(Shortened version of a paper presented at the ASAIHL Conference in Taipei, Taiwan, April 16-18, 2010.)

Knowledge economy has been defined by the Oxford English Comprehensive Dictionary as “the economy based on the production, distribution, and application of knowledge.” The World Bank has adhered to the definition of knowledge economy given by the economist Lester Thurow, who defined it as the economy that relies on the development and application of science and technology rather than human resources.

The Philippine economy has kept afloat during these years of economic turbulence because it has evolved a different type of knowledge economy. It has an army of workers whose skills are needed in other countries. According to the economic journal Next 500 Corporations: Business Profiles 2005-2006, the country dispersed eight-million workers to work abroad and they sent home 12 to 14 billion dollars.

Information and Communication Outsourcing, which consists of Information Technology Outsourcing (ITO) and Business Process Outsourcing (BPO), has contributed tremendously to buoying the Philippine economy.

In 2005-2006, the country was ranked next to India as it had “attained a 100 percent growth in 2005 from 40,000 seats in 2004 to 80,000 seats in 2005, the fastest in the whole of Asia.” Bernardo M. Villegas, one of the outstanding economists in the Philippines, acknowledged the huge economic boost created by the BPO industry when he said that, based on one estimate, the industry earned around $2.1 billion in export revenues and employed about 120,000. He added that, after the semiconductor/ electronics and garments industries, the BPO sector – practically non-existent only six years earlier -- had become the third largest industry exporter.

Villegas refutes the common notion that BPO is all about college graduates and undergraduates, who have been carefully trained to communicate in certain prestigious dialects of English, Korean, Chinese, and other languages. In his view, “the larger share of the global BPO industry involves non-voice processes such as animation, accounting and finance, and medical transcription.” Degree-holders in accounting and related areas of study enjoy the greener pastures created by “knowledge process outsourcing, such as data search, integration and management services, financial services, research and analysis technology research, computer-aided simulation and engineering design and professional services such as business research and legal service.” More opportunity beckons as McKinsey Global Institute observes the scantiness of the human resources of China that can meet the expansionist ambitions of its multinational companies.

Tourism is another industry that propels the indigenous type of knowledge economy of the Philippines. Aside from BPO and overseas employment, it is one of the motors of the Philippine economy, according to Next 500 Corporations: Business Profiles 2005-2006. Although other industries such as “logistics, garments, agribusiness, and furniture exports” display potential,
tourism nevertheless appears to be the most promising. According to MasterCard International, by 2015 personal travel spending around the globe “would reach US $4.6 trillion, or 11 percent of the world’s personal consumption,” or “an annual growth rate of 5.1 percent.” On the other hand, non-travel spending would rise only to US$963 billion in 2015, with an average annual rate growth of four percent. The tourism industry spreads its prosperity to other industries such as construction,
communication, transportation, entertainment, food, marketing, retailing, and advertising. The industry can even significantly serve certain programs and activities, which promote history and culture. Each dollar and peso spent has an income multiplier effect, “the total economic activity generated in a local economy for each dollar spent.”

The Department of Trade and Industry has identified the sectors of mining technology, electronics, motor vehicle products, energy, infrastructure, tourism, shipbuilding/shipping, jewelry, fashion garments, industrial tree plantation, iron and steel, exploration, mining, quarrying and processing minerals, industrial tree plantation, development and self-reliance of disabled persons as very attractive to investors (Next 500 Corporations: Business Profiles 2005-2006). The mining industry is enticing to prospectors and venture-makers (Top 700 Corporations: Business Profiles 2005-2006). Villegas has lauded the rich source of skill workers in the Philippines because they are highly sought abroad, and “the area of technological infrastructure (especially telecom) in which it was ranked higher than China and Indonesia.”

For the Philippines to meet the challenges of the knowledge economy, Philippine education must have the creative content and structure that can meet the fluidity of labor market demands. According to the report Philippine Education for the 21st Century, the knowledge economy needs “workers to move efficiently across sectors”. Certain jobs that have significant economic impact might be ephemeral and peripheral. They are needed in a relative period of time, and they proliferate in certain places, but suddenly they are gone, or become jobs which now look different. There are jobs that grow up from the existence and constant refinement of certain highly complex skills. Thus, Philippine education infrastructure and programs must be prepared both to adequately equip knowledge workers with the required minimum of skills, and to competently retool them with new and advanced skills and knowledge.