IN ITS QUEST to implement high-profile information technology projects in the Philippines, the government should not dismiss the importance of low value-added electronics and semiconductor industries. This was stressed by an official of the Semiconductor and Electronics Industries in the Philippines Inc., which represents 105 companies from this export top-grossing sector.

"When you talk about low value-added to macroeconomists, it's almost like original sin. They immediately dismiss such projects. I'm trying to get across the idea that there's nothing wrong with low value-added IT industries. What's the point of being high-tech if you're losing money? As long as it's profitable, then we should continue doing it," said Saturnino Belen Jr., Seipi first vice president and chief executive electronics manufacturing service provider Fastech Synergy Ltd.

The Philippine semiconductor and electronics industry has been the country's top export sector since 1996. Last year, it generated $19.87 billion in export revenue, representing 67 percent of the country's total export earnings. Of this almost $20-billion export revenue, the value-added component last year amounted to about 30 percent.

While agreeing that the industry would eventually have to move on to more value-added components, Belen said that government should not automatically be prejudiced against low-value added industries such as component assembly. He said that the Philippines has a competitive advantage in electronics and semiconductor test and assembly, citing the country's strategic location and availability of quality professional managers and technical people.

For this sector to remain competitive, however, Seipi officials said that there should be incentives for investment in the electronics industry. While investments reached $1.47 billion in 1997, this dropped to $671 million last year, mainly due to the regional crisis. Another factor that Seipi officials cited is the lack of incentives previously given to export zone and special economic zone investors.

"Duty-free importation expired in 1997, but the way we see it, we were competitive when this law was in place. In the rationalization of incentives bill, (the "Proposed Act Modifying the System on the Grant of Investment Incentives") it's there. But they are proposing scrapping the ITH (Income Tax Holiday) and replacing it with Nolco (Net Operating Loss Carry-Over). It's better, however, if Nolco is there, and ITH is there, to leave the choice to companies. It should be up to the companies to decide which is more advantageous," said Seipi executive director Ernie Santiago, who is also a private sector member of the National Information Technology Council, the country's highest IT policy-making body.

"Through dialogues like this one, we can bring across the point of view of our industry," Belen said.