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Case-study results

Copper industry

We considered the techno-system for copper wires and cables, copper cathodes, and copper concentrates, as shown in figure 8. For simplicity's sake we will refer to this techno-system as the copper industry. The evaluation of self-reliance indicators for the copper industry was undertaken through the analysis of existing literature and background papers and the interviews of the principal actors of the sector. The results are shown in table 9.

The important dimensions of S&T self-reliance are obvious. The general assessment is that in terms of technological capability, the system is still in the operative stage, with some indications of nascent adaptive capability. This is confirmed by the value of indicator no. 4.21 in table 9.

The self-reliance of the copper industry is weak in the following dimensions, where the average score is 1.5 or less:

- Quality of technological innovation by Filipinos.
- Support of local R&D by the industry.
- Utilization of R&D results.
- Local supply of hardware.
- Number of innovations in the industry.
- Control of financing.
- Foreign nationals in management.

Both the quality and the quantity of local innovations in the industry are unsatisfactory. Of the 10 important patents registered for the industry, only one is of Filipino origin.

Fig. 8. Techno-system for the copper industry

Table 9. Indicators of self-reliance in science and technology: copper industry

In R&D, the sector is not doing anything important. The industry's only significant link to government R&D is in the area of geological exploration. The interviews with the technological leaders of the industry revealed a static perspective on process or product improvements. The prevailing general attitude is that R&D cannot help the industry except in trivial ways.

In spite of the constitutional provision that natural resources-based industries should be at least 60 per cent owned by Filipinos, alien control of the copper industry is still significant. This is indicated by the following facts:¹²

- The key officers of the biggest firms are mostly foreigners.

- The biggest sales contracts are with a very few foreign firms.

- Of the combined resources of the 10 biggest mining companies about P22 billion - only P9.8 billion is owned by stockholders; the rest is owned by creditors.

- Only about P5.9 billion of the mining resources representing 27 per cent of total assets, are owned by Filipinos; 73 per cent are owned by foreign stockholders and leaders.

The strongest aspects of self-reliance (indicator value greater than 2.5) are the following:

- Local maintenance of hardware.
- Technical training programmes in companies.
- Adequate supply of graduates.
- Vertical linkages of the system.

Although almost all the capital equipment is imported, local technicians can maintain these properly. This further reinforces the observation made previously that the industry is still in the operative state and has not reached the replicative stage. This is consistent with the finding that there is an adequate supply of engineers and technicians but they are of low quality.

In summary, then, the copper industry is technologically dependent. The historical, political, and social factors conspire to create this condition of perpetual dependency. The recent closures of many firms in the industry are perhaps symptomatic not only of dependency but of a latent potential for self-destruction.

Geothermal energy

The techno-system for the geothermal energy sector is shown in figure 9. There are four processing stages, starting from the geophysical and geochemical survey and leading to the transformation process in which the voltage output is stepped up before it is transmitted to the local substation.

Fig. 9. Techno-system for the geothermal energy sector

Table 10. Indicators of self-reliance in science and technology: alternative energy sector (geothermal and biogas)

Interviews with some of the principal actors in the sector and a thorough analysis of literature and background papers written about geothermal energy operations in the Philippines facilitated the evaluation of the self-reliance indicators. The results can be seen in table 10. From these, it can be generalized that the Filipinos are more or less capable as regards the main technologies involved in a full-scale geothermal energy production. Skills in geothermal exploration and drilling management have been acquired by a significant number of Filipinos. These skills range from the evolvement of design layouts for steam collection and effluent disposal systems to the supervision of their con struction and the eventual maintenance of the systems. In terms of technological capability, therefore, it can be surmised that the system has clear indications of adaptive capability.

It is worth noting that technology transfer was assured here through the training of local professionals under "hands-on" conditions. This was provided for in the contract with Union Oil. This training programme was complemented by bilateral training assistance programmes with New Zealand, Italy, Japan, and the United States. By 1985, there were more than 280 technical personnel trained in other countries.¹³

As can be seen in table 10, self-reliance is low or absent in the following dimensions, where the score is 1:

- Existence of R&D programme in corporate plans.
- Nationality of management.
- Number of innovations in the industry.
- Quality of technological innovations by Filipinos.
- Utilization of R&D results.
- Local supply of hardware.

The quantity of local innovations in the industry is unsatisfactory. There are only two important patents registered, neither of which is Filipino in origin.

Self-reliance is very strong in the following areas, where the indicator value is 3:

- Existence of technical training programme in corporate plans.
- Number of Filipinos with managerial know-how.
- Existence of technical industry library locally.
- Existence of historical industry statistics.
- Utilization of locally trained technicians and engineers.
- Relevance of curricula to industry.
- Adequacy of number of graduates.
- Local maintenance of hardware.
- Existence of the various components of the techno-system.
- Interdependence/linkages of the subsystems.

From all indicators, the geothermal sector, being a very important energy source, has been given more than adequate attention by the government. However, the government has yet to make it more viable for local geothermal companies to operate in the Philippines. Laws on tax exemptions on capital goods and other inputs, plus presidential proclamations setting aside geothermal areas as national reservations, are indicators of the heavy government support for the sector.

The geothermal energy sector is still technologically dependent on imported capital equipment. However, in spite of this, there are clear indications that it has achieved a semblance of self-reliance in its manpower requirements and in the adaptation of the technology to local conditions.

The existence of relevant indigenous R&D and strong government support for the industry's development account for the higher degree of technological capability in this field. It is unfortunate, however, that this thrust is not being pursued with a sustained commitment to reach the level of technological mastery.

Coconut industry

The major products derived from coconut trees are copra, coconut oil, copra meal/cake, and dessicated coconut.

Figure 10 shows the six processing stages, starting from the planting and cultivation of coconut trees to the processing of coco-chemicals. The knowledge stock of the industry is with engineers, chemists, botanists, agriculturalists, technicians, and managers. Training is carried out mainly in the universities and through company-sponsored training programmes. R&D is undertaken by government agencies and universities. The government agencies are the Philippine Coconut Authority and the Bureau of Plant Industry, and the universities UP Los Banos, Palawan National Agricultural College, the University of Eastern Philippines, Visayan State Agricultural College, and the University of San Carlos.

The results of the evaluation of self-reliance indicators are shown in table 11.

With respect to coconut milling and refining, the system is in the replicative stage of technological capacity. However, at the coco-chemical processing stage, it is still at the operative level. The average value of indicator no. 4.21 is 1.5, indicating that the system is weak in terms of technological capacity.

Other indicators show that the sector is weak in the following aspects of self-reliance:

- Existence of technical training programmes in corporate plans.
- Quality of technical innovations by Filipinos.
- Utilization of R&D results.
- Level of R&D effort.
- Support of local R&D.

There are no explicit technical training programmes in the industry's corporate plans. The industry, then, does not put emphasis on learning in its formulation of goals.

Table 11. Indicators of self-reliance in science and technology: coconut oil industry

The technical innovations by Filipinos are of little value to the in dustry. The industry does not support local R&D and utilizes hardly any local R&D results.

The strongly self-reliant aspects of the industry are the following:

- Role of nationals in policy formulation.
- Nationality of management.
- Equity participation of nationals in corporation.
- Control of managerial inputs.
- Use of local material inputs to various processes.
- Existence of technical industry library locally.
- Existence of historical industry statistics.
- Number of scientists, engineers, and technicians in relevant fields.
- Utilization of locally trained technicians and engineers.
- Adequacy of the number of graduates.
- Local maintenance of hardware.
- Existence of the various components of the techno-system for coconut.

Control of the techno-system rated high self-reliance scores. Philippine nationals have increased their participation in the industry's control.

In the past, while actual crop cultivation was in the hands of Filipinos, the intermediate processing of coconut products for export and local distribution was dominated by foreign capitalists. In recent years, a new breed of local capitalists, composed of coconut landlords, Filipino capitalists, and government bureaucrats, has emerged and taken over the processing and export of coconut oil. Foreign capital, however, has remained in the manufacture of coco-chemicals.

In terms of material inputs, the industry has increasingly made use of local materials in the various processes. Local maintenance of hardware is ably done by local technicians. In terms of local manpower there is an adequate supply of engineers and technicians for the industry.

Foreign technological and material inputs continue to flow into the various sectors of the industry. Although the industry has made moves to disengage itself from foreign control, it continues to follow a colonial pattern of trade. Its present orientation still maintains the colonial and agrarian character of the Philippine economy. The refining and manufacturing of coconut-based consumer products are still in the hands of TNCs.

Semiconductors

Over a span of 10 years, the semiconductor industry experienced tremendous growth. There were 17 companies in 1978, and these grew to 33 foreign and local firms in 1981. In a matter of nine years since the first shipment of electronic components in 1973, worth US$10 million, semiconductors have become the Philippine's top non-traditional export. Table 12 shows the performance of semiconductors in relation to other prime exports. The techno-system for the semiconductor industry is shown in figure 11.

The Philippine semiconductor plants only carry out assembly, and are classified into: (a) captive producers or foreign-owned subsidiaries who turn out products for the exclusive use of the mother company; and (b) independent contractors who cater to the requirements of various customers.

Raw materials are consigned to subsidiaries by the mother company or to subcontractors by the foreign clients. These imported raw materials include silicon dice, wafers, metal can packages, aluminium wire, gold wire, epoxy caps and bases, chemicals, etc. In packaging assembly, there are four stages which are done in the Philippines; a few companies have testing facilities. All marketing activities are done by the mother company/customer.

Fig. 10. Techno-system for the coconut oil industry

Table 12. Top commodity exports, 1980-1983 ($US millions)

Sources: NCSO Foreign Trade Statistics; External Trade Statistics Group, DER International; Special Study, Technical Staff. Foreign Exchange Committee.

a. Garments are net of import value of material inputs for exports on consignment basis, while semiconductor devices are net of import value of material inputs for consigned exports and payments for loans and advances from parent companies.

Fig. 11. Techno-system for the semiconductor industry

For foreign-owned subsidiaries, R&D activities are carried out by the mother company. Minimal innovations (e.g. simplification of word processes) are made in the Philippines. An evaluation of self-reliance indicators, based on existing literature, plant visits, and interviews with key officers in the industry, is shown in table 13.

In foreign-owned subsidiaries, the chief executive officers are mostly expatriates, except for Timex, which is headed by a Filipino. Filipino engineers occupy managerial and supervisory positions. as the country has an adequate supply of skilled and highly trainable technical personnel. Technical training programmes are present in most companies as part of the regular manpower orientation and training programme.

R&D and linkages with relevant institutions are non-existent. self-reliance. is weak in the following aspects;

- Existence of R&D programmes.
- Control of technological inputs.
- Control of material inputs.
- Control of financing.
- Innovations in the industry.
- Existence of technical industry library.
- Local supply of hardware.

The Philippines does not in fact have a "semiconductor industry." The labour-intensive phase of production is carried out here primarily because of inexpensive labour, whereas the more capital- and technology-intensive stages take place in the mother companies or clients' facilities. There is a need to develop the industry's backward and forward linkages to establish technological independence.

The industry could break out of this situation by: (1) establishing local R&D; (2) training the Philippines' unlimited labour force for high technologies; (3) providing investment and financial assistance from local sources; (4) developing the support of allied industries; (5) developing new products; (6) expanding and seeking new markets; and (7) promoting regional and global cooperation through exchanges of technologies.

Table 13. Indicators of self-reliance in science and technology: semiconductor industry

Self-reliance may be achieved by moving in the following directions:

1. Establishing a semiconductor R&D centre.
2. Organizing a national association of semiconductor producers in the Philippines.
3. Creating a government agency that would protect local interests in the industry.
4. Setting up a Philippine wafer fabrication facility.
5. Developing a semiconductor industry complex that would spear head the transformation of the industry from more offshore assembly houses to a total manufacturing base for semiconductor production.

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