THE PHILIPPINE INNOVATION ACT
Sponsorship Speech
Senate Bill No. 1355 – An Act Adopting Innovation as Vital Component of the Country’s Development Policies to Drive Inclusive Development, Promote the Growth and National Competitiveness of Micro, Small, and Medium Enterprises, and for Other Purposes (The Philippine Innovation Act)
Session Hall, Senate of the Philippines, Pasay City March 6, 2017
Delivered by HON. SHERWIN T. GATCHALIAN, Senator of the Republic:

"INNOVATION IS, TO ALL APPEARANCES, AN IDEA WHOSE TIME HAS COME."1

Good afternoon, Mr. President and esteemed colleagues. Allow me to introduce this presentation with a real-life anecdote that could perfectly weave the history and the vision that has inspired the passage of this legislation - The Philippine Innovation Act.

This is Diosdado Banatao - the son of a poor farmer and a homemaker. He was born and raised in a rural area in the municipality of Iguig, Cagayan Valley. Growing up in poverty, he went to school without shoes. His family had no access to electricity. Today, his net worth is estimated at about $5 billion, as he also sits on the big chair of a multibilliondollar company2 in Silicon Valley. This company invests in semiconductors and semiconductor-related technologies. Perhaps the easiest way to explain Dado's journey from Cagayan Valley to Silicon Valley is to attribute it to a computer chip: that first single-chip graphical user interface accelerator that made computers work a lot faster without the large boards. These chips can be found in every PC today - just

as Banatao's name is found in the Computer History Museum in Mountain Valley, California as pioneer of the first PC chipset.

While most people refer to these chips as his "invention," Dado says that it is more appropriate to refer to them as his INNOVATION. He explains that "[i]nnovation is more important because innovation implies that you are putting together a whole bunch of other elements beyond that one invention."

Dado's life inspires the Filipino, especially the innovators of today. As he would himself say: "My story could be your story. As Filipinos, it must be our story." The Philippine Innovation Act carries that much needed "innovation vision" to inspire the commitment and cooperation of the government, industry, educational, academic, research and scientific institutions, and the rest of the community, towards building an innovation economy that will change the economic narrative of our country.

A few days ago, I met with a group of innovation advocates - one of them was Dado Banatao - and together we envisioned how this legislation could put innovation at the center of our national development policies, and make innovation a major driver of economic development that will build the foundation of a more inclusive future. We therefore made it the overarching objective of this Act to generate and scale up the promotion of innovation in all levels and all areas of national development, through the following areas of endeavor:

1. Promote a culture of strategic planning and innovation to encourage creative thinking and knowledge creation;

2. Improve the country's innovation governance and compel the adoption of a long-term vision and focused priorities for innovation;

3. Ensure the effective coordination and eliminate the fragmentation of innovation policies and programs at all levels;

4. Remove obstacles to innovation by eliminating bureaucratic hurdles;

5. Strengthen partnerships among different actors - from the public and private sectors, to the academe, the Micro, Small and Medium Enterprises (MSMEs), the research & development institutions, and our communities - towards improving the quality of life through innovation;

6. Strengthen the position of MSMEs in the innovation system, in order to stimulate business ambitions and encourage entrepreneurial behavior; and

7. Explore, promote and protect the potentials for innovation of traditional knowledge, traditional cultural expressions and genetic resources.3

In the Global Innovation Index Report4 (GII) of 2016, the Philippines ranked 74th among 128 economies in terms of overall innovation, garnering a score of 31.8 out of 100. This is a slight improvement, from our 83rd place ranking, out of 141 economies in 2015, with a score of 31.1. In this 2016 GII Report, the country also ranked 5th out of the 7 ASEAN economies that are included in the survey. It ranked higher than Cambodia (95th) and Indonesia (88th), but lagged behind Singapore (6th), Malaysia (35th), Thailand (52nd), and Viet Nam (59th). The Philippines' relatively low ranking was pulled down by weakness in human capital and research, with a score of 27 out of 100. This score was brought about by low public and private expenditure on education and research and development, as well as low tertiary inbound mobility.5

While the Philippines has shown an increasing trend in R&D spending, the percentage of its R&D expenditures to GDP at 0.14% still falls below the UNESCO norm of 1% for R&D expenditure to GDP for developing countries. For comparison with other ASEAN countries, R&D expenditure to GDP is 0.19% in Viet Nam, 0.36% in Thailand, 1.09% in Malaysia, and 2.0% in Singapore. In terms of S&T human researchers, the country's number of researchers is equivalent to 270 researchers per million population- which is also below the UNESCO norm which is 380 per million population.

From 2015 to 2016, the Philippines registered an improvement by being ranked 47th among 144 countries in the Global Competitiveness Index (GCI) of the World Economic Forum. However, steady improvements were also made by our neighboring countries. Hence, we still lagged behind economies like Malaysia (18th), Thailand (32nd), and Indonesia (37th). The same report also ranked the Philippines 68th in terms of technological readiness and 48th in terms of innovation factors.6 In yet another global ranking in 2016 which looked specifically at a country's total impact on global innovation, the Philippines ranked 47th among 56 economies assessed in a report by the Information Technology and Innovation Foundation. This report focused on the extent to which a country's innovation policies generate benefits for the global innovation system.

These survey results offer nothing more but compelling evidence on the need for more vigorous action to stimulate a thriving and growth-fueling national innovation system. Such is the purpose of this legislation. In fact, there is no better timing for the passage of this bill than now. Under Ambisyon 2040, innovation is identified as one of three major components of fostering economic growth, along with infrastructure and competition. The recently approved Philippine Development Plan (PDP) 2017-2022 likewise identifies innovation as one of the major components of fostering economic growth. Under Chapter 14 - entitled "Vigorously Advancing Science, Technology, and Innovation" - the latest Philippine Development Plan aims to increase the country's growth potential by graduating to a knowledge economy, where technology adoption will be promoted and innovation will be stimulated. This is in recognition of the important role that STI continues to play in the country's economic and social progress. In the past 6 years, for example, STI has provided landmark solutions to our problems through the Project NOAH, the nationwide flood-hazard and resource mapping using LiDAR, and the launch into space of the country's first microsatellite Diwata-1 which was designed, developed and assembled by Filipino researchers and engineers under the guidance of Japanese experts. The new Philippine Development Plan emphasizes that it is very critical to mobilize all the actors in the innovation ecosystem to collaborate and translate the results of research activities into tangible products and services for the people.7 Consistent with this development goal under the new Philippine Development Plan, the Philippine Innovation Act will steer the adoption of a clear and inspiring long-term view of the country's innovation vision, improve the governance framework for innovation, and mandate key reform areas toward building a thriving and inclusive national innovation ecosystem.8

For the Philippines, the challenge does not stop at clearly defining the vision upon which our innovation thrusts and strategies will be rooted. Setting the national innovation agenda is another key element of the national innovation system which, in other countries, is a task done by a National Innovation Council. A study by the Information Technology and Innovation Foundation or the ITIF states that about 50 economies have established national innovation foundations or enterprises that are specifically charged with promoting innovation.

This ITIF table9 lists 30 out of the more than 50 countries throughout the world that have created government-chartered entities specifically charged with promoting innovation.

The establishment of our own National Innovation Council (NIC) under Section 9 of the proposed Act is necessitated by our highly fragmented formal governance system where numerous agencies are charged with carrying their respective parts of the innovation mandate. The NIC will facilitate horizontal interaction and consultations with stakeholders beyond the official circle of government functionaries, thus avoiding too much focus on "top-down planning" that stifles broad-based participation in the development of the national innovation agenda. It will develop the country's innovation goals, priorities, and long-term national strategy. Its proposed structure is guaranteed to be well-supported by broad expert advice, with adequate authority to harmonize inter-agency roles and contribute to the national innovation agenda.10

Under Section 6 of this Act, the NIC shall develop a National Innovation Agenda and Strategy Document (NIASD). Such document will establish the country's vision and long-term goals for innovation and provide a road map and the strategies for improving innovation governance through clear-cut delineation and complementation of innovation efforts across agencies. The goal must be to deepen and accelerate innovation efforts, especially inclusive innovation programs that target the poorest of the poor, and integrate public- private partnerships with those of large businesses, MSMEs, academe, and RD&E institutions.

In developing the agenda, the NIC shall identify strategies to stimulate regional capacity for development, taking into consideration the competitive advantages and strengths of each province, region, and community. The agenda and strategies shall have a minimum horizon of ten years, subject to periodic reviews. It will be developed in consultation with government agencies, Regional Development Councils (RDCs), Local Government Units (LGUs), and other stakeholders. The bill has identified vital areas that shall be considered in developing the country's priorities for innovation.

The NIC is also tasked to administer an Innovation Fund under Section 20 of this Act, from which grants will be issued to strengthen entrepreneurship and enterprises engaged in developing innovative solutions benefiting the poorest of the poor.

Since a successful national innovation system will require collaborative governance, it is vital that a "whole of government" approach is adopted in laying down the foundations and setting the long-term goals, priorities, strategies, and policies, and in delivering the country's innovation programs. This will strengthen our innovation ecosystem, improve policy coherence and allow innovation to unlock the potential of more inclusive, stronger growth. Thus, under Section 13 of this Act, the NIC will adopt strategies that promote regional innovation to harness the competitive advantages and potential strengths of regions and provinces.

Cluster policies or strategies shall also be adopted by the NIC as a significant component of the country's innovation policy mix. The cluster policies shall be adopted to focus on regional hubs, provinces or sectors such as MSMEs, large firms, spinoffs and start-ups, academic or educational institutions and research centers. Under Section 12, the internationalization and participation in the local and global value chains of MSMEs are specifically promoted. The NIC is tasked to develop a comprehensive support program to push the growth of MSMEs through innovation. In the Philippines, where 99.6 percent of businesses are considered MSMEs, the role of innovation cannot be overemphasized. Unlike large companies that have ready access to funding and resources, MSMEs are at a disadvantage because of their size and problems of access to resources and markets. Innovation will enhance these MSMEs' global competitiveness.

On the whole, what this legislation intends to achieve is to make innovation a major driver of economic growth and a key foundation of a more inclusive future. It compels us to place innovation at the center of our development policies to enable the country to move as a coherent whole. We cannot anymore afford to take half-steps, or sporadic efforts, in our bid to fuel sustainable and inclusive growth.11 We need to finally develop a culture of innovation that will propel our nation to an economic success.

Last but not the least, I would like to thank Senator Loren Legarda for spearheading the passage of The Philippine Innovation Act. This legislation will change the rules of the game: a Filipino with an innovative idea will no longer have to look elsewhere for support. This will not only transform our country to an economic powerhouse; it can also turn innovators into patriots.

Thank you, Mr. President.

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1 The Global Flourishing of National Innovation Foundations. See www2.itif.org/2015-flourishing-national-

2 Tallwood Venture Capital. See https://www.youtube.com/watch?v=6YdgKvdW43o

3 Based on a study commissioned by the Philippine APEC Business Advisory Council (2015-2016).

4 The Global Innovation Index (GII) aims to capture the multi-dimensional facets of innovation and provide the tools that can assist in tailoring policies to promote long-term output growth, improved productivity, and job growth. The GII helps to create an environment in which innovation factors are continually evaluated. It provides a key tool and a rich database of detailed metrics for economies, which in 2016 encompassed 128 economies, representing 92.8% of the world's population and 97.9% of global GDP. The GII surveys a range of global innovation indexes that include institutional environment, human capital and research, infrastructure, business sophistication, knowledge and technology outputs, and creative outputs.

5 Tertiary inbound mobility refers to the number of students from abroad studying in a given country, as a percentage of the total tertiary enrolment in that country. Discussion based on the Draft of Chapter 14 (then titled as "Leveraging Science, Technology and Innovation") of PDP 2017-2022.

6 World Economic Forum Global Competitiveness Report 2015-2016

7 Discussion based on the Draft of Chapter 14 (then titled as "Leveraging Science, Technology and Innovation") of PDP 2017-2022.

8 Based on a study commissioned by the Philippine APEC Business Advisory Council (2015-2016).

9 See www2.itif.org/2015-flourishing-national-innovation.pdf , pp. 3-4.

10 Based on a study commissioned by the Philippine APEC Business Advisory Council (2015-2016).

11 Based on a study commissioned by the Philippine APEC Business Advisory Council (2015-2016).