House Committee on Ways and Means chairperson Albay Rep. Joey Salceda stressed the need for the country to work on six critical aspects to enable the growth of start-ups, particularly tech enterprises in the Philippines.
Salceda made the comments in an address to the Annual National ICT Confederation of the Philippines (NICP) Summit, organized by the Convergence of Luzon ICT Champions Conferences and Exhibitions (CLICCONEX).
In his speech titled, “Formulating policies on transformation of incubation and startup technologies in health and economy,” Salceda said that the key ingredients to startup growth in a country are “(1) an abundance of very highly-skilled work, mostly from excellent local universities, (2) access to financing from both private and public sectors, but most private capital markets, (3) fast and reliable internet, (4) access to public data that startups can play around with to solve the public’s problems, (5) strong laws to guarantee ownership and beneficence from intellectual property, and (6) strong electronic commerce laws.”
Salceda emphasized that the most crucial element is an abundance of very highly-skilled workers, mostly from very strong universities.
“If we want to emulate this success story, there is no way around funding our premier public university. We have to fund the University of the Philippines and its science endeavors. And, we must maintain academic independence. The entrepreneurial spirit dies in tightly controlled environments,” Salceda added.
Capital liberalization will boost financing
Among the other elements Salceda discussed, the House tax chair also emphasized capital market liberalization as an enabler of an environment favorable to startups.
“Our foreign equity restrictions and low domestic savings rates (the lowest in the region) hamper the development of a liquid venture capital environment. We have to open up our investment environment to foreign equity. There is no way around it,” Salceda said. The House tax chair is principal author of the amendments to the Retail Trade Liberalization Act, the Foreign Investments Act, and the Public Service Act, all of which are expected to pass Congress this year.
“The fund-of-funds model allows the state to indirectly finance startups in a diversified, and therefore risk-reduced manner. Here’s how it works. Smaller, private funds that can evaluate startups competently are infused with capital by state financial institutions. The state invests in a diversified portfolio of these funds to hedge its risks. At the same time, startups not having to deal directly with the state reduces red tape and the opening for corruption,” he added.
Salceda also pushed for the creation of a National Broadband Network, which he says would have been cheaper to pursue earlier, during President Arroyo’s time.
“But there is no way around a strong fiber optic network. We just have to have one,” Salceda said.
Salceda is also pushing for open and usable big data in government, strong intellectual property laws, and a modernization of the E-Commerce Law, which Salceda also drafted as a freshman Congressman in 2000.
“In summary, how do we create a culture that enables strong startups? The state must not try to be another cook in the kitchen. After all, too many cooks spoil the broth. Instead, we give the cook the kitchen, the ingredients, and we guarantee their reward for cooking great food, but we let them take it from there,” Salceda concluded.