Setting the Environment for Innovation in Batangas City

Home , Batangas, Calabarzon, Rising Stars Philippines

Investment Enabling Environment (INVEST) Project

Output 1.1, Deliverable 1, Program Area 2.3, Component 2

Submitted to:

U.S. Agency for International Development/Philippines Office of Economic Development and Governance under Contract No. AID-492-C-11-00005

August 8, 2013

By Orient Integrated Development Consultants, Inc. (OIDCI) FSS Building, 89 Scout Castor Street, Quezon City, Philippines Tel No. 374.0757; Fax. No. 413.232 TABLE OF CONTENTS

List of Acronyms ………………………………………………………………………. iii

I. Introduction ……………………………………………………………………………... 1

II. Theoretical Context of Innovation …………………………………………………… 2 A. The Process of Innovation …………………………………………………...…. 2 B. Importance of Innovation for Developing Countries …………………………. 3 C. Framework for Promoting S&T in Batangas City …………………………… 5

III. Promoting innovation in Batangas City ..…………………………………………… 7 A. Potential of Batangas City to Promote S&T Development 7 1. Educational Institutions ………………………………………………………… 7 2. Large Enterprises ………………………………………………………………. 8 3. Industry-Academe Linkage .. ………………………………………………….. 8 4. Start-Ups and Incubators ……………………………………………………… 10 5. Small and Medium Enterprises ……………………………………………….. 10 6. National Government Agencies/ City Government ………………………… 10 7. Research and Development Projects ……………………………………….. 12 B. Challenges of Batangas City in S&T Development …………………………… 12

IV. Recommendations ………………………………………………………………………. 16

References ……………………………………………………………………………….. 19

List of Tables Table 1. The Role of Innovation by Categories of Countries ……………………….. 4 Table 2. Challenges and Proposed Action Areas for S & T Development In Batangas City ……………………………………………………………….. 12

List of Figures Figure 1. The Process of Innovation ………………………………………………….. 3 Figure 2. Factors and Elements of Innovation in Batangas City ……………………. 6

Annex. List of Persons, Government Agencies, Private Sector Groups Consulted ………………………………………………………………………. 20

LIST OF ACRONYMS

ABET Accreditation Board for Engineering and Technology AG & P Atlantic, Gulf and Pacific BCCII Batangas Chamber of Commerce and Industry, Inc. BPLS Business Permit and Licensing System BSU Batangas State University CALABARZON Cavite, Laguna, Batangas, Rizal and Quezon CDI Cities Development Initiative CIC Center for Industrial Competitiveness CSR Corporate Social Responsibility DOST Department of Science and Technology DOTC Department of Transportation and Communications DPWH Department of Public Works and Highways DTI Department of Trade and Industry DUI Doing, Using and Interacting FAITH First Asian Institute of Technology and Humanities FGD Focus Group Discussion IGLP Industry and Government Linkage Program INVEST Investment Enabling Environment Project KII Key Informants Interview LU Lyceum University MIMAROPA Mindoro, Marinduque, Romblon and Palawan MIT Mapua Institute of Technology NCC National Competitiveness Council NGA National Government Agencies OECD Organization for Economic Cooperation and Development OJT On-the-Job Training PCIERD Philippine Council for Industry and Energy Research and Development PLDT Philippine Long Distance Telephone Company PPA Philippine Ports Authority PQA Philippine Quality Award PQC Philippine Quality Challenge PQCP Philippine Quality Challenge Program PSHS Philippine Science High School R&D Research and Development SEUP Small Enterprise Upgrading Program STAR Southern Tagalog Arterial Road S&T Science and Technology SME Small and Medium Enterprise STI Science and Technology Indicator TAPI Technology Acquisition and Promotions Institute TBI Technology Business Incubator UPCOE University of the Philippines College of Engineering UB University of Batangas UPEMLP University of the Philippines Engineering Manufacturing Linkage Program USAID United States Agency for International Development

iii

I. INTRODUCTION

Investment is important in the government’s drive for inclusive growth and poverty reduction. Studies have shown that promoting innovation capacities can enhance economic growth (OECD, 2012). While innovation is often associated with high technology products, the concept of “inclusive innovation” applicable to low and middle income households have been recognized as a means to improve welfare and access to business opportunities. For some middle-income countries, building innovation capacities is important in their bid to compete in the global environment.

In Asia, China has been recognized as an important player in the global innovation system. Following the flying geese development model and the division of labor in Asia, countries like the Philippines and Vietnam, which are taking on lower value activities, have increasing opportunities to tap innovation and science and technology (S&T) to accelerate growth thru production of more competitive products and to find more effective solutions for poverty reduction.

The INVEST Project recognizes the role of cities as drivers of growth, with their close links to the outside world. Hence, cities to be able to compete globally will require greater innovation capacities. A think paper was commissioned by the Project to explore the potential of one of its cities, Batangas, in promoting innovation. Batangas City is strategically located to become an economic hub in the CALABARZON region and is currently one of three cities included in the Cities Development Initiative (CDI), a new urban development program of the United States Agency for International Development (USAID). Assistance has been provided to the city since January 2012 through another USAID Project, the Investment Enabling Environment Project (INVEST), to improve its business climate in order to generate more investment. Specifically, development interventions have been provided in streamlining the cities’ business permits and licensing system (BPLS) and in improving the investment planning and promotion capabilities of city officials.

This report summarizes the recommendations of Engr. Filemon Berba, Jr. on the following areas covered in his paper: (1) the investment potentials and competitive edge of Batangas City, and (2) the strategies for promoting innovation in the City. This report is not meant to be comprehensive paper; it consolidates the recommendations of various stakeholders who were consulted in the process of preparing the think paper (refer to Annex 1). This report is being submitted as part of Output 1.1 (Deliverable 1 of Program Area 2.3 under Component 2).

II. THEORETICAL CONTEXT OF INNOVATION

The concept of innovation is not easy to understand simply because it encompasses other concepts that tangentially touch some of its most basic elements. In its ordinary usage, innovation is easily confused with the related concepts of invention of tangible technology and the improvement of processes and systems.

A. The Process of Innovation

Innovation is best understood as the process of applying new solutions that meet new requirements, inarticulate needs, or existing market needs (Wikipedia, 2013). This definition implies the introduction of something original and new that “breaks into” the market or into society and community.

Innovation can be differentiated from invention. The latter is the process of generating new ideas or methods by themselves while the former generates ideas and applies these new and novel ideas to improve processes and systems. Innovation, however, is different from the concept of improvement because new ideas implies the notion of doing something different rather than just doing the same things better.

In the context of industrial development, Joseph Schumpeter (1949) argued and suggested that industries must incessantly revolutionalize the economic structure from within. He suggested that industries therefore should innovate with better or more effective processes and products. He further asserted that “creative destruction” is the essential fact about dual economies. In most familiar and practical sense, entrepreneurs, in their quest to be patronized, continually look for better ways to satisfy their consumer base with improved quality, durability, service and price. Consumers, on the other hand, look for new and excellent products and services. Hence, the relentless need to innovate.

Innovation is not all about S&T; although they are in its core. Also important is organizational culture. In the organizational context, therefore, innovation may be linked to positive changes in efficiency, productivity, quality, competitiveness, market share and others. Recent studies highlight the complementary role of organizational culture in enabling organizations and societies to translate innovation activities into tangible performance improvement. This, therefore, calls for looking at the context where innovation should and must take place.

While the concept of innovation seems to be biased in favor of industries, society and government play a significant role. According to James Lewis (2005), while innovation ultimately depends on industry or society’s skills and creativity, government policies can play an important role in creating the conditions and the resources for innovation.

In pushing for innovation, many scholars claim a bias towards the “science and technology” mode (S&T mode or STI-mode) while the “learning by doing, using and interacting” mode (DUI- mode) is widely ignored (Wikipedia, 2013). In recent writings, however, the two (2) have been strongly interlinked. The recent assertion is that S&T can be further enhanced by and through the processes of learning, doing and using, and vice versa. Each of these two (2) modes has their respective roles in the whole process of innovation.

The process of innovation is illustrated in Figure 1.

Figure 1. The Process of Innovation

Invention Innovation (per se) Diffusion

The process of innovation involves: (a) invention; (b) innovation (per se); and (c) diffusion.1 Invention refers to the generation of new ideas or methods while innovation (per se) is the development of ideas and methods for a possible application on specific areas of work in an industry or a society. Diffusion, on the other hand, is the widespread application of the new ideas and methods within an industry or society.

Several authors presented critical elements and factors that would bring about the culture of innovation that encompasses the three-stage process. Lewis, for example, identified the following: (a) human capital; (b) research universities; (c) skills and resource clusters; (d) entrepreneurial culture; (e) research and development (R and D) funding; (f) information technology; (g) technology transfer; (h) commercialization of new knowledge; (i) private sector financing or venture capital; (j) supporting infrastructures; (k) physical infrastructure; (l) soft infrastructure; and (m) openness to competition.

Mathew W. Ashby, et al. (2009), focusing on the more general categories, suggested four (4) major elements of innovation: (a) collaboration; (b) ideation; (c) implementation; and (d) value creation. On a much broader perspective, Karl Ulrice (2013) identified three (3) factors or elements of innovation - knowledge, culture, and process.

In summary, innovation could be an ardent desire that remains an essential move for local economies with great potentials for their industry sectors to further improve their performance and the potentials to push the local economy, in general, to become more economically attractive as a place for investors and markets to operate. The elements of innovation can then be grouped according to themes, as follows: (a) enterprises (large, medium and small as well as starting ones) as sources of ideas and the beneficiaries of new ideas and methods; (b) academic and research institutions as the main base for knowledge creation; (c) government (national and local) as sources of policy direction and technical assistance; (d) interface of business, academe and government; (e) infrastructure support and facilities; and (f) funding source for R&D and S&T.

B. Importance of Innovation for Developing Countries

The OECD has developed an Innovation Strategy for high income economies that can be applied to the unique conditions of developing countries. The elements that comprise this strategy include: (1) framework conditions that encourage entrepreneurship and mobility of factors in all markets; (2) openness to trade as global networks of innovation emerge; and (3) public and private investment in human capital, R&D and other intangibles.

1 Adopted from the concept of technological innovation process as cited in Wikipedia published in http://en.wikipedia.org/wiki/Innovation.

An interesting aspect of the OECD study on innovation is the analysis of the role of different types of innovation at different stages of development. Table 1 illustrates the various aspects of innovation for various categories of countries.

Table 1. The Role of Innovation by Categories of Countries

Country Category Mechanism/Objective Type/Source of Main Agents of Innovation innovation Developing/low- • Adoption requires • Incremental • Universities income countries adaptation: innovation based on and research and middle-income Innovation needs to foreign innovation & institutes, countries respond to specific technologies leading private “local” conditions for business esp. outcomes those w/ exposure to foreign markets and institutions • Inclusive innovation: • Incremental • NGOs, small for low- and middle- innovation based on firms, public income households foreign innovation and private to improve welfare and /or local institutions and access to traditional engaged in business knowledge disseminating opportunities generated “out of knowledge via necessity” networks, • Social innovation private often helping to introduce large business technical invocations in communities, e.g. mobile banking services Mainly middle • Build-up innovation • Incremental and • Requires full income countries capacities that will be radical innovation development but also some key for reaching capacity to compete of innovation opportunities for world technological with leading world systems developing or low frontier in many innovators involving income countries industries, esp. diasporas as a relevant to avoid connector “middle-income traps” • Address • Major innovations • Public and environmental. and scientific private heath, social research conducted universities challenges thru in global and research global innovation partnerships but institutions; efforts and local also marginal private efforts to address innovations to business them address the welfare operating in of poor people the sectors • Build-up niche • Incremental • Public competencies. i.e. innovations based institutions

Country Category Mechanism/Objective Type/Source of Main Agents of Innovation innovation growth/ exports in on applying foreign that address sectors of innovations and coordination comparative technologies challenges advantage strategically to support industrial development Mainly • Climb the value • Incremental and • Private sector emerging/middle- ladder in global radical innovation w/ support income countries value chains capacity to from public after initial progress differentiate agents, on dimensions contributions intermediaries, above large firms • Keep • Innovation is • Involves competitiveness in identical to mainly private frontier industries developed countries sector in interaction w/ public research institutions and universities, global partnerships, Large firms Source: Reproduced from OECD (2012)

As shown in Table 1, developing countries will primarily depend on foreign innovation and technologies, which may have to be adapted to suit local conditions. Academic and research institutions as well as business firms play a role as agents of innovation. Social or inclusive innovation aimed at improving the welfare of the poor and in providing access to business opportunities are also undertaken by developing countries, with non-governmental organizations (NGOs) and private firms as agents or conduits.

C. Framework for Promoting Innovation in Batangas City

In the Philippine context, particularly for Batangas City, setting an environment for a culture of innovation to happen and eventually to succeed would involve several specific factors based on the elements presented in the preceding discussion.

Science and technology (S&T) are identified as the core element of innovation for Batangas City. This implies that S&T serves as the main enabler for the improvement of performance and the assurance of high quality products and services, both of industries, and the society as a whole.

For S&T to pave the way for the development of the culture for innovation, several requisite factors are necessary for laying the foundation for the generation of novel ideas. These factors are: (a) education institutions; (b) large enterprises; and (c) relevant national government agencies, such as the Department of Science and Technology (DOST), which provide available and potential technological solutions, and the Department of Trade and Industry/Center for

Industrial Competitiveness (DTI/CIC), which supply information on possible technology applications in the context of industrial competitiveness.

Once novel ideas are molded through the application of S&T or once appropriate technology has been identified through research, several groups could serve as vehicles for additional idea generation, further development of ideas and methods, immediate application, and diffusion. These factors or groups include: (a) research and development (R&D) projects of relevant entities, such as DOST and other education institutions; (b) small and medium enterprises; (c) industry-academe linkages; and (d) business start-ups or incubators. These agents of innovation as shown above have roles in spreading innovation at different stages of development.

The factors or elements that will contribute to S & T development and the groups that use and can further enhance the use of S&T in the context of innovation development for Batangas City are diagrammatically presented in Figure 2.

Figure 2. Framework for Promoting Innovation in Batangas City

Research and Industry and Business Start- Development Small and Medium Academe Ups and (R&D) Projects of Enterprises Linkages Incubators DOST and Other (SMEs) Education Institutions

Science and Technology (S&T)

National Education Large Government Institutions Enterprises Agencies (NGAs)

These seven (7) factors or elements of innovation in Batangas City shall be assessed and evaluated in this paper with the end in view of determining what needs to be done so that a successful culture of innovation can be established in Batangas City.

III. PROMOTING INNOVATION IN BATANGAS CITY

Using the framework for promoting innovation through S&T, the capacity of Batangas City to embrace, adopt and promote the culture of innovation both at the industrial and societal levels was assessed using key informants interviews (KII), focused group discussions (FGD)2 and an examination of relevant literature, e.g., the industry study for Batangas City prepared by INVEST. A set of action areas was drawn as initial points of discussion with concerned sectors.

A. Potential of Batangas City to Promote Innovation

The framework for pursuing S&T development indentified seven critical elements which were analyzed in the context of Batangas City.

1. Education Institutions

As a factor of innovation, education institutions provide a venue for idea generation, development of technologies through research and development, incubation of ideas, and possible promotion, and dispersion of new ideas and methods. Education institutions create and recreate culture, including the culture of innovation – the mindset of doing something new and doing some things better for the benefit of the community – businesses and industries and the society and local economy as a whole.

Batangas City has the potential to advance S&T due to the presence of top caliber universities, colleges and other academic institutions. There are three universities in the city which are fertile grounds for generating ideas and producing graduates competitive enough to supply the pool of technology-oriented professionals and specialists for industry and commerce. In particular, the Batangas State University (BSU) which has enrollment of over 30,000, boasts of 7,000 enrollees in engineering and science while the University of Batangas (UB) and Lyceum University (LU) reported almost 2,000 enrollees in engineering and sciences.

The percentage of graduates passing the government licensure examinations in engineering, most especially those graduating from the above-mentioned universities, has been higher than the national average. Many engineering graduates of these universities landed among the “Top 10” passers in licensure examinations, and were sought after by companies in the CALABARZON region and Metro Manila. This is an excellent indication of the kind and quality of education these universities in Batangas City offer.

While the engineering and science programs in these universities have been quite strong, the assessment found out that there is a need for these universities to continuously upgrade their capabilities (e.g., facilities and human resources) for them to meet the challenges of technology development. More specifically, the curricula and course offerings must be regularly reviewed and revisited; likewise, the continuous upgrading of the knowledge base of these universities should be ensured through faculty

2 Representatives from the academe, business sector groups and civil society organizations as well as key officials from the city government and national government agencies participated in these sessions.

7 enhancement programs. These areas for upgrading can best be addressed by strengthening these universities’ linkages with industries and other academic and research institutions here and abroad.

As a critical factor of innovation, the role of education and academic institutions is not only to produce top caliber graduates but more importantly to provide advice and technical solutions to local industries and businesses. This can be achieved by the universities in Batangas City by continuously enhancing and sharpening their research and extension capacities and services, as well as creating a culture of “thinking out of the box”.

2. Large Enterprises

The presence of large enterprises is an important factor for promoting innovation. Large companies generate and produce ideas based on their experiences and business operations, at the same time, that they search for new concepts and technologies to improve their performance in the market.

In Batangas City, the large enterprises absorb the graduates of education institutions in the area. They provide opportunities for graduates to gain professional experience and serve as a venue for the transfer of technology available in the market to the schools through different modes of industry-academe linkages. Several large enterprises, such as Shell, Atlantic Gulf and Pacific (AG&P), the Naphta Cracker Plant of J.G. Summit, and the large electric power plants located in the City (e.g., Shell), are actively involved in the recruitment and training of graduates of the colleges and universities in the City. At the same time, these enterprises have pools of high-powered technology professionals, with work experiences overseas and exposed to latest global practices, who are able to transfer their acquired knowledge and vast experience to fellow workers who are recruited from local universities.

There are also initiatives and projects of large corporations in the City that help local schools and facilitate the transfer of technology between the academics and the corporate world. These include: (a) scholarship grants to deserving students; (b) on-the- job training (OJT) or internship programs where students can initially apply academic concepts in real industrial world; (c) research projects that are commissioned to schools; and (d) faculty complement to schools thru the deployment of top caliber executives who are allowed to teach as “adjunct professors” without compensation and as part of their Corporate Social Responsibility (CSR). These programs and initiatives in Batangas City are starting points which may lead to the development of appropriate technology and other forms of industrial solutions.

3. Industry-Academe Linkage

Industry-academe linkage is a necessary element in promoting the culture of innovation. Both the industry sector and the academic community would benefit from helping each other enhance their capacities for innovation through continuous sharing of knowledge, harnessing of processes and methods particularly for production and manufacturing, and setting a culture of dynamic and continuous discovery and application of technology (methods and processes).

As observed in studies, innovation can happen in different sectors of the local economy. Opportunities for innovation can occur even in lower technology sectors with high export potentials. In the case of Batangas City, the potential for applying science and technology is huge in two priority areas, which can spur the development of the local economy – agribusiness and tourism.

Agribusiness

While agricultural food production, especially staple, is not considered as among the potentials of Batangas City because of its proximity to Metro Manila and the rising land prices in the City, the presence of livestock and poultry producers, together with feed millers offer opportunities for more value-adding activities such as processing to supply large food manufacturers. The estimated number fattener hogs exceed 200,000, with about 30,000 breeder hogs produced by over 4,000 hog raisers. The hog industry consumes more than 1,300 metric tons of corn, which is favorable to the local feed milling industry. The further development of the livestock and poultry industry can be accelerated with the application of S&T that will encourage both backward and forward linkages. This is an area where the academic institutions can focus on in formulating their research agenda.

Furthermore, the private sector in Batangas City can be encouraged to engage in the processing and packaging of fruits and other agricultural products such as cassava, ube and bananas, which are currently shipped fresh from Batangas and nearby areas, the Visayas and the MIMAROPA region to Metro Manila. Batangas City can capture these fresh products for processing and packaging. A food terminal connected to the international port located in the City could be established to do these value-adding activities which can spur the development of appropriate technology for food manufacturing.

Tourism

Tourism offers a good opportunity for innovation to take place. It requires good infrastructure and other support facilities for visitors to reach and enjoy tourist spots. Appropriate and well-designed accommodation facilities and services are necessary for tourists to stay longer. There are many nice tourist spots, and in particular the Verde Island Passage being part of the world’s center for marine biodiversity offers great opportunities for investors. To intensify patronage and attract investments in tourism, this sector would require radical, bold and profound application of innovation, i.e., new ideas, new technologies, new methods and processes.

There are several requisites of a productive industry-academe linkage, to wit: (a) trust in the capacities and potential growth of each other and the notion of and focus on progressive exploration of the yet-unknown but potentially and sustainably beneficial to both; (b) willingness of both parties to take calculated risks and invest their resources to mitigate or eliminate these risks; and (c) equal sharing of credits.

As mentioned earlier, the linkage between industries and the academe in Batangas City was observed in the following areas: (a) recruitment and training of students in key industries in Batangas City; (b) research and extension services provided by schools

9 and universities to private companies; and (c) deployment of company executives as faculty members of schools and universities.

Despite the presence of this industry-academe linkage in the City, there is a need to strengthen and formalize this through: (1) more regular and frequent interactions; (2) inclusivity where everybody can participate; and (3) far-reaching scope and coverage of interactions. Private sector groups play a significant role to make this happen. For example, meetings among academic institutions and industry groups can be organized for the help develop curricula and program offerings needed by enterprises, which will eventually lead to the training of human resources to address current and future needs of the industry sector. The Batangas Chamber of Commerce and Industry, Inc. (BCCII) can serve as the catalyst that can strengthen the industry-academe linkage by facilitating regular forums for such interaction. Sharing of ideas and experiences breeds a culture of innovation.

4. Start-Ups and Incubators

Business start-ups and incubators are significant factors in the dispersion of innovation; likewise, various forms of innovation are expected to emanate from these sectors. The generation and development of new methods and systems could necessitate starting businesses to flourish and advance their operations into sustainable and profitable economic endeavors.

Assistance and support for the transformation of business concepts into actual business operations is a way to encourage and convince investors that doing business in Batangas City is worthwhile and laudable undertaking.

Right now, however, this factor of innovation is hardly in existence in Batangas City. The presence of good universities in the city, which can link up with the Department of Science and Technology (DOST) or private groups like Ayala Foundation which manages the Technohub with the University of the Philippines (Diliman), may be a starting point for promoting technology incubation.

5. Small and Medium Enterprises

Small and medium-enterprises (SMEs) are considered primary beneficiaries of innovation. With it, they progress rapidly; they improve their performance and become more competitive and, in turn, they are able to contribute in uplifting the quality of life and the level of competitiveness of the whole locality.

Batangas City has over 10,000 registered SMEs and microenterprises, mostly in services; there are very few in manufacturing and processing. SMEs comprise about 80-85% of all registered business establishments. This sector presents a rich ground for innovation.

6. National Government Agencies/City Government

Innovation will thrive in a supportive environment where the public sector issues policies that encourage the use of S&T by different sectors. In the context of the Philippines, the support from and involvement of national government agencies (NGAs) are critical in setting an environment conducive to innovation. The concerned NGAs can provide

10 policies and directions necessary for new ideas to evolve and develop. Among NGAs, the DOST and the DTI stand out as sources and foundations of assistance in promoting innovation at the local level. Equally important is the contribution of city governments in promoting the culture of innovation.

Department of Science and Technology (DOST)

The DOST has existing programs, such as its Small Enterprise Upgrading Program (SEUP), that assist SMEs in the acquisition of hardware (such as computers) for the improvement of business operations.

The Philippine Council for Industry and Energy Research and Development (PCIERD), in particular, undertakes continuing R&D projects in various disciplines which include, among others, the productivity and efficiency of different types of industries. Interested prospective investors can easily access the results of completed research projects.

DOST also manages the Technology Acquisition and Promotions Institute (TAPI), whose primary mandate is to help businesses, particularly SMEs, in upgrading their skills and competencies in the area of technology application. Scholarship grants are also extended to engineering and science students.

The Philippine Science High School (PSHS) is under the supervision of DOST. The PSHS is mandated to set up a campus in each region. There is strong interest to set up the next campus in Batangas City. Students of PSHS regularly participate in international competitions and are regular winners with innovative projects. The presence of PSHS in the city would boost the promotion of S&T even in early and basic education that will be strengthen the foundation of college enrollees in the City and will provide support to its industries.

These efforts of the DOST can be mobilized in bringing together various novel ideas that they may impact on the economic growth and progress of Batangas City.

Department of Trade and Industry (DTI) / Center for Industrial Competitiveness (CIC)

The Center for Industrial Competitiveness (CIC) has continuing programs such as the “road shows”, where the DTI staff goes around to different urban centers and conducts forums on “Quality and Productivity for Competitiveness.” These road shows are primarily intended to support SMEs by sharing with them good practices and by providing training programs for their staff, particularly on management of quality and productivity.

CIC also handles the secretariat function for the National Competitiveness Council (NCC) and coordinates activities of the different sectors tasked to identify actions that are necessary to improve the level of competitiveness of the country.

CIC manages the Philippine Quality Challenge (PQC), which is the SME equivalent of the Philippine Quality Award (PQA) – an award program for the most competitive enterprises conducted every year. As part of the requirements of the Philippine Quality Challenge Program (PQCP), award winners are committed to share their successful innovation experience during forums conducted by the CIC; thereby, nurturing a culture of innovation and excellence.

Batangas City Government

With the assistance extended by the national government, the City could respond well by setting the environment where enterprises can operate competitively-- one that is devoid of bureaucratic red tapes. Competitiveness of an enterprise depends on two (2) major components, namely: (a) internal efficiency, productivity and quality; and (b) reduced external costs in doing business. More often, the external costs (inadequate infrastructure, bureaucratic red tape, “extra costs”, etc.) far outweigh the internal effectiveness of enterprises; thereby, affecting their level of competitiveness and productivity.

The city government started to implement measures to reduce the cost of doing business in the city. It has significantly streamlined its business permitting process in 2013 thru reduction in processing time and adoption of more efficient processes. The city will be using technology in the next wave of reforms that hopefully will enable business applicants to apply for their registration online.

7. Research & Development (R&D) Projects

The conduct of research is one of the major mandates of academic institutions. It has been observed, however, that topics of researches are merely for academic debates and discussions. For this very important factor of innovation to fully contribute in promoting the level of development and competitiveness of Batangas City, there is a need to align the topics of researches to current and future needs of industries. This would make results of researches more appropriate, responsive and relevant to business and society where they are most expected. NGAs should be tapped to help provide focus and varied forms of technical assistance.

B. Challenges of Batangas City in S &T Development

Using the seven (7) factors or elements for promoting S&T in Batangas City, the challenges faced by the City and the proposed action areas are summarized in Table 2.

Table 2. Challenges and Proposed Action Areas for S&T Development in Batangas City

Factor/Element Challenge/s Action Area/s 1. Education • Continuous upgrading of • Academic institutions to Institutions capacities (facilities, ensure that course offerings academic programs or address the needs of course offerings, and industries thru better faculty) linkages between industry • Weak research and sectors and the academic extension services of community in the city education institutions • Expose the faculty to industries’ best practices locally and abroad 2. Large Enterprises • Lack of a venue to share • Regular conduct of forums

Factor/Element Challenge/s Action Area/s industry needs, best for knowledge creation practices and innovative • The city government to methods Implement policies and • Provide infrastructure development programs and facilities that would support projects that will be business growth supportive of business • High cost of doing business expansion and growth, e.g., due to inefficient processes expansion of roads and highways to accommodate potential growth of business operation, streamlining of the business permitting processes to cut down transaction costs and provide incentives to attract prospective investors 3. Industry-Academe • Need for a more formal • Local business associations Linkage mechanism for regular, (e.g., local chamber of broad-based and inclusive commerce and industry) to interface and interaction play a more active role in between industry and organizing forums where academe business can interact with the academic community • Academic institutions to take a more pro-active stance in addressing the needs of priority sectors in the city (e.g. livestock, power industries) • City government to act as catalyst in providing the venues for discussion between the academe and the business community. 4. Start-Ups and • Lack of opportunities for • Establish a technology Incubators start-ups and incubators to business incubation (TBI) develop with DOST and/or private sector support • The city to discuss w/ academic institutions their plans and possible assistance that the city can provide in putting up a “technohub” in the city • Develop a pool of experts and specialists in the areas of business development and management

Factor/Element Challenge/s Action Area/s 5. Small and Medium • Encourage SMEs to use • SMEs, thru cooperatives, to Enterprises technology to transform into actively participate in better and bigger business industry-academe interfaces ventures • Cooperatives to be • The need to improve encouraged to seek the capacities to become more assistance of academic efficient and productive institutions in identifying technology solutions and applications that can be used by their members • The DTI regional and provincial offices to make available to SMEs in the city information on credit programs and assist in improving access to credit 6. National Government Agencies • Department of • More active involvement of • Academic institutions with Science and DOST in assisting the city government to start Technology industries and SMEs in the discussions with the DOST city in developing on programs that the city technologies for more can tap in promoting S &T in efficient operations the city • DOST to play a more aggressive role in promoting innovation and suggesting mechanisms for the diffusion of knowledge and technological advances • DOST to make available to firms and academic institutions researches that are relevant to the sectors and industries in the city • Department of • Intensify efforts in helping • DTI to be more proactive in Trade and out SMEs and local disseminating the framework Industry- Center governments improve their for competitiveness that the for Industrial level of competitiveness cities can work on and in Competitiveness encouraging cities to collect data for assessing their own level of competitiveness • The CIC to conduct a forum on “Quality and Productivity for Competitiveness” for SMEs and companies in Batangas City

7. Research and • Improve the capacity of • Provide venue or platform to

Factor/Element Challenge/s Action Area/s Development academic institutions in the transform the results of R&D city to undertake into technologies needed by researches, especially in local industries sciences and technology • Tie-up with international • Mismatch between R&D institutions for researches conducted by collaborative endeavors academic institutions and • Establish R&D funds the needs of industries and specifically for SME SMEs development • Lack of efforts to translate • Tap NGAs (DOST and DTI) researches into adaptable for focus of researches and and appropriate for the provision of technical technologies assistance • Lack of funding support for R&D activities

IV. RECOMMENDATIONS

Given the above, the study drew several specific recommendations grouped into thematic categories that are responsive to the promotion and adoption of a culture of innovation in Batangas City.

1. Creation of Institutional Support for S&T Development

The national government, through the DOST, launched the “Smarter Philippines” program that sets the foundation for using technology to enhance various government operations. Part of this program is the “Smarter City” Project, which encourages city governments to take a more active role in the use of technology not only in industrial development but also for addressing social needs. Some of the more critical measures that Batangas City can undertake to further promote the use of technology and a culture of innovation are the following:

a. Support the setting up of a PSHS campus in the City. The PSHS System is mandated to set up a campus in each region of the country and is considering the Batangas City as a possible venue for CALABARZON owing to its strategic location. The Batangas City government should take the initiative to offer the PSHS to host the campus. There have been counter offers forwarded by the provincial governments of Quezon and Rizal and the City of Lipa.

b. Promote investments that will bring in foreign technology and/or assist in building incremental innovation that will respond to specific local conditions. Immediate areas that need to be addressed to attract investment include:

(i) better communication facilities: The city government should coordinate with the Philippine Long Distance Telephone Company (PLDT) and other telecommunications service providers to ensure sufficient high quality service for existing and prospective investors;

(ii) good road network: The city government should immediately make necessary representation with concerned national government agencies, such as the Department of Transportation and Communications (DOTC), the Department of Public Works and Highways (DPWH) and the Philippine Ports Authority (PPA), for the completion of the STAR Tollway four-lane divided highway between Lipa City and Batangas City; and

(iii) further improvements in business permit processing. The city government should computerize its business permits and licensing system and work towards an online business registration system.

c. Develop business intelligence and improve coordination with NGAs and business groups. For instance, the City may wish to coordinate with the PPA on potential investors around the international port area. There are feelers from investors who are considering setting up grain silos to handle grains from Mindanao to supply CALABARZON’s feed millers for the hog and poultry industries. The City, in cooperation with the local business groups, such as the BCCII, should promote the

setting up of value adding enterprises for the hog and poultry industries, and invite processors for fruits and related agriculture products

d. Advocate the productivity improvements in the workplace. The city government should include in its investment promotions program, in cooperation with the BCCCII, a slogan “Productivity and Quality for Competitiveness.” At the same time, it can also initiate discussions with the business groups, thru the Local Economic and Investment Officer (LEIPO), to invite the DTI/CIC to sponsor forums on productivity enhancements in the private sector.

e. Assist the Batangas City Universities in promoting engineering education. Dr. Jose B. Cruz, Jr., a “balik scientist” is currently assisting Batangas State University for the local certification – the Philippine Technological Council. It is recommended that the city government assist in setting up a symposium on Engineering Education to be conducted by Dr. Jose B. Cruz, Jr. for the benefit of Batangas Engineering Colleges.

2. Strengthen Academe-Industry Linkage

The academic institutions, particularly the engineering departments of universities, should strengthen industry-academe linkage programs. These linkage programs should go beyond the usual on-the-job-training arrangements of schools. For these new linkage programs, the DOST can be tapped to provide further support and be the technology catalyst.

In 1985, the University of the Philippines College of Engineering (UPCOE), with initial support from PCIERD (under DOST) initiated the UP Engineering Manufacturing Linkage Program (UPEMLP) with several leading manufacturing companies. The program allowed UPCOE to tap high caliber managers and executives of the participating companies to teach specialized subjects without UP paying for their services. UP gained experienced lecturers for free while the participating companies gained priority access to engineering graduates and used their programs with UP as part of their corporate social responsibility. The UPEMLP has succeeded over the years and has now evolved into the “UP College of Engineering Industry and Government Linkage Program (IGLP).” Engineering colleges and universities in Batangas City can replicate this model.

3. Setting up of Technology Business Incubator

The City, together with local business groups, such as the BCCII and the academic community, can initiate the setting up of a Technology Business Incubator (TBI). The DOST will readily provide this program with technical and financial support.

The TBI is a good venue where innovation can be encouraged as faculty members, students, and industry players can test new ideas for possible commercialization over a period of time. Opportunities will be provided for new “start up” companies with minimum initial capital.

The City can initially provide the office space and basic facilities. If necessary, even second hand 20-footer containers can be facilitated and used as offices. This idea was presented to, and generated a good response from BSU and UB.

As a model for planning purposes, the city government with the business sector can study the experience of the Ayala Foundation and the University of the Philippines in establishing the UP TBI, which was a “Joint Experimental Facility on Technology Development and Technology- Based Entrepreneurship.”

4. Upgrading Engineering Education

With the rapidly changing technology environment, the engineering education programs offered by the universities in Batangas City should be able to catch up with the more advanced programs of other universities in Asia. As a result of the “Washington Accord”, the engineering schools around the world have to follow certain accreditation programs to place their engineering graduates at par with their counterparts abroad, based on certain curriculum standards. The US-based Accreditation Board for Engineering and Technology (ABET) sets certain standards for engineering graduates to be recognized for the practice of engineering internationally. This standard is set for specific programs in engineering schools. So far, Mapua Institute of Technology (MIT) is the only ABET certified college in the Philippines. Dr. Jose B. Cruz, Jr., a “balik scientist” was responsible for facilitating its ABET certification. He is currently assisting Batangas State University for the local certification from the Philippine Technological Council. He is also assisting The First Asian Institute of Technology and Humanities (FAITH) in Tanauan, Batangas to get a similar certification. The certification of BSU will slowly lead to the upgrading of engineering education in the city, an important factor if the city will move towards better use of technology and its promotion not only for the use of industry but also for SMEs to achieve inclusive innovation.

REFERENCES

Ashby, Matthew V., Kathy Moore Cowan, Lyn E. Haralson and Faith Weekly (2013). The Four Key Elements of Innovation: Collaboration, Ideation, Implementation and Value Creation, published at http://www.google.com/think/interviews/key-elements-of-innovation.html. Think Insights. Date Retrieved: July 2, 2013.

Lewis, James (2005). Elements of Innovation. CSIS, published at http://csis.org/files/media/csis/pubs/0805_elements_of_innovation.pdf. Date Retrieved: July 2, 2013.

OECD (May 2012), Innovation for Development. Published at http://www.oecd.org/sti/inno/50586251.pdf. Date Retrieved: July 2, 2013.

Schumpeter, J. A. (1943). Capitalism, Socialism, and Democracy (6 ed.). Routledge. pp. 81–84. ISBN 0-415-10762-8, as cited in http://en.wikipedia.org/wiki/Innovation. Date Retrieved: July 2, 2013.

Storme, Sean (2013). 6 key elements to aligning innovation to sustain growth. Kansas Business Journal, Kansas City, published at http://www.bizjournals.com/kansascity/news/2013/06/07/stormes-6-key-elements-to- innovation.html?page=all. Date Retrieved: July 2, 2013.

Ulrich, Karl (n.d.). Elements of Innovation (Video). Published at http://www.google.com/think/interviews/key-elements-of-innovation.html. Date Retrieved: July 2, 2013

Wikipedia (2013). Published at http://en.wikipedia.org/wiki/Innovation. Date Retrieved: July 2, 2013.

ANNEX. List of Persons, National Government Agencies, Private Sector Groups/Individuals Consulted

1. City Mayor and staff to understand Vision- Mission of city administration.

2. Batangas Chamber of Commerce and Industry as a group and individuals to understand concerns and suggestions.

3. Representatives of the Academe on the role of the academic institutions as regards to development of technology and programs on Science and Engineering.

4. Philippines Ports Authority on status of the Batangas Port.

5. Department of Science and Technology (DOST) on assistance that can be drawn on for the support of the academic institutions and local industries for more efficient and productive operations.

6. Executive Director of Philippine Science High School and Director of DOST Science Education Institute.

7. Philippine Economic Zone Authority (PEZA) for policies and incentives for locators in PEZA for registered enterprises. Incentives for IT-based enterprises.

8. National Competitiveness Council and DTI/CIC re: programs on-going on a nationwide scale that includes Batangas City and other urban areas.

9. Chief Executive Officers of large enterprises that operate within Batangas for comments, suggestions on long-term programs that impact on Batangas.

10. Balik Scientists on world class initiatives for Engineering and Science education programs.

11. Batangas State University and University of Batangas on setting up technology-based business incubator.

12. Prof. Rolando Dy, Agribusiness expert of University of Asia & the Pacific.

13. Mr. Francis Estrada, former President of Asian Institute of Management.

14. Prime Minister Cesar Virata.