DEPARTMENT OF TRADE AND INDUSTRY

Policy
Briefs
Special Issue. October 2018.

The Philippine Inclusive Filipinnovation

and Entrepreneurship Roadmap:
Bridging the Gaps, Setting the Milestones
Introduction
The Philippine economy has been growing at an average rate of 6.4 percent from 2010
to 2017. Although it slowed down during the first half of 2018, the economic outlook
has remained positive given the country’s strong macroeconomic fundamentals.
Manufacturing has continued to be one of the important growth drivers, posting an
average growth of 7.6 percent during the 2010-2017 period, while services grew by 6.7
percent on the average. The manufacturing resurgence that the country is experiencing
has been attributed to its growing domestic market, growing middle class, low and
stable wages, and abundant, young, and highly trainable, English-speaking work force
as well as rising costs in China.

The performance of the agriculture, hunting, fishery, and forestry sectors, however, has
remained lackluster, lagging behind services and industry, with an average growth of
only 1.4 percent from 2010 to 2017. Since most of the regions are dependent on these
sectors, regional economic imbalances have continued to persist along with poverty,
unemployment, and underemployment. The Autonomous Region in Muslim Mindanao
(ARMM) has the highest poverty incidence at 54 percent, followed by CARAGA and
Eastern Visayas (39 percent), SOCCSKSARGEN and Northern Mindanao (37 percent),
Bicol (36 percent), and Zamboanga (34 percent).

In order to sustain a high level and inclusive growth, the government is implementing a
growth model where a modern industrial sector plays a key role in generating investment
and employment. Innovation is at the heart of the new industrial policy known as
Inclusive Innovation Industrial Strategy (or i3S). Its goal is to grow and develop globally
competitive and innovative industries with strong forward and backward linkages. i3S
focuses on three major areas namely, a) creation of an innovation and entrepreneurship
ecosystem; b) removal of obstacles to growth to build industry clusters; and c)
strengthening domestic supply and value chains to deepen our participation in global
and regional value chains and networks. The implementation of the strategy relies on
strong government-academe-education-industry collaboration, with the government
acting as main coordinator and facilitator in addressing the most binding constraints
that prevent industries from growing. Central to the new industrial policy framework is
the process of competition-innovation and entrepreneurship-productivity that serve as
channels through which investments, employment, and growth are generated.

The industry priorities of the i3S cover automotive; aerospace parts and maintenance,
repair and overhaul of aircrafts; agribusiness and tourism; chemicals; construction,
transport, and logistics; creative, furniture, and garments; electrical and electronics;
innovation and research and development (R&D) activities; climate change and parts
and components supply development (inclusive businesses); iron and steel, tool
and die; IT-business process management and e-commerce; and shipbuilding and
ship repair. These industries have been selected based on a discovery process that
assessed the industries’ strengths, weaknesses, and growth opportunities as well as
their contribution to objectives that are crucial for economic transformation such as:
a) technology upgrading; b) promoting innovation; c) closing the infrastructure gap; d)
addressing regional imbalance; e) generating more and better jobs; f) sustainability; g)
creating spill-over and multiplier effects; and h) strengthening supply and value chain
linkages.

This Policy Brief aims to assess our innovation and entrepreneurship ecosystem and
recommends effective innovation strategies and policies. The analysis looks at the
different elements of the ecosystem and their interaction using innovation studies and
indicators from various sources. A total of 12 consultation workshops and focus group
discussions with over a thousand participants were conducted in six key cities (Manila,
Angeles, Legaspi, Cebu, Davao, and Cagayan de Oro) covering the country’s various
regions from 2017 to 2018. The innovation strategy and policy recommendations
are crucial towards making our industries more innovative and globally competitive,
providing solutions to societal and industry issues and challenges, supporting economic
transformation, and leapfrogging to industrialization.

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An Assessment of the Innovation and Entrepreneurship Ecosystem

Innovation refers to the implementation of new or significantly improved products,

services, or processes, as well as the introduction of a new marketing or organizational
method in business practices, workplace organization or external relations in response to
problems, challenges, or opportunities arising in the social and economic environment The innovation
(OECD 2007). Such innovation is the result of new combinations of existing knowledge, strategy and policy
capabilities, and resources and is regarded as inclusive because it can lead to economic
recommendations
transformation both in the developed and underdeveloped areas of the country. In
addition, it includes low-tech and high-tech activities occurring across all industries, are crucial
as well as in both the private and public sectors. Innovation may not necessarily mean towards making
“new to the world,” but can also refer to something that is new to producers or users. It our industries
does not have to be disruptive – like a product using artificial intelligence or robotics
more innovative
– but may be an incremental improvement or upgrading of a process or product, like
making more energy efficient motors or engines. and globally
competitive,
Innovation policy focuses not only on the creation of new solutions or inventions, providing solutions
but also on their exploitation and diffusion, including the many feedbacks that occur
to societal and
between the various phases of the innovation process. Given the emphasis on the
entire innovation cycle and adoption and subsequent commercialization, the approach industry issues
integrates the importance of connecting innovation with entrepreneurship, building an and challenges,
inclusive innovation and entrepreneurship ecosystem, and creating an environment supporting
that is conducive to innovation and enabling and supporting the active engagement
economic
and interaction of the different players and stakeholders. The approach emphasizes
a market-oriented research policy with focus on the promotion not only of research transformation,
and development (R&D), but also the commercialization and diffusion of these R&D and leapfrogging
investments. to industrialization.
The elements of the innovation and entrepreneurship ecosystem include universities and
research institutions, companies, government innovation agencies, funding and finance
sources, services providers, regulatory framework and infrastructure, culture, markets,
education and training, support mechanisms, and human capital and workforce. In the
Philippines, the ecosystem players include large multinational companies, small and
medium enterprises (SMEs) and start-ups, industry associations, universities as research
partners and developers of future workforce, and key government agencies like the The approach
Department of Trade and Industry (DTI), Department of Science and Technology
(DOST), Commission on Higher Education (CHED), Department of Education (DepEd),
emphasizes a
Department of Agriculture (DA), National Economic and Development Authority market-oriented
(NEDA), and Department of Information Communications and Technology (DICT). The research policy
interaction of these stakeholders will create and transfer knowledge that will enable with focus on
new products and new business models to catalyze economic transformation and
development.
the promotion
Figure 1. RTI Innovation Ecosystem Framework not only of
research and
Research and knowledge creation (basic,
applied, translational activities) stem from a development
strong core of education and human capital.
For the ecosystem to function, new knowledge
(R&D), but also
must be transferred into commercial
applications. The paths to commercial use are:
the commercia-
lization and
• Direct service agreements where universities
provide direct assistance to commercial diffusion of
clients on discrete tasks
• Commercialization through licensing these R&D
where the IP rights are transferred to an
outside organization for further development investments.
• Spin-offs and start-ups that transition IP to
small firms

The elements of the ecosystem function only

in an atmosphere of collaboration, which
is dependent on social capital, trust, and
information sharing. (RTI, 2017)

Source: RTI, 2016 and 2017

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Figure 1 presents a framework developed by RTI International (RTI) on the innovation
and entrepreneurship ecosystem and the inherent linkages between the stakeholders.
It builds on the following interrelated blocks: human capital, research and knowledge
creation, knowledge transfer, intellectual property (IP), and an infrastructure of
collaboration. The health and development of the ecosystem requires the connections
between the knowledge economy (driven by research) and the commercial economy
(driven by the marketplace) and it is in this intersection that the Philippines, like most
countries, is facing difficult challenges (RTI, 2017).
Figure 2. Global Innovation Rankings of Selected Southeast Asian Countries, 2014-2018
150

97 100
100 87 88 87 85
83
74 73 73 71
55 52 51 44 59
48 52
47 45
50
33 32 35 37 35

0
Indonesia Malaysia Philippines Thailand Vietnam

Source: Global Innovation Index, various years.

Currently, the Philippines has a low level of innovation, ranking 73rd of 126 countries
in the 2018 Global Innovation Index, behind Malaysia, Thailand, and Vietnam.
Compared to its neighbors, the country’s ranking has not changed significantly in the
last three years.

The 2018 GII indicated that the areas where the Philippines has been consistently weak
are in: a) ease of doing business; b) government operating expenditures in education;
c) government expenditure per pupil (% GDP/capita); d) pupil-teacher ratio; e) gross
expenditure on research and development (GERD, % of GDP); and f) ease of protecting
minority investors.
Table 1. Philippine Expenditure for R&D

2014 2015 2016 2017

Total Government Budget 2,019,062,065 2,414,640,618 2,682,814,855 3,350,000,000

GERD 11,004,493 10,977,253 10,511,248 12,255,388
GERD as % of Total Budget 0.55 0.45 0.39 0.37
GERD as % of GDP 0.09 0.08 0.07 0.08

Source: Department of Budget and Management

In the last four years, R&D in the national budget has not reached 0.1% of GDP. The
recommendation of the United Nations Educational Scientific and Cultural Organization
(UNESCO) is to allocate at least 1 percent of GDP for R&D support.

Comparative data on R&D expenditure shows that the Philippines is investing far less
than other countries on activities that drive innovation. Front runners of innovation like
Korea, Japan, Israel, China, and Singapore allot a considerable part of their budget on
R&D, while neighbors Thailand and Vietnam also invest much in R&D.

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 Figure 3. R&D Expenditures (% GDP)
5
4.3
4 3.6

3
2.1 2.2 2.2
2
1.3
1
0.5
0.1 0.1 0.2
0

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Source: WEF Readiness for the Future of Production Report 2018

The Philippines also lacks the manpower needed to support innovation and
commercialization activities. Along with Vietnam, it exhibits low availability of
scientists and engineers, in comparison with countries like Indonesia, Malaysia, Japan,
Israel, and Singapore.
Figure 4. Availability of Scientists and Engineers

Vietnam 3.8

Thailand 4.1

Singapore 5.2

Rep. of Korea 4.5

Philippines 3.8

Malaysia 5.3

Japan 5.3

Israel 5.3

Indonesia 4.5

China 4.7

Source: WEF Readiness for the Future of Production Report 2018; 1-7 best; weighted average.

Correspondingly, data from UNESCO show that total R&D personnel in the Philippines
is very miniscule in comparison with innovation leader countries like Korea, Singapore,
and Japan. This goes to show that base support for innovation and commercialization
remains comparatively weak in the Philippines.
Table 2. Total R&D Personnel per Thousand Total Employments (FTE), 2013
China 4.619

Japan 13.768

Philippines 0.671

Republic of Korea 15.998

Singapore 13.994

Viet Nam 1.494

Source: UNESCO Institute for Statistics
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Likewise, the Philippines does not fare well in terms of research productivity.
The country’s ratio of scientific and technical publications relative to GDP is around 1.6,
while Thailand and Vietnam produce more than three times of this value (6.5 and 5.6,
respectively). The research productivity of Israel, Korea, and Singapore is notably high.
It also appears that Malaysia (12.3) is catching up with China (14.1) and Japan (15.1).
Figure 5. Scientific and Technical Publications (number per Billion PPP$ GDP)

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sia

sia

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ap
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ai
pp

et
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Si
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Source: WEF Readiness for the Future of Production Report 2018

Patent applications are also low, even when compared with other Asian countries like
Malaysia or Thailand. The indicators imply that policies and incentives for research
productivity must be improved to promote a balance between the incentives for
basic and applied research. To achieve this, a shift towards more academe-industry
collaboration and commercialization of research is necessary.
Figure 6. Patent Applications (applications/million population)
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sia

sia

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nd

m
ae
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na
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la
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Th

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Si
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Source: WEF Readiness for the Future of Production Report 2018

The collaboration between academe and industry in the country remains weak. Over
the years, the country’s score and ranking on the university-industry collaboration in
R&D indicator of the Global Competitiveness Index has not improved as much as
desired.

Studies and stakeholder consultations have shown that academe-industry linkages

continue to be limited. In general, universities do not see research collaboration as
part of their core mission, as opposed to teaching and publishing journal articles.
University faculty seem to have a sense of aversion towards consulting services or work
for hire due to issues with IP ownership. To exacerbate these issues, financial gains
6
from academe-industry collaboration do not accrue quickly to faculty members, as
these are highly-taxed and are relatively small when compared to the financial gains
from independent consulting arrangements.
Figure 7. University-Industry Collaboration, PH Score and Rank

16

17

18
12

13

14

15
20

20

20

20

20

20

20
-

-
-

15

16

17
11

12

13

14

20

20

20
20

20

20

20

Rank Score
Source: Global Competitiveness Report, various years.

Conversely, there are prevailing perceptions from industry that dealing with the academe
is too complicated. With limited public information about their expertise, research
interests, and innovation projects; businesses commonly do not perceive the academe
as potential partners. The lack of legally-sanctioned payment mechanism for financial
contributions also erodes the interest of companies to support government-funded
research. The academe’s desire for full control of IP and their lack of familiarity and
trust on legal mechanisms for licensing likewise discourages companies to pursue such
collaboration. Overall, relations between the academe and industry is characterized
more by competition rather than collaboration. This limits the commercialization
of potentially useful research outputs and seriously impacts the overall innovation
performance of the country.

With some exceptions, Philippine universities generally remain detached from

problems as signaled by the market and often fail to appreciate the importance of
commercialization. Some institutions are also unable to respond timely to the
commercialization intent of some businesses because of their onerous processes
or lack of mechanisms or preparedness to deal with such. University researchers
normally do not consider commercialization as part of their core mission because their
performances are evaluated based on the number of their research publications.

Moreover, research activities in universities usually do not end up being commercialized

due to the lack of personnel with the capability to deal with technology transfer and
commercialization. Researchers also need to be acquainted with business plans,
conducting market research and feasibility studies, and valuing technology because these
are sometimes part of the requirements for IP filing. Additionally, financial constraints
limit the commercialization of university technologies because IP management entails
high transaction costs and consumes much time due to the complexity of the process
and requirements.

It is also important to note that there is limited awareness of and clarity about government
policies and programs for R&D. Some researchers who tried to avail of R&D grants did
not qualify or did not choose to take advantage of such programs because they saw it
as being rather restrictive (e.g., limited to specific industries, repayment conditions) or
that the process to access it is arduous and complex (STRIDE, 2017).

The rules and guidelines on government procurement (RA 9184) cover state universities
and colleges (SUCs) and the state-funded research activities conducted by its faculty
and researchers. Problems arise when administrative requirements, including complex
procedures, hinder the timely purchase of research equipment or consumables, thereby
reducing research productivity and slowing commercialization (STRIDE, 2014). Such
inefficiencies disincentivize researchers and require urgent appropriate reforms.
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Regional Inclusive Innovation Centers: Building Connected Creative
Communities
Connecting and integrating the key elements and stakeholders of the Philippine
innovation and entrepreneurship ecosystem is crucial. To address the weak innovation
performance of the Philippines, our vision is to close this gap by linking the stakeholders
together through the creation of regional inclusive innovation centers (RIICs) in
different parts of the country. These RIICs are envisioned to be at the heart of Philippine
economic transformation and serve as linchpin of productive collaborations between
and among industries, universities, government agencies, LGUs, startups, MSMEs, R&D These RIICs are
laboratories, S&T parks, incubators, FabLabs, investors, among many other agents in envisioned to be
the ecosystem.
at the heart
Figure 8. Regional Inclusive Innovation Centers (RIICs) of Philippine
economic
Co-Working R&D Labs, transformation
Spaces
Large, Small, S&T Parks and serve as
Medium, Enterprises Accelerators/Incubators/ linchpin of
Start-ups Innovation Hub
productive
collaborations
Service
Providers
Events between and
Meetups
among industries,
universities,
Government government
Funders
agencies, LGUs,
startups, MSMEs,
Support
R&D laboratories,
Organizations/ Universities
Communities S&T parks,
incubators,
The i3S recognizes that we cannot adopt a one-size-fits-all approach and we need to FabLabs,
recognize the diversity of regional/local conditions across the country. As such, the investors,
RIICs will be set up by building upon the existing elements of the ecosystem in the among many
regions. These centers will be sensitive to the current clusters in the regions and
capitalize on the cluster strategies being implemented by the national and regional/
other agents in
local government. The RIICs will link together various DTI and DOST projects such the ecosystem.
as shared services facilities (SSFs), FabLabs, R&D centers, food innovation centers,
Negosyo Centers, technology business incubators, and technology transfer offices.
Support mechanisms (incubators, accelerators, co-working spaces) and service
providers (logistics, accounting, e-services) will also be features of the RIICs.

In the end, the ecosystem will be constituted by connected and creative communities
in various regions of the country, propelled by innovative and entrepreneurial Filipinos,
who are driven by their desire to do things better, provide solutions, make better
products, and address market demands. They will be nurtured by the collaboration
of government, industry, and education/academia through policies, strategies, and
programs/projects that continuously develop human capital; ensure access to funding
and other sources of financing; and provide the appropriate support mechanisms and
services for commercialization. All of these activities, interactions, and partnerships
will be fostered in an environment in which institutions, infrastructure, intellectual
property rights system, culture, and customers enable more and better innovation and
entrepreneurship throughout the country.

In order to achieve the overall vision of creating an inclusive innovation and

entrepreneurship ecosystem, the following recommendations and strategies are
proposed: 1) Strong Government-Academe-Industry Linkages; 2) Human Capital
Development Towards Innovation and Entrepreneurship; 3) Enabling Policy
Environment to Accelerate Innovation and Entrepreneurship; 4) Entrepreneurship
8
Culture and Support Programs for MSMEs; 5) Funding and Financing for Innovation
and Entrepreneurship; and 6) Growth and Development of Industry Clusters. The more
specific recommendations are subsequently presented.

1. Strong Government-Academe-Industry Linkages

The coordination between and among government, academe, and industry is crucial
for innovation and entrepreneurship to thrive in the country. Within government, the
various national government agencies will coordinate their priorities, strategies, and
programs, harmonize these, and optimally use their resources for greater impact.
Coordination between the national and regional/local levels of government is also
important, because of the latter’s proximity to the stakeholders and the additional
resources and support that can supplement those coming from national agencies.

Government and industry need to continue working together as guided by the new
industrial strategy, i3S – with government serving as enabler of the private sector, and
industry acting as engines of the country’s growth. Government and the academe, on
the other hand, must strengthen their relationship not only in training the country’s
future workforce, but also in terms of finding solutions to market failures, societal issues,
and industry problems. Government promotion of partnerships between industry
and universities/higher education/research institutions will contribute in addressing
misunderstandings and exploration of mutually beneficial arrangements for improving
human resource, increasing available funding, and conducting basic and applied
research.

The initiatives that will require government-academe-industry collaboration include:

• Promotion and strengthening of the ecosystem environment through the alignment

and continuity of existing innovation- and entrepreneurship-related government
policies, programs, and support infrastructure (e.g., SSFs, FabLabs, Food Innovation ...this triple helix
Centers, Technology Business Incubators, Negosyo Centers, Tech4Ed centers, of government,
incubators/accelerators); academe,
• Development of a government portal or database that includes information on
research being done by universities, research and development institutions, and and industry
industry; inventory of laboratories, equipment, machinery, and other resources collaboration
available in the region; prices and specifications of innovation-related products, serves the pursuit
equipment, and consultancy; of knowledge
• On the part of government research institutions, the Department of Agriculture (DA)-
Bureau of Agricultural Research and the Department of Science and Technology production,
(DOST)-Philippine Council for Agriculture, Aquatic and Natural Resources Research designing solutions
and Development (PCAARRD) to establish and maintain websites and webpages (innovation),
for public information about tested technologies ready for commercialization; as well as
• Production of a directory of local MSMEs, start-ups, and industries, as well as
a directory of industry experts; setting-up informal opportunities for industry value-creation and
representatives and academic researchers to meet, interact, and collaborate; and commercialization.
• Coordination with the Regional Research Development and Innovation Committee
under the Regional Development Council (RDCs).
Furthermore, this triple helix of government, academe, and industry collaboration serves
the pursuit of knowledge production, designing solutions (innovation), as well as value-
creation and commercialization (entrepreneurship). Two key areas of action have been
identified to optimize this collaboration: 1) curricular development, re-engineering,
and reforms in the undergraduate and post-graduate curricula; and 2) research and
extension engagements with industry. To create a culture of dialogue between academe
and industry, the following teaching and learning programs and research collaboration
initiatives are recommended:

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 Building innovation ecosystem

• Formulation of higher education policies that encourage and incentivize academe

and industry partnerships;
• Development and promotion of university policies that value faculty-industry
collaboration in knowledge production and innovation;
• Strengthening student internship programs that serve as platforms to provide
students with industry-relevant knowledge and competencies;
• Recognition and reward for faculty immersion in industry;
• Establishment of a database of university and industry research and knowledge
resources;
• Initiation of curricular reforms to address job mismatch and cater to the needs of
emerging industries in the regions;
• Crafting of new metrics of performance excellence that recognize and reward
faculty research engagement with industry and the inclusion of entrepreneurship
and community engagements as new metrics of extension;
• Organizing university research groups and centers that cater to the needs of the
local community and industry;
• Establishment of pathways for university publications and patents to be translated
into industry solutions or to pass on university researches to industry for
implementation;
• Inclusion of innovation and entrepreneurship in the R&D consortia of universities;
• Capacity-building of faculty-researchers in solutions-driven and market-driven
research as well as business development, customer discovery, and customer
development;
• Training of faculty-researchers on the methods of market studies, market
segmentation and analyses, and marketing;
• Provide incentives for university faculty who are engaged in extension-technology
transfer projects;
• Require agricultural SUCs to promote and share their expertise and accomplishments
in the field of food and agricultural research and extension;
• Set up a special fund for university researchers in food and agriculture for technology
demonstration and dissemination;
• Encouraging faculty-researchers to be actively engaged in the proposed RIICs as
resource persons; recognize and use the RIICs as venues for university extension
programs; engage local entrepreneurs or leaders of industry as guest lecturers in
classes or as conference speakers;
• Establishing university office, technoparks, hubs, or centers focusing on
entrepreneurship, innovation, and technology and business incubation; and
• Setting up of common research and support facilities catering to local industry
needs.

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2. Human Capital Development Towards Innovation and Entrepreneurship

Human capital is the engine of innovation and entrepreneurship. It fuels knowledge

production, spurs revisions to innovations, catalyzes incremental innovations, identifies
and develops new enterprises and business opportunities, facilitates technology
adoption, and leads to the diffusion or transfer of knowledge to another generation of
skilled workers, which then accrues to enhanced human and social capital. The government’s
three education
The success of this inclusive innovation-entrepreneurship dynamic is anchored on
the composition and agility of human capital – the set of skills, competencies, and agencies, i.e.,
attributes that reflect both technical competence as well as so-called ‘generic skills’ DepEd, TESDA,
such as problem solving, creativity, teamwork and communication skills, learning to and CHED, will
learn, motivation, discipline, self-confidence, self- awareness, networking, and capacity
to embrace change.
need to design
integrative
The role of “Philippine education,” then, in developing a culture of innovation and programs and
entrepreneurship will have to start in the formative years, from pre-Kindergarten to 12th curricula that
Grade and seamlessly progressing to tertiary and higher education. The government’s
three education agencies, i.e., Department of Education (DepEd), Technical Education can effectively
and Skills Development Authtority (TESDA), and the Commission on Higher Education produce Filipino
(CHED), will need to design integrative programs and curricula that can effectively lifelong learners
produce Filipino lifelong learners who possess the knowledge, competencies, values,
and attitudes to make them succeed in the world of work, develop innovative solutions who possess
to key societal issues, or transform these innovations into economic goods. the knowledge,
competencies,
The following strategies are recommended:
values, and
• DepEd’s review of the K-12 curriculum to be used as an opportunity to integrate attitudes to make
innovation and entrepreneurship in basic education; them succeed in
• Interest in Science, Technology, Engineering, Agro-Fisheries, and Mathematics the world of work,
(STEAM) disciplines and careers should be promoted across all levels;
develop innovative
• TESDA to support local MSMEs, startups, and industries of specific regions through
dynamic and customized techvoc programs that can produce the human capital solutions to
needed in these local enterprises; key societal issues,
• TESDA to offer or accredit private providers that offer re-skilling and upskilling or transform
courses (e.g., coding, data analytics, leadership, entrepreneurship, business
these innovations
communication, etc.) to produce knowledge workers/professionals in the new
knowledge economy; into economic
• CHED to support initiatives by universities, public or private, to promote innovation goods.
and entrepreneurship/technopreneurship as part of university coursework or overall
university mission or thrust (e.g., UP, DLSU, ADMU, MSU-IIT, USC, and USTP);
• Establish SUCs/HEIs as centers for excellence in innovation and entrepreneurship;
• Establish university programs that encourage cross-pollination of courses to engage
faculty and students in the collaborative and multi-perspective nature of innovation
and entrepreneurship.

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3. Enabling Policy Environment to Accelerate Innovation & Entrepreneurship

Significant strides have been taken, thus far, to ensure that government programs
and the overall policy environment in the country are conducive for innovative and
entrepreneurial activities. Nonetheless, the following recommendations related to
technology transfer, commercialization, and support for startups are intended to
enhance the policy environment:

• Strengthen the implementation of the Technology Transfer Act;

• Capacitate SUCs/HEIs to establish pathways for university publications and patents
to be translated into industry solutions or to pass on university researches to industry
for adoption;
• Strengthen IP system to facilitate the commercialization process, including the use
of services offered by the Intellectual Property Satellite Offices (IPSOs), Innovation
and Technology Support Offices (ITSOs), and the IP Depot;
• Simplify and reduce the cost of IP filing; provide support and assistance to facilitate
the process of IP filing and management;
• Provide incentives to MSMEs that innovate and undertake R&D initiatives;
• Support the passage of the proposed Innovation Act and Innovative Startups bill,
which will be significant milestones in the country’s efforts to boost innovation and
entrepreneurship; and
• Ease regulatory policies and administrative burden in starting up businesses to
facilitate the introduction of ideas into market.

4. Entrepreneurship Culture and Support Programs for MSMEs

Towards cultivating a culture of entrepreneurship in the country, the various

entrepreneurship programs and support for MSMEs implemented by government will There ought to
be enhanced and actively promoted for greater awareness. Efforts to simplify and be synergistic
rationalize requirements and availment process for these programs will be made. programs and
Central as well to developing an entrepreneurship culture is the pivotal role of activities at the
education. There ought to be synergistic programs and activities at the basic, tertiary, basic, tertiary,
and higher education levels to support appreciation of entrepreneurship, acquisition and higher
of entrepreneurial, and 21st Century/lifelong learning skills, and promotion of venture
creation as a career opportunity.
education levels
to support
• Strengthen and expand one-stop-shops for MSMEs, which provide services such as appreciation of
certification, licensing, capability training, production, and marketing of products/ entrepreneurship,
services; services can be expanded to provide business mentorship, particularly
for startups, as well as creative and design services that aid in transforming ideas/
acquisition of
prototypes into commercially viable products and services; entrepreneurial,
• Establish regional startup offices or hubs that can serve as a platform for MSMEs and 21st Century/
to connect and network with industry experts as well as function as business lifelong learning
incubators for stakeholders in the regions;
• Foster greater cooperation among actors in the MSME support network (i.e.,
skills, and
incubators, accelerators, small business development centers, export assistance promotion of
centers) by deepening and strengthening their involvement and engagement with venture creation
stakeholders, including industry experts; as a career
• Build and/or strengthen MSME partnerships with academe and larger players in
industry for mentorship programs for innovation and technology-related training
opportunity.
programs and activities; and
• Strengthen the StartUp Ecosystem Development Program (SEDP) and provide
support programs and other forms of assistance to startups and other members of
the community.

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5. Funding and Financing for Innovation and Entrepreneurship

It is critical for innovators and entrepreneurs to have adequate financial resources as

they move forward in commercializing their ideas and products. This will include public
funding (such as grants, microcredit, tax incentives) and private sources of finance
(such as equity financing, venture capital). The appropriate form of funding/financing The appropriate
for a particular stage of innovative/entrepreneurial activity (seed, startup, early-stage, form of funding/
expansion) should be made accessible and interventions to make these available will financing for a
be carried out.
particular stage
• Increase government expenditure on R&D (GERD) towards reaching the UNESCO of innovative/
benchmark of 1% of GDP; entrepreneurial
• Strengthen programs that provide financing for commercially-viable projects to
activity (seed,
bridge the gap between commercialization and R&D;
• Create an investment environment that encourages more private sector participation startup,
in financing enterprises, including angel investors, venture capital, and crowd early-stage,
fund-sourcing; expansion)
• Review and rationalize requirements and guidelines for availing of government
should be made
funds for R&D in order to ease and broaden access by startups, MSMEs, and
researchers; and accessible and
• Provide to startups and MSMEs information and mentoring on finding sources of interventions
financing, qualifying for these, and sustaining capital flow. to make these
6. Growth and Development of Industry Clusters available will
be carried out.
The RIICs will build upon the existing industry clusters in the regions and capitalize on
the cluster strategies being implemented by the national and regional/local governments.
As common points for convergence, RIICs will be able to galvanize a shared direction
among stakeholders and provide a venue to weave together and/or harmonize programs
and projects in support of innovation and entrepreneurship in the regions.

Conceivably, the RIICs shall have the following functions in order to spur the growth As common
and development of industry clusters in the regions: points for
• Establish, together with local SUCs and HEIs, knowledge centers for innovation convergence,
and entrepreneurship, market research and insights in the region; RIICs will be
• Serve as open innovation platforms and hubs for technical collaboration/cooperation able to
between industry and academe (foreign & local) for market-driven research;
galvanize a
• Host shared service facilities for rapid prototyping and demonstration, testing
equipment, and reliable ICT networks and communication platforms; shared direction
• Improve supply chain, value adding, and agro-processing, as well as systems for among
food and agricultural research, access to technologies, financing, regulation, and stakeholders
certification particularly for high-value crops such as rubber, mangoes, coffee,
and provide
cacao, coconut;
• Promote the Philippines as an agribusiness regional hub and increase its a venue to
participation in the global value chain as a supplier of semi-processed or finished weave together
farm products; and and/or harmonize
• Provide a directory of regional products and services and serve as venues for
programs and
startups and MSMEs to connect and network with industry experts to enhance their
entrepreneurial know-how and enable them to be Industry 4.0-ready. projects in
support of
Among the priority industries under i3S, electronics, automotive, aerospace, chemicals, innovation and
IT-BPM, and agribusiness (including various high value crops) are primed for innovation
initiatives and more entrepreneurship opportunities.
entrepreneurship
in the regions.

13
 Way Forward: Roadmap Implementation

In June 2017, DTI and DOST signed a Memorandum of Understanding (MOU) to jointly
formulate and implement the innovation roadmap. This has been expanded to include
NEDA, DepEd, CHED, DA, and DICT, as part of the whole-of- government approach
in establishing the ecosystem. One of the objectives of the expanded MOU is to revive
and reconstitute the Filipinnovation Council, to be composed of concerned national
government agencies and representatives from industry and education/academia, which
will serve as the central coordinating mechanism on innovation and entrepreneurship
policies, strategies, and programs/projects in the country.

Figure 9. Expand DOST-DTI Innovation MOU

Market-oriented
research grants, R&D,
commercialization Coordinator linking
Support for innovation support
& R&D; DILG: LGUs industries with
academe & support
for innovation
other government
agencies
Innovation policy
monitoring evaluation
of implementation
Physical
innovation
infrastructure

Basic and applied

research grants: Market-oriented
commercialization research grants,
support, HRD & curricula, commercialization
balance between support
automation & labor
intensive activities

The ultimate
In coordination with the Council, each member-agency will be responsible for aspects
of the ecosystem that are within their purview. goal of the
Inclusive
• DTI, BOI, IPOPHL: market studies, linking industries with academe and other Filipinnovation
government agencies; ease of doing business; IP strategy and Entrepre-
• DOST, DA, CHED: basic and applied research grants, R&D, commercialization
support neurship
• DepEd, TESDA, CHED: human capital development and curriculum reforms Roadmap is
• DICT: physical innovation infrastructure; support for startups to activate
• NEDA: innovation and entrepreneurship policy monitoring and evaluation innovation and
TESDA and DOLE are targeted to be included and involved in human resource entrepreneurship
development, while the DILG will take lead in regional/local stakeholder engagement as the main
and the DOF will be concerned with fiscal support for innovation, R&D, technology levers to
transfer, commercialization, and MSMEs. reduce, if not
Together, the member-agencies of the Council will coordinate their innovation and completely
entrepreneurship-related policies, strategies, and programs/projects in order to avoid eliminate,
duplication, harmonize these, and maximize the use of resources. Towards this end, poverty in
a central data portal containing information on major government-funded research the country.
projects is currently being developed by DICT, DA, DOST, DTI, and NEDA. In the
regions, the roadmap implementation would be spearheaded by the Regional Research
Development and Innovation Committee under the Regional Development Council
(RDCs).

14
The needs assessment studies project for the establishment of RIICs has commenced
in Cebu, Cagayan de Oro, Legaspi, and Davao. The project, which is a collaboration
between DTI and the USAID-STRIDE, aims to examine the existing ecosystem, identify
the gaps, and recommend measures to link the different players towards creating more
inclusive innovation and entrepreneurship ecosystem in these pilot cities.

The ultimate goal of the Inclusive Filipinnovation and Entrepreneurship Roadmap

is to activate innovation and entrepreneurship as the main levers to reduce, if not
completely eliminate poverty in the country. By institutionalizing the proper policy
framework and implementing innovation-centered strategies and programs through
strong government-academe-industry collaboration; domestic firms and industries
can address the challenges and take advantage of market opportunities arising from
Industry 4.0 technologies and serve as an engine for sustainable growth, job creation,
and poverty reduction.

References

OECD Innovation Strategy. (2007). Retrieved from Organisation for Economic Cooperation and
Development: https://www.oecd.org/site/innovationstrategy/defininginnovation.htm.
Department of Budget and Management. (various years). National Expenditure Program.
Retrieved 2018, from: https://www.dbm.gov.ph/index.php/dbm-publications/national-
expenditure-program.
Global Innovation Index. (various years). Global Innovation Index. Retrieved 2018, from Global
Innovation Index: https://www.globalinnovationindex.org/Home.
RTI International. (2014). Philippine Innovation Ecosystem Assessment. Retrieved 2018, from
Science, Technology, Research and Innovation for Development (STRIDE):
www.stride.org.ph.
RTI International. (2017). Agribusiness Innovation Ecosystem Assessment. Retrieved 2018, from
Science, Technology, Research and Innovation for Development (STRIDE):
www.stride.org.ph.
RTI International. (2017). Driving Innovation to Deliver Economic Value: A Needs Assessment
of the Philippines’ Technology Sector. Retrieved 2018, from Science, Technology, Research
and Innovation for Development (STRIDE): www.stride.org.ph.
UNESCO. (2013). Data for the Sustainable Development Goals. Retrieved 2018, from United
Nations Educational, Scientific and Cultural Organization: http://uis.unesco.org.
World Economic Forum. (various years). Global Competitiveness Report. Retrieved 2018, from:
https://www.weforum.org/.
World Economic Forum. (2018). Readiness for the Future of Production Report 2018. Retrieved
2018, from World Economic Forum: https://www.weforum.org/reports/readiness-for-the-
future-of-production-report-2018.

15
 The preparation of this policy brief was led by
DEPARTMENT OF TRADE AND INDUSTRY
DTI Assistant Secretary Rafaelita M. Aldaba with the

Policy
support of the following consultants & BTIPR staff:
Kris Francisco, Francis Quimba, Napoleon Juanillo, Jr. ,
Richard Umali and Myleen Aldana, Cyrus Kim
Bautista, Jude Martin Joya, Amara Zarah Amper, Mc

Briefs
Phearson Christian Ramos and Elli May Malabayabas.

The DTI Policy Briefs is published by the Department

Series No. 2018-07 of Trade and Industry – Bureau of Trade and Industrial
Policy Research (BTIPR), with email address at
[email protected].