particularly in the early stages, would be keeping the price low enough to be attractive to MSEs and reaching a high enough volume to cover costs. To keep prices for MSEs reasonable, the provider could target subsectors of MSEs and provide information to groups through industry associations, in addition to individual users. For example, the sectoral associations under the Laguna Chamber of Commerce and Industry would be good potential clients. To reach sufficient volume, the provider could target medium-sized businesses that are still interested in processed information, in addition to MSEs. The medium-sized businesses also are more likely to demand information services initially, whereas MSEs will require awareness-raising efforts before demand is increased.

An initial market survey would help pinpoint the content focus and the service features MSEs demand. Considerable resources will be needed for the awareness-raising effort focused on showing MSEs the value of information they could receive from the provider. A customer feedback mechanism would help fine-tune services to demands of MSEs and other clients.

Because the service provider would need skilled personnel familiar with business, and with MSEs in particular, a business-focused organization such as a chamber of commerce and industry, or a business-focused NGO, might make the best service provider. This organization either could source information directly from the Internet or could work through other, more specialized information providers such as those profiled above. For example, ASSIST could provide information on agribusiness; ACTETSME on APEC-focused issues; PHILEXPORT on foreign buyers and local exporters; and PCCI on national business linkages. A flow chart is provided in Figure 5.

Chapter Four—A Model for Information Brokering 28

Figure 5: Information Flow for an Information Service Provider

Subsector ASSIST Group of MSEs

ACTETSME Business Organization Subsector (Chamber or NGO) Group of MSEs

PHILEXPORT

Medium-Sized PCCI Businesses

Although this model would work on a limited scale, reaching large numbers of MSEs might require having a central office for information processing with outlets around the country to retail the information. In terms of technology, the outlets would need only a computer, modem, and e-mail. Requests could be sent to the central office, and the information could be sent by e-mail back to the outlet. This system would lower the personnel costs of the outlets by decreasing the technical skill required. However, outlet personnel would still need good people skills to promote the service as well as good communications and technical skills to package and deliver the information appropriately. In this case, the model would depend on sufficient demand for similar information so that the central office would not need to conduct a new information search for each MSE, thus pushing the costs up.

As Internet-based services are currently focused on larger enterprises, it is likely that the market will need a jump start from donors to start supplying services to MSEs. The results of this study show that there is the potential for building this market. Both demand and supply exist, although they are weak. Donors might, for example, subsidize the initial costs of raising awareness, which are likely to be the most significant investment needed to build a market. Donors also might help providers refocus their services to meet the demand for service features from MSEs. These two efforts would start to bring the demand and supply of Internet-based services closer together.

Microenterprise Best Practices Development Alternatives, Inc.