Panel files bill which will give IT firms access to capital

MANILA, Philippines - A government-private sector panel assessing the information technology (IT) sector has recommended that Congress pass a law mandating some institutions to provide funds to the sector in order for it to be competitive. The IT and IT-enabled Industries sectoral panel of the Congressional Commission on Science and Technology, and Engineering (Comste) on Monday proposed the passing of a “Fair Access to Capital" bill that will hopefully give birth to many local IT enterprises doing high-value type of IT activities or services. In a proposal submitted to Comste in its en banc meeting on Monday, the IT panel said the proposed bill is a “critical step" in ensuring that the country can generate groundbreaking products and more intellectual property (IP) assets that can make the country competitive. Comste was created last year by Congress to assess and review the state of the Philippines’ science and technology (S&T) sectors in order to recommend proposals, such as legislation or policies, to make the country competitive. Competitiveness is being underscored in Comste since Congress noted that the Philippines has not been faring well in global competitiveness rankings. Comste created six sectoral panels in S&T and after months of meetings, researches and consultations, the panels submitted their proposals to the comission. The Fair Access bill is particularly encouraging more investments in the high-end IT businesses such as software development and animation. While the country is known worldwide as a services and outsourcing destination, it is more known for low-value add services such as call center operations. The IT sector has been trying to move up the value chain which includes software development, game development, and animation, to name a few. The IT panel said local IT companies should change the way they are doing business by creating their own IP and producing groundbreaking new products. However, the panel members noted that access to capital is a challenge. The panel said in their proposal that the proposed bill should have three major provisions, including securitizing IP and other intangible assets such as software, realigning lending institutions’ focus such that micro-financing can be made available to IT companies, and enhancing local laws on bankruptcy to protect the IT companies since some investments in IT are considered as risky. In realigning the focus on lending institutions, the sectoral panel noted that IT companies asking for loans below P50 million is a challenge. “Micro-financing institutions such as the Land Bank [of the Philippines], which provide access to smaller loan amounts, are few and far between, and typically suffer from shortage of funds for SMEs (small and medium-sized enterprises)," the panel noted in its recommendations. “On the other hand, the Development Bank of the Philippines has been known to have access to, and provide facilities for, higher loan denominations," the recommendation continued. However, most of these loans go to infrastructure development such as mass housing and roads. For there to be truly “fair access to capital" for the local IT companies, the panel said these lending institutions “should be reconfigured to make available their resources to the companies at the appropriate moment in their growth." With the proposed legislation, the panel said IT firms can grow into billion-peso companies employing at least 1,000 S&T workers. - Veronica C. Silva, GMANews.TV