Full Digitalization in the Philippines

An Industry Report presented by Mr. Bernabe A. Kitane, in his capacity as Vice President of PPTF, during the 3rd FAGAT Information Exchange Meeting held on October 1998 in Bangkok, Thailand.

Introduction

Integration is the word that aptly describes the impact of computers on the various divisions of the graphic arts industry. But the increasing cost of technology has stalled the Filipino printers' momentum and bogged down efforts on the road to full digitalization.

The present and foremost concern is the financial turmoil, which is dampening investors' interest in the acquisition of imported capital goods. It is thus unlikely that significant technological progress will be observed in the short-term as expansion plans of most printing firms are curtailed due to the substantial depreciation of the Philippine peso since July 11, 1997 and the banks' high lending rates.

Furthermore, since the performance of the printing industry is an indicator of the direction of the economy, it is worth considering the concurrence of analysts in their forecasts that a relatively flat economic growth rate may be observed in the country within two to three years. The Philippine government projected a 1% growth in the gross domestic product (GDP) while other economists predicted 0.4% in 1998.

Along with the financial constraints is the problem of social resistance to printing innovations. Many printers in the country are still cautious of shifting to high-end computerized machines because the products of mature technology may not be fully acceptable to the general market at this point in time. While the price of digital output may appear exorbitant to an average consumer, the difficulty also lies in the ignorance of both the seller and the buyer on the existence of global quality standards.

With the current conditions inducing more price wars in the sector, many printers believe that investments in digital equipment and training of technical operators will further increase production cost and may not even assure the investor of modest returns.

Current Stratus of Printing in the Philippines

Users of computer-to-film technology are still dominant in the printing industry, particularly in packaging services, newspaper and commercial printing.

While a number of printers are into computer-to plate systems, the technology is confined to the low-end uses, as in quick printing.

Operators of computer-to-press machines are the most limited of the group. Installations of said equipment in the Philippines could be counted with one's fingers. Local suppliers noted that market response was not encouraging. High price and heavy cost of maintenance, compared with those for offset printing, affected sales of computer-to-press systems. In fact, one distributing firm, which was unable to sell such equipment, resorted instead to the establishment of a service bureau using the unsold machine.

Even with the exchange rate of around PhP25: 1 dollar two years ago, selling the cheapest computer-to-press machine worth PhP 3 million proved to be a headache, as one supplier experienced. One can easily perceive a more woeful predicament on the part of importers and sellers with the present currency exchange fluctuating between PhP 43 and PhP 44 to the dollar.

The contraction in inward shipments of printing equipment paints a bleak picture for potential investors as well as the technological development of the printing sector. Data culled from the Philippines' National Statistics Office (NSO) show the country's importation of printing and bookbinding machinery and parts in the first half of 1998 decreased 27.63% to US$ 22.08 million from US$30.51 million in the same period in 1997.

On a yearly basis, the growth in imports of the same capital goods was only 0.29% to US$ 62.73 million in 1997 from US$ 62.55 million in the previous year. In 1996, imports even decreased 0.9% from US$ 63.12 million in 1995. Note, however, that the largest growth rate during the 1993-1997 period was recorded in 1995 at 64.8%.

The list of imports provided by NSO also gives an idea on how slow the Philippines has assimilated modern technological trends throughout the years. Among the printing equipment that comprised the imports are phototypesetting/composing by other process; reel-fed offset printing machines; sheet-fed, office type offset printing machines; letterpress printing machines, whether reel-fed or otherwise; flexographic and gravure printing machines.

But with print-on-demand (POD) technology gaining ground in the country, digital printing is expected to expand, albeit at gradual pace. This is quite consistent with the observation of many equipment suppliers that the Asia-Pacific regional market is growing much slower than its American of European counterparts.

POD's shortened production process has resulted in faster turnaround time and high quality output. This benefited both the Philippine manufacturing and packaging industries where the delivery of packaging materials at the shortest time is imperative.

Problems

Like any industry, the difficulty of technological assimilation in the printing sector is rooted on the problem of mind and matter. The mind refers to the mindset or attitude of adopting innovative ideas and engaging in paradigm shifts when the economic competition and survival so require. Matter, on the other hand, points to the material and human resources needed to acquire the technology. In many cases, the two are intertwined such that one may determine the existence of the other.

In the Philippine situation, this relationship can be spotted in the vicious cycle of price wars, low awareness of quality standard, dearth of investment in technology and inadequate technical training. Note, however, the arrangement of the factors is not necessarily in the order mentioned. Nonetheless, the ultimate challenge of printers in its pursuit of digitalization is how to puncture this cycle.

Although it is to be expected in any industry, cutthroat competition in the form of price wars has never been more manifest and intense in the printing sector. Because of the competition, reaching a 50% mark-up in sales is already an uphill climb.

But also to be blamed is the Filipino consumer. It must be emphasized that there are two types of clients: one who does not care about the price as long as the quality is good; the other, who is not concerned about the quality as long as the price is low. Many industry players believe 80% of the market base belongs to the second type.

The second problem necessitates the adoption of a uniform standard by the industry. The absence of such a standard has encouraged the emergence of small-time printers. Referred to in the industry as the “mom and pop " and " social " printer, these groups are primarily engaged in the production of cheap but low quality printed matter such as invitation cards.

On the part of the more serious printers, the lack of commercial norms has also caused confusion in ascertaining what quality output really means, not only on the theoretical level but also on the actual production of graphic materials. This, to the detriment of the public. For instance, it is quite common to hear advertisers complain why a visual impression and color texture of the same advertisement on one newspaper is different from another. The answer is while both newspapers may have been using the same machine, they may also be resorting to varying calibrations.

Ideally, the most modern technology is the norm. The infusion of an innovation or procurement of advance equipment gives the user an edge, marginalizes the others, and creates industrial classes. The commercial existence of these divisions would largely depend on how fast they can respond and compete with the industry leaders who possess the high-end technology.

Realistically, however, this has never been the case in the Philippines where purchases of state-of the art equipment are restrained by financial considerations and ignorance of the buyers.

Thus, this fact brings our focus to the third problem-low investment in technology. While our European counterparts would dispose of their printing machines and buy new ones after five to seven years, Filipino printers have a penchant for obsolescence. For cost cutting reasons, printing machines are sold and passed on to other printing firms five to seven times.

For local printers, the acquisition of costly high-end digital printing machines, instead of being a boon, is viewed as a bane. To this, even foreign suppliers agree that an average Filipino's purchase decision is largely influenced by price such that earning potentials of the capital goods are seldom taken into account. As mentioned earlier, the economy is not yet, fully prepared to absorb the mature technology and its corresponding output.

But suppliers may also share a portion of the blame when they take advantage of the " buy the cheapest " attitude of the client marketing and selling equipment that is no longer available elsewhere. This, in addition to the imposition of profit margins that would virtually drain the buyer of his financial reserves and thus leave no more funds for the training on the integration and management of the systems. Furthermore, unscrupulous sellers of equipment would sometimes dupe the local printers into believing that a product, say particular expensive software, is indispensable to the buyer's system, when in fact it is not.

Given the reluctance of printers to procure new equipment, the situation presents no need to invest in human resources training. Furthermore, with rampant piracy of technical skills, an investor would be quite wary of the consequences of such a costly endeavor.

However, even if charity dictates otherwise, there is still the problem of schools not offering the relevant training because the learning institutions themselves lack competent teachers and pertinent equipment. Instructors complained of the mismatch between the schools and industry with the former investing in Pcs and the latter using the Macintosh.

Moreover, the tuition is most often prohibitive to the underprivileged. Only few schools are accessible to the poor, like the Dualtech Training Center, who offers vocational courses in printing. The system applied by Dualtech requires the cooperation and sponsorship of the industry for the practical training of an apprentice. But the patronage is hard to come by, not even from the government, which shuns any assistance, since the sector is not classified as a priority industry.

Also related to technology investment but on a large, infrastructural level and thus beyond the printing industry's capability to address, is the need to improve telecommunications in the county which is critical in the quick transfer of digital files through the Internet.

Lastly, some foreign suppliers mentioned that the country's archipelagic features create a physical constraint, although not a serious one, on the distribution systems of printed matter, in particular, and the spread of digitalization , in general.

Future Trend to Approach Full Digitalization

While unifying the various components of a printing firm into one coherent system, digitalization in the Philippines is also foreseen to widen the product and service lines offered, enabling the customer to enjoy the one-stop benefit at the quickest possible time. It is thus likely that the lines separating the once specialized spheres of design, pre-press, printing and distribution will be erased. As a logical consequence of the integration process, production time and cost of output will be substantially reduced.

With the transmission of digital files through fiber optics technology, it is now possible to tap cyberspace as a marketing tool of Filipino graphic artists and subcontract services between the Philippines and other countries via the Internet. A handful of enterprising Filipino corporate designers, advertising agencies, publishers and commercial photographers have already toyed with the idea and are now involved in scanning, production and transfer of digital artistry like designs through computer networking.

In fact, some Filipino digital artists are operating, although neatly concealed, in the underground economy. Some experts in the field predict that if such proliferation goes unchecked, the country might be saturated with such services and threaten the existence of legitimate ones in the future. This, of course, is an accepted reality in any market economy.

On the other hand, there are critics, which are not yet fully sold to the viability of the digital arts services, at least within the short-term domestic front, given the country's current economic level. The meager advertising base and the relatively small number of computer users are hindrances to the realization of such a First World concept. In fact, one business newspaper in the Philippines that ventured into the CD ROM version of its publications incurred losses and completely abandoned the project due to zero advertisements.

Nonetheless, the computer graphics industry is moving one step at a time. One group, the International Designers Network (IdN)-Philippines, is quite active in the promotion of the digital arts in the country. It is presently working for the establishment of the Philippine Center for Creative Imaging with workshops patterned after those of Palm Beach and Maine.

Another bright note which may be worth considering regarding the prospects of digitalization in the country is the decision of the Asian Wall Street Journal to finally establish a distribution center in the Philippines through satellite printing. This stamp of approval also conveys the idea that the country, although not yet moving in strides, is in the right direction.

Globalization is also expected to contribute to the trend as the bandwagon effect of technology may force others to adopt digitalization in order to survive the stiff competition in a border less economy.

Conclusion

Not much improvement in printing technology is predicted while the economic instability hovers over Asia. However, it is hoped that a silver lining will appear soon once the financial storm has passed and allow technological leapfrogging in the country to continue.

But as a proprietor may reap the benefits of computer technology with the return of normalcy in the country, the significance of the ordinary Filipino print worker becomes an issue. Up to now, the question on the human element in a digitalized environment is left unanswered.