Philippine Graphic Arts: Moving Forward with IT21 

An Industry Report presented by Mrs. Eleanor L. de Gracia, in her capacity as President of PPTF, during the 5th FAGAT Information Exchange Meeting held on September 2000 in  Manila, Philippines.

This paper gives a recap of the graphic arts situation in the Philippines. The industry's problems and strengths are discussed and the country's competitive advantage pointed out. Finally, the prospects of FAGAT member countries electronically sharing information and other resources via the Internet are presented.

1.The Graphic Arts Situation in the Philippines: A Recap

Industry Profile

The printing industry in the Philippines comprises around 5,000 printing and graphic imaging companies, 70% of whom are commercial printers. Seventy percent (70%) of these companies are located in Metro Manila, the rest scattered in the country's major cities and economic centers. In terms of investment in equipment, only 3% have a total net worth of US$ 1.5 million and employ about 200 workers; the rest are mostly small and medium-sized shops employing around 30 or less workers. Local printing products consist of publications (books and newspapers), commercial prints (magazines, forms, posters and flyers), security (postal stamps and bank forms), office supplies (continuous forms), special printing (adhesives and cartons), packaging (labels and boxes), and software-related services (color separation and electronic stripping).

The country's 42 pulp and paper mills, with a combined capacity of about 1,300,000 metric tons, produce newsprint, printing/writing materials (linerboard and fluting), tissue paper, carton board, sack paper, and Kraft/wrapping products. But the industry's main source of material being secondary fiber limits the range and quality of the paper produced. Thus, the printing industry has to import its quality paper requirements, resulting in higher cost of printing full-color publications.
Locally produced inks, on the other hand, are at par in quality with those imported from the US, Europe and Japan because of local ink manufacturers' tie-ups with suppliers from these countries. Of the 14,000 MT of various inks produced locally, 50% goes to packaging, 40% to publications, and 10% to other applications. However, with the opening of world markets and the consequent entry of lower-priced ink products into the country, local manufacturers face the prospect of stiff competition from their foreign competitors.

Weaknesses

Hard hit by the recent financial crisis in the region, the industry did not register much growth in the last two years. Importation of printing and bookbinding equipment, machinery and spare parts fell by nearly 30% between 1997 and 1998 and no dramatic increase is expected soon.

The prohibitive cost of imported late-model printing equipment - the country having no local manufacturing of printing equipment - have pushed local printers into a situation where they have to make-do and live with older printing technology, effectively stunting the growth and global competitiveness of local printers, especially the small ones.
It is often said that while it is common practice in Europe to dispose of their printing machines and buy new ones after five to seven years, local printing machines are sold and bought and change hands three to five times. Printing machines in the country average in age from 10 to 20 years, some as old as 30 years. Easily 70% of current printing equipments are still single-color, 20% two-color, and only a small 10% in four to eight colors. Consequently, older technology takes its toll on print quality and delivery schedules, forcing quality-conscious clients to take their jobs to the few high end printers or to other countries.

The same is not the case, however, with the bigger, better capitalized presses, such as those in the packaging sector, which enjoy a steady stream of orders - practically a guaranteed market - from their manufacturer-clients. Those with excess capacity have even ventured into commercial printing, effectively encroaching on and taking away business from their small and medium-size competitors. The result is a battle for survival where the big players always win.

The other major obstacle to growth is the lack of a highly trained workforce to operate sophisticated and cutting-edge press equipment. Current printing education in the Philippines has fallen short of meeting this demand, coming as it does mostly in the form of technical seminars, exposure and educational trips abroad, supplier-sponsored product launches and technical presentations. With the exception, perhaps, of a few Training Centers, the printing courses general offered by schools are mainly theory-based and lacking in modern demonstration equipment.

Strengths

But while the demand for press equipment appears to be on the decline, the reverse is true for electronic prepress, quick print and print-on-demand systems. There is a growing demand for instant, high quality, large-format but low-volume designs and images and a trend among print houses to integrate electronic prepress into their press operation and consequently saving on the costs of design and film output by service bureaus.

Current prepress installations range from low-end desktop systems, off-the-shelf page makeup software, and desktop scanners to imagesetters, color electronic prepress systems (CEPS), large networked computer workstations, proprietary page makeup software and color separation programs, and high-end imagesetters.

While low-end systems are the more popular choice owing to their lower cost, the few service bureaus that have invested in high-end digital installations capable of producing high-resolution halftone images and color separations are operating viably, catering to the more discriminating and quality-conscious advertising, publishing and commercial segments of the market.

Quick print and print-on-demand systems, on the other hand, grew out of the market's demand for instant or quick-turnaround, low-volume-order (1-to-500-copy) printing that conventional offset printers would normally accept or would take longer for them to print and at higher cost per page. Found mostly in malls and commercial areas or near schools and offices, quick print setups range from stand-alone color copiers to high-speed printers linked to computer workstations.

2.The Philippines’ Competitive Advantage

The growing popularity of digital prepress in the country has been attributed to a host of technical reasons, among them, the need to catch up on graphic arts technology worldwide, the speed, time-and-money-savings, and total-control advantages of doing in-house prepress work.

But often missed is the human factor that set the stage for its acceptance and use in the country: the new generation of printers' scions - most of them in their twenties - who have taken over the management of past generations printing and imaging businesses. They are profiled as creative and professional, ambitious and progressive-minded, aggressive and risk-takers, well-traveled and 'technology-hungry.' This new generation of managers is in constant search for new and creative technologies that would give their products and services added value and a decided competitive edge.

Equally significant is the contribution of Filipino digital artists - most of them young and extremely creative - who have created a market for their services not only locally but internationally. These artists continuously hone their talents and market their products and services through regular digital art competitions and active exchange of information thru the Internet.

Add to these distinctive advantages the principal strengths of the Philippine IT industry: a well-educated, price-competitive labor force, proficiency in the English language, a growing record of successful IT work, fast growing telecom infrastructure, government interest in the industry, less regulation than some neighbors, good capabilities for dealing with foreign partners, and strong entrepreneurship - and it becomes obvious that the Philippines' competitive advantage in the graphic arts lies in its core of young IT professionals and practitioners.

3.'IT21' and Its Implication on FAGAT

'IT21,' the National Information Technology Plan for the 21st Century, is the Philippines' vision and broad strategy to spur the country to global competitiveness through Information Technology. It sets down specific time frames for achieving these goals:

By the turn of the 21st Century, the Philippines will have laid the infrastructure for every business, every agency of the government, every school, and every home in the Philippines to have access to Information Technology.
By the Year 2005, IT use will be pervasive in daily life. Philippine companies will be producing competitive IT products for world markets.

Within the first decade of the 21st Century, the Philippines will be a Knowledge Center in the Asia-Pacific: the leader in IT education, in IT-assisted training, and in the application of information and knowledge to business, professional services, and the arts.

Approved by a joint meeting of the Cabinet and the National Economic and Development Authority (NEDA) Board chaired by the President, the 'IT21' document is the result of a 1997 study by a team of international and local experts organized by the National Information Technology Council (NITC) and the United Nations Industrial Development Organization (UNIDO), with funding assistance from the United Nations Development Programme (UNDP) and the national Government.

Soon after, the President met with the heads of leading global IT companies to forge strategic alliances in implementing specific projects identified in 'IT21.' The President also issued Administrative Order No. 332 on the RPWEB, directing government agencies to connect to the Internet.

Areas identified where the country can build its capability include the design and manufacture of large-scale integrated circuits and microprocessors, software design, information and data services, distance professional services, and knowledge-based industries - all leading to the goal of making the Philippines the 'Knowledge Center of Asia.'

The overall bullishness in the Philippines' IT industry is borne out by IT sales figures showing that, despite keen competition, the country's top 350 IT companies posted net sales of PhP 89 billion in 1995, up by 33% from 1994, while the reported net sales of the top 200 IT companies in the Philippines reached PhP 135 billion in 1996.
Investments continue to pour in. Intel investing between $300 and $400 million in local manufacturing; Seagate expanding its recording head manufacturing facility, with 1996 investments of nearly $300 million; Fujitsu inaugurating a hard disk manufacturing plant with investments worth about $300; Apple Computers opening a full subsidiary; NEC building a board wiring plant in Laguna; Acer building additional facilities in Subic; and Cypress Semiconductor investing $110 million in a new assembly and test plant in the country.

The deregulation of the country's telecommunications industry has paved the way for the huge and rapid buildup in investments in this sector estimated at a total PhP 130 billion by yearend. In terms of net sales of the top 350 IT companies, for instance, the networking/online sector topped all other sectors by posting a growth of 103% between 1994 and 1995 alone indicating a rapid growth in connectivity in the country.

The numbers of Philippine ISPs actually jumped more than four times from 19 in 1995 to 88 in 1996, and to over 160 by the end of 1997. More ISPs are expanding their services to include content provision as well. From around 85,000 in 1997, Philippine Internet users have crossed the 100,000 mark by the turn of the Millennium.
Many Manila-based printers especially those with in-house prepress, are connected to the Internet which serves as a convenient, though still limited, medium for sending graphic files to service bureaus and print shops using PDF. High-resolution graphics requiring large file sizes, of course, continue to be exchanged offline.

That the Philippine government is serious in pursuing the 'IT21' vision is proved in the recent enactment of RA 8792 on E-commerce, placing the Philippines as the fourth Asian country after Malaysia, Singapore and Korea to pass an E-commerce law.

All these developments augur well for a bright and promising future of meaningful electronic exchange of information and commerce between the Philippines and the rest of the world.

The time is rife for active electronic information networking between nations. The concept of B2B or E-commerce-based printing, while exciting, may not be immediately realizable owing to the need for a high-speed network and large-size file servers. But this is something to hope for within the context of the Philippine 'IT21.'

Through the World-Wide Web, which will necessarily feature bulletin board postings, members may not only exchange news and trends but also, and more importantly, outsource graphic arts skills, designs, materials and services that fellow members and other nations may have in their country and can supply economically. This way, the distinctive advantage of each member country is optimized and shared productively with the rest of the world.