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An eCommerce Guide

for the eFilipino

written by
JANETTE TORAL
Windows user*

edited by
DANNY ESCASA
Linux & OS2 user*

layout, cover and logo design by


ANTONIO BUCU
Mac user*

Marketing Secretariat
FIERA DE MANILA, INC.
Zen Bldg. 8352 Mayapis St.
San Antonio Village, Makati City
PHILIPPINES
TEL. (632) 896-0637, 896-0639
FAX (632) 890-2101, 896-0637
WEB: http://www.fmi.com.ph
EMAIL: fiera@info.com.ph

Copyright © 2000 Janette Toral. All rights reserved.


No part of this book can be used, copied or reprinted
in any form without the written consent
from the author.
Renaissance Digital font used for the Digital Filipino logo
and page elements Copyright © 1999 Antonio Bucu.
Visit the Digital Filipino Website:
http://digital filipino.com
email: janette@digitalfilipino.com

* This book was conceptualized on a Windows PC, edited on a Linux/OS2 environment and laid-out on a Mac.
CONTENTS

Foreword ................................................................. 3

Chapter 1: Introduction................................................ 5

Chapter 2: E-Commerce Through EDI.......................... 15

Chapter 3: Establishing Your Presence


on the Internet.......................................... 31

Chapter 4: Frequently Asked Questions


on the Proposed E-Commerce Bill................. 45

Chapter 5: E-Commerce in the Philippines:


An Interview with
President Joseph Estrada............................ 55

Chapter 6: Statistics.................................................. 65

Chapter 7: Opportunities and Challenges:


Making the Philippines
an Ideal Environment
for E-Commerce........................................ 75

Annex A: SENATE BILL 1902


An Act Providing for an Electronic Commerce Law
and for Other Purposes................................................... 83

Annex B: HOUSE BILL 9971


The Electronic Commerce Act of 2000............................... 99

Annex C: SENATE BILL 2025


An Act Providing Protection against Computer Fraud
and Abuses and other Cyber-related Fraudulent
Activities, Providing Penalties Therefore
and for other Purposes..................................................117

Annex D: The Digital Filipino Webring........................123

Annex E: eFilipino Web Awardees.............................129

Acknowledgement.........................................................135

About the Author..........................................................136


FOREWORD

A few months ago, I ordered some Raul de Blasio CDs and a book on trust written by
Francis Fukuyama over the Internet simply to try out the service at Amazon.com. As I was
checking out Amazon’s search engine, I was impressed at how quick and easy it was to find
titles that are otherwise very hard to find in ordinary bookstores. Amazing, tempting, and
a breeze!! Paid of course by credit card. Right then and there I decided I would keep on
using Amazon.com as long as it would give me good, swift, and secured service.

The field of Information Technology (IT) increasingly widens as doors of opportunities


are continuously being opened. The advent of the Internet and e-commerce, for instance,
has paved the way for convergence of technologies. The Philippines, like the rest of the
world, will have to change its ways of doing business, sooner or later, because of these rapid
developments.

In my previous dialogue with different interest groups, I have learned more about
e-commerce and how it can be used to improve our business processes. Our present systems
pose certain inefficiencies that can be streamlined effectively through e-commerce and result
in major cost savings and better use of time. A retail chain, for instance, will not have to
fax hundreds of purchase orders every day by paper if it will use e-commerce instead and
save on time and resources. An aspiring entrepreneur can become an online merchant and
sell his goods electronically through credit card payments.

Our country has all the potential t


DFNN.com, which was launched recently by a young US-trained Filipino financial analyst
named Ramon Garcia, is showing a lot of promise as a national or even a regional player.
DFNN.com has put together an impressive array of services that are easily accessible.

As Janette told me, this book report is designed for the reader who may be a student, a
small business entrepreneur, or someone just starting up his own business. I urge you to
harness the power of the Internet and e-commerce and use it to your advantage. It offers a
lot and makes way for so many opportunities that the only things that will limit its potentials
are your own inhibitions and our country’s infrastructure. This is where government and
private sector must work hand-in-hand to overcome obstacles.

Our government educational institutions have devised programs that would make the
Internet and e-commerce reach down to the grassroots level. Higher learning institutions
in the country are now in the process of coming up with an e-commerce curriculum which
they will begin offering by this year. There are government programs that would allow
computers to be present even in the countryside. We have brought down all duties and
taxes on all information-related equipment, including computers and telecommunications
equipment. The private sector is doing its best to put together packages that will make the
computer accessible as in cybercafes that have been hugely successful in provincial cities.
THE DIGITAL FILIPINO

Yes, e-commerce is very promising. This book report, The Digital Filipino, is one of
the many ways of educating you about it. The Filipino is considered one of the highly
skilled nationalities in the world. We have the brains, the skills, and the character to
succeed. We have the capability to be at the forefront of all of these developments. We
have the opportunity to actively participate in e-commerce, perhaps even lead, instead of
being passive consumers.

So read, enjoy, and heed it!

RAMON MAGSAYSAY, JR.


Senator
Republic of the Philippines

6
CHAPTER 1

INTRODUCTION
THE DIGITAL FILIPINO

8
INTRODUCTION

This book is all about e-commerce in the Philippine and Asian marketplace. Yes, there are
a lot of e-commerce books available in the bookshelves but most are published in Western
countries and cover only situations in their part of the world. There’s a need for a book
that speaks more about our country that can be a reference for aspiring entrepreneurs who
want to venture into e-commerce.

The book should be useful as well to students in understanding the e-commerce paradigm
and giving flesh to the theories that they may have already read. Most schools and universities
around the world are gearing up to offer an e-commerce course. I hope this book will be
a useful educational and reference material.

Why do we need a book on e-commerce? You might say, “There’s already a lot of
information on the Internet. A book on e-commerce might just become useless in a
short span of time.” True, there’s a lot of information on the Internet and we’re now even
experiencing information overload. But note that only those who have access to information
and know how to use it to their advantage will be the ones to succeed. The information is
there but how you organize and analyze it to come up with bright decisions is a different
story.

To the best of my knowledge, e-commerce has never been covered in this way. But I
hope that through this book, more individuals and businesses will appreciate e-commerce
more and realize how it will play a pivotal role in this millennium.

What is Electronic Commerce?

Electronic Commerce (e-commerce) is the paperless exchange of business information


by using any form of electronic business communication. This includes Electronic Data
Interchange (EDI), Electronic Mail (E-mail), computer bulletin boards, fax, Electronic
Funds Transfer (EFT), and other similar technologies.

Simply put, any transaction that takes place using electronic means can be referred to as
e-commerce. The idea is that instead of printing a purchase order and sending it to your
supplier, for example, you send its details from your computer to your supplier’s computer.
The latter would route the information to the appropriate departments.

Why do some refer to E-commerce as Business-to-Business (B2B)


and Business-to-Consumer (B2C)?

There are two types e-commerce. Let me use a simple analogy. When you purchase
your groceries at the supermarket and pay them over the counter, that type of service is
what we would refer to as Business-to-Consumer (B2C). So when you buy books, food,
groceries, CD, software, or hardware from your favorite shopping web sites, you’re doing
B2C, electronic commerce between businesses and consumers.

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THE DIGITAL FILIPINO

The supermarket on the other hand, will need to purchase the goods on the grocery
shelves from its suppliers. The business transactions that take place on this end is what we
would refer as Business-to-Business (B2B). So when supermarkets, bookstores, computer
stores, restaurants, music outlets purchase their goods from their suppliers either via fax,
EDI, email, and other means, that is B2B, electronic commerce between businesses.

How long has the Philippines been practicing e-commerce?

We’ve been practicing e-commerce since the emergence of computers and


telecommunication technologies. It even became more prevalent as fax machines entered
our lives; retail shops implemented point of sales (POS) systems and bar coding; the banking
system introduced automated teller machines (ATM). Each of these are a step towards a
full-blown e-commerce system where human intervention is becoming less and less.

EDI has been widely used in some form in the Philippines on a domestic and international
level. It is used by retail chains like SM Supermarket and Makro to communicate with
their suppliers.

With the emergence of the Internet commercially, as it started in the Philippines in 1994,
e-commerce took a new manifestation and businessmen can now sell their goods through
their Web sites and close sales transactions either online or through e-mail. Web sites like
Chow.net, Grocerific.com, Magoos.com, and Powerbooks.com.ph, are just some sites that
sell goods and services online.

Why should companies do e-commerce? Is this only for big companies?

Small- to medium-sized companies should consider e-commerce more and even have
a much greater need for it than larger companies. With the advent of expanded global
trade (GATT, ASEAN, and APEC initiatives), it is imperative that small- to medium-sized
companies automate their businesses to compete with foreign brands, as international and
intra-regional trade will increase exponentially. Manual processes in the supply chain that
are slow, redundant, unreliable, and inefficient can be replaced with more efficient ones.

The entrepreneur who wants to sell goods and services to a greater audience can exploit
the Internet to promote them. With less human intervention, Internet-based businesses
are open 24 hours a day, seven days a week and can accommodate any customer regardless
of their time zones. But of course, an Internet-based business is not just about building
Web sites and expecting profits to just come; the infrastructure to complete the sales cycle
must be all covered from B2B to B2C.

10
INTRODUCTION

What is the implication of e-commerce to the supply chain?

Perhaps the best way for me to explain this is to give you a real world implementation
of e-commerce in the various industries. In a supply chain, there are the buyers and the
suppliers. A tier 1 buyer can be the SM Supermarket retail chain or a major garments
importer. Both tier 1 companies are what we would consider as the 10-thousand pound
gorilla or a power buyer that has the clout and influence in directing the standards or
means of trading to its suppliers. Companies below tier 1 are not in the same enviable
situation. These companies dealing with multiple power buyers have to adjust their
respective systems and processes as instructed by the multiple power buyers. This results
in a complex e-commerce solution and implementation for these companies. They also
end up having multiple e-commerce systems just to meet the requirements of these power
buyers.

A lot of companies still have the mistaken notion that e-commerce is merely credit card
transactions. It is much more than that. It is also not just the transfer of data from one
company to another. A full-blown e-commerce implementation encompasses the entire
supply chain: from the supplier delivering the goods to buyers through transportation
partners, managing logistics, up to collecting payment. Figure 1 illustrates some of these
processes.

CAR MANUFACTURING

Car Manufacturer
Tier 1

Car Seat Supplier


Tier 2

Fi g 1 . E - C o m m e rc e f l ow b e t we e n
Car Seat Coil manufacturer, suppliers and third level
Tier 3 suppliers.

There are three business information flow layers. In the product specifications and
purchasing layer, the intent is to communicate required data to request, establish, and
modify product pricing, packaging specifications, and contract information for purchased
parts and tooling. The intent of the scheduling and delivery layer is to provide two-way
communication between the customer and the supplier. The customer provides the required
data to plan, authorize, and schedule the delivery of material. The supplier communicates
shipment information. If discrepancies exist, the customer communicates them at the
time of receipt. There’s the payment layer, where one communicates billing and payment
information.
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THE DIGITAL FILIPINO

There are also big companies with shorter product life cycles that build products and
release new ones every six months. Cases like these are printer and cellphone companies
where new products have to be built and released every six months in order to survive fierce
competition and stay in the lead. Its relationship with its lower tier suppliers are tight and
in order to keep up with schedule, everything has to be automated.

Suppliers whose back-end systems are sophisticated enough to meet the demands of these
companies are the ones who will survive. In order to keep up with hectic competition,
companies can no longer say that they don’t need to innovate in this industry. E-commerce
is now a necessity for competitiveness. We are no longer competing merely with local
companies. We are now beginning to be challenged by companies based in other countries.
Retail trade liberalization has heightened the need for power buyers and suppliers to do
e-commerce. Those who refuse to do it may find themselves excluded from participating
in a powerful purchasing community for not being e-commerce ready.

Ways of Doing E-commerce


There are so many ways that e-commerce can be defined, one of which is how information
is transmitted. A lot of people have limited the definition of e-commerce through Internet
transactions. There is more to that. When planning in building e-commerce systems, you
have to consider all forms of media as how documents can possibly flow in the organization.
Let’s discuss how documents are transmitted in various forms.
1. Value Added Network (VANS) - These are private network that transmit documents to
various trading partners. Most EDI implementations go through a VAN. Documents
such as purchase order or invoice are being converted to EDI format through a
translator, then sent through a VAN.
The same thing happens when you are about to retrieve invoices or functional
acknowledgments for the documents that you’ve transmitted. You will connect first
to the VAN and download the EDI messages. The translator will convert these EDI
messages to a more readable form and feed it to the back-end application. Please note
that XML-based messages can be transmitted this way as well, which is ideal for high
volume document transmission.
2. Internet FTP - The process works the same way as the VAN system except that instead
of using a private network, you will transmit the document via FTP through the
Internet.

3. Internet SMTP/MIME/X.400 - Similar to #1 and #2 except that you transmit the file
as an email attachment.

4. Internet Web/HTML/XML - In this process, users transmit and receive documents


through the browser interface or web site. Translation happens at the back-end.

5. RJE/Direct Connect - This is a direct connection between the two parties trading
using communication software such as CrossTalk, HyperLink, etc.

12
INTRODUCTION

6. Mass storage such as floppy, CD, tape, optical drive, or hard drive - This happens to
companies where mass storage devices are shipped from one location to another. Upon
retrieval of data, this is translated and feed into the back-end system.

7. Fax, phone, snail mail, paper - Traditional process of exchanging information whereby
data gathered are entered into the application and processed. Some companies
offer special services whereby companies who don’t have the infrastructure can fax a
document and recipient will convert it to EDI format and transmit it to the VAN.
The implementation appropriate to your organization can be a combination of the
seven methods. But in building a major e-commerce system, you have to define the
appropriate document flow, dependent on triggers, issues, and benchmarks.

Media

For the forms of media, e-commerce encompasses all forms of electronic data. It can
include:
1. Voice. Which can now be synthesized or digitized and have a voiceprint for establishing
identity for authentication.

2. Paper. Which can now be scanned and digitized and used in e-commerce.

3. Electronic media, which can be technical in nature. These are CAD/CAM,PDES/


STEP, CITIS, SGML, IGES, etc. There are business documents as well. If it is an
open standard document driven by industry, national, or international guidelines, it
can either be ANSI or EDIFACT or XML, among others. Proprietary and other
type of documents can include flat file, binary, e-mail, telex, BBS, voice, and video.
These can be transmitted via Internet or VAN and be stored in tape, CD, cartridge,
and floppy.

“How can small and medium sized enterprises (SME)


benefit from e-commerce?”

The Internet has always been positioned as the leveler of the playing field between big
companies and SMEs. I hope that in the next edition of this book, we will be able to focus
more on SMEs.

A study was recently undertaken by Pricewaterhouse Coopers’ for the Asia Pacific
Economic Cooperation (APEC), Telecommunication Working Group (TEL), Business
Facilitation Steering Group (BFSG). The focus of the study was on SME Electronic
Commerce Study; the final report came out last September 1999. In the rest of this chapter,
we will give some highlights of the report and offer our own analysis in the Philippine
context.

In the report, SMEs were classified as companies who have no more than 500 employees.
The study was conducted across 21 member countries.
13
THE DIGITAL FILIPINO

The study classified SME levels of e-commerce capabilities. Level 1 SMEs remained as
they are, with no online capabilities or, at best, only the basic company email address (e.g.,
amberstore@aol.com). Level 2 companies have their own Web site, most likely an online
incarnation of their company brochure. This year and in the years to come, we expect
to see SMEs moving up to Level 3 and taking the challenge of online business by being
able to take orders and provide customer support through their respective sites. With the
growing availability of online payment, we can expect to see SMEs move up to Level 4
where they will start offering the complete transaction loop including the acceptance of
payment through their site.

Some of the perceived e-commerce benefits were mentioned in the report:

1. Improved customer service and increased revenue.


Take the case of Magoo’s Pizza (http://www.magoos.com). The Internet has allowed
this company to be the first to offer online ordering and coupons, a service that their
competitors have not maximized till now. The ATM network cards such as MegaLink,
BancNet, and ExpressNet are also examples of improved customer service where we are
able to withdraw money from any of the member banks. And even where a company
doesn’t realize an increase in sales, they enjoy savings from online transactions. An
ATM withdrawal, for example, costs a bank a fraction of what an over-the-counter
withdrawal would cost.

2. Enhanced company image, improved competitive position, access to international


markets.
A Web site sets a company apart from the competition. When Jewelmer
(http: /www.jewelmer.com) first went online, it immediatelyreceived foreign inquiries
for its pearls that are sold wholesale. No other Philippine jewelry company was able
to tap this potential.

3. Customer information exchange, increased customer loyalty


The Internet has allowed merchants to be more closely in touch with their customers.
When DFNN.com first started, it had a very simple Web site. But the site keeps
evolving with its interface and functionalities which are all customer driven. DFNN
solicits customer feedback, which it reviews and acts upon.

4. Reduced costs of information


Remember before that if we wanted to be kept informed, we’d buy several newspapers.
Now, you can read three or more publications online.

5. Supplier information exchange


Facilities such as buyer-supplier matching have enabled our SMEs to offer their
goods to anyone interested. These are facilities such as USAID’s Global Technology
Network and Global Sources.

14
INTRODUCTION

6. Attract new investment


With the right business concept and approach, one might just attract investments
to their company. Who would ever think that a Web development company, Fiesta
Online, would attract investors such as WS Computer Publishing and Catcha.com.
This makes yehey.com the Philippines’ first Internet success story.

7. Reduced procurement cost


Through e-commerce, SM Supermarket, Makro, and Grocent are able to
communicate with their suppliers more efficiently in coordinating their orders.

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THE DIGITAL FILIPINO

16
CHAPTER 2

E-COMMERCE
THROUGH EDI
THE DIGITAL FILIPINO

18
E-Commerce through EDI
What is EDI?
If you’re an importer or exporter and have to deal with foreign principals, you are most
likely to use EDI as a format for exchanging documents. It is frequently used in the B2B
environment.

EDI, which is one form of electronic commerce, is the computer-to-computer exchange


of business information between trading partners using a standardized electronic format.
EDI was first used in the transportation industry in the mid-seventies. It was used by ocean,
motor, air, and rail carriers and the associated shippers, brokers, customs offices, freight
forwarders, and bankers.

EDI is a central part of e-commerce, because it enables businesses to exchange business


information electronically, and more quickly, cheaply, and accurately than is possible using
paper-based systems. This exchange of information in electronic form occurs by using a basic
unit called a transaction set, which typically relates to standard business documents such
as Purchase Orders, Requests for Quotations, and other business-related transactions.

The essence of EDI is that data can be transported from one application format to
another in a structured, predetermined form. With EDI, there are no more stamps to buy,
no envelopes to open, no data to re-key into your computer. Everything is handled by
sending information between computers over the telephone network.

UN/EDIFACT and ANSI X12 are the popular standards being used to do EDI in Europe
and the US. In the Philippines, UN/EDIFACT is the one being implemented. There are
also sectorial EDI standards used by certain industries (e.g. EANCOM for retail).

In the Philippines, EDI started with Multinational Corporations (MNCs) with local
offices or local trading partners. These EDI transactions are coursed through international
Value Added Networks (VANs) like GE Information Systems (GEIS), IBM, and British
Telecomms (BT). VANs are connected via network nodes. EDI engines were located in
other countries and there was no local traffic then.

If Philippine importers and exporters cannot meet the requirements of buyers abroad
in terms of electronic shipping documents, it would simply mean that the foreign buyer
will turn to other suppliers outside the Philippines who can meet those requirements.
What is a Trading Partner?
A Trading Partner is “a business that has agreed to exchange business information
electronically.” This term describes any business that has been registered to conduct business
electronically with the government and other businesses. You should note that this term
is used in the government and commercial market place worldwide.
For the importer/exporter, becoming a registered trading partner in the global marketplace
provides a lot of opportunities and the needed edge to those who are EDI-enabled in
competing for opportunities both here and abroad.

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THE DIGITAL FILIPINO

Parties who agree to transact using e-commerce means such as EDI normally enter into
a Trading Partner Agreement (TPA). TPAs are needed to properly inform the trading
parties of their rights, obligations, and liabilities, and protect them, if correctly followed.
This includes: messaging standards such as UN/EDIFACT; communication methods;
security procedures; record storage; message processing such as receipt, acknowledgment,
technical errors; validity and enforceability of documents as evidence, contract formation;
data confidentiality; liabilities; dispute resolution; and jurisdiction.

What do I need to do EDI?

You will need hardware, two types of software, and an electronic mailbox via subscription
to a VAN, a special online service that transfers EDI messages between the government’s
computers and your computer or between Trading Partners.

You’ll also need a Communications Software package that allows your modem to dial
out through a telephone to connect with another computer.

A Translation Software program converts the information you type into standard EDI
formats to be sent, and translates incoming EDI messages into characters you can read on
your computer screen. This can be integrated into your back-end applications for full-cycle
implementation. If there is a large number of users utilizing the system either as a recipient
or sender, and high volume of transactions, you may consider getting EDI Server/Gateway
software.

What does a VAN do?

VANs are companies that provide EDI services to their subscribers. A VAN has computers
that receive EDI messages from their subscribers and pass them on to the recipient. It acts
as a central post office for EDI forms and is used by trading partners to transfer electronic
information. It eliminates the need for computer systems to be connected to a multitude
of other systems in order to send and receive EDI messages. It offers services to connect
all parties so that EDI users need only establish one single connection with the VAN in
order to communicate electronically to all other parties connected to the VAN.

The essential services provided by a government-certified VAN include:


• the exchange of many different types of EDI messages with the trading partners’
computers at whatever time is convenient for you;
• the delivery of your trading partner registration to the government if joining a
government EDI network like the BOC Gateway;
• the maintenance of records and checking of the accuracy of EDI messages

VANs are like telephone switchboards. A VAN has to connect the computer sending the
message with the computer(s) that are supposed to receive it. If the receiving computer
is not available, the messages will be stored in an electronic mailbox, the equivalent of an
answering machine for your computer. When it is convenient on your end, you can retrieve
the stored messages and decide which ones you want to respond to immediately, which
20
E-Commerce through EDI

ones you want to keep for later evaluation, and which ones you want to throw away.

Some VANs can convert a message that has been sent from one EDI standard to another.
Others can convert a message written in a trade industry standard, like the Uniform
Communications Standards (UCS) used by grocers, to EDIFACT, the international
standard.

This illustrates a typical flow of EDI system connecting to a VAN. Business transactions
such as Purchase Order, Accounts Payable, Treasury/Finance, Warehouse/Shipping, etc., are
converted into their corresponding EDI Interface. The EDI interface allows the user to use
data elements that are needed on a particular transaction and reformats the data in structured
form, after which the reformatted data goes into the EDI Translator, which converts the
information you type into standard EDI formats to be sent and translates incoming EDI
messages into characters you can read on your computer screen. The converted information
then passes through a communications program which is responsible for
transmitting that particular transaction to the selected VAN.

Dealing with Trading Partners in a B2B environment/Trading Partner Information.

When dealing with potential trading partners, you need to create a profile as to what they
are capable of doing and how mature their back-end systems are. If you are a company
looking forward to doing business-to-business transactions with different companies, this
is important for you. Companies who are e-commerce enabled will ask these questions:

1. Trading Partner Name


2. Industry Type
3. Business contact including mailing address, email address, fax, and phone number
4. Technical contact including mailing address, email address, fax, and phone number
5. Business documents and applications that you can process electronically using
EDIFACT or ANSI E-commerce Implementation Procedures

When implementing e-commerce systems, you now have to plan what will transpire as
each transaction gets processed. This includes the activities and reports that need to be
triggered at certain periods of time. For each trading partner, in a business to business
transaction, take each daily interaction and follow document/procedural flows until the
transaction sets processed are completed and later purged from the database. Further, you
need to be able to cover the following:

1. Criteria for acceptance of a business document transmitted in thee-commerce


system
2. Ownership of data.
3. Recovery/Contingency plan in handling failures.
4. Security measures.
5. Transaction control numbers for audit and control.
6. Error conditions to be accounted for such as mapping errors, wrong version, missing

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THE DIGITAL FILIPINO

information, mismatch with cross reference files, transmission errors, lost transmission,
among others.

Successful strategies for using EDI include the following goals:

1. Provide the highest level of accuracy in the data being exchanged.


2. Receive the EDI data directly into the business application, using the appropriate
edits. This is commonly referred to as EDI integration.
3. Generate any EDI data directly from the business application. If the trading partner
has integrated the received EDI data into their system, then both systems will exactly
have the same data.
4. Automate the processing of data by having the computer perform routine reviews of
the data.
5. Eliminate any delays in the transmission of data into the trading partners. This applies
as well to any internal delays in the processing of any received data.

Who are the companies using EDI locally?

There are several EDI implementations in the Philippines, namely:

1. GTEBNet The Garments and Textile Export Board (GTEB)


(http://www.dti.gov.ph/gteb/index.html), a quasi-government agency attached to the
Department of Trade and Industry (DTI), issues the export clearance for garment,
textiles, carpets, yarn, fiber, and other natural synthetic fibers for shipment to other
countries.
The GTEBNet, a World Bank-funded electronic network for textile quota
administration, export documentation, and import authorization, including the
electronic visa information system (ELVIS) for the US Customs, was set up for the
GTEB.
The project has been operational since December 1994 and is expected to service
more than 1,500 garment exporters, with an estimated volume of 240,000 annually.
The project started with four pilot garment exporters. Currently, the GTEBNet has
over 90 exporting companies, in Metro Manila, Cavite Export Processing Zone, and
the Mactan Processing Zone in Cebu as well as two service center facilities in Makati
and in Cebu to service small garment exporters. It is targeting to increase its subscribers
to 200% in a year.
The GTEBNet has adopted 13 EDI messages based on EDIFACT syntax and
directories. Since December 1999, GTEB has been implementing EDI over the
Internet.

Twenty percent of the processes and transactions of the GTEB is generated through
the GTEBNet. Textile clearance and export visas to North America and Europe can
now be obtained in less than 30 minutes. In the manual system, it would take 72
hours to secure a textile clearance and 48 hours for export visas.

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E-Commerce through EDI

2. SSSNet
The Social Security System (SSS) administers social security protection to workers
in the private sector. It handles three programs, namely: the Social Security Program,
Medicare Program, and the Employee’s Compensation Program. At present, there
are 18 million SSS members nationwide, 60% of whom reside in Metro Manila. Its
employer base is more than half a million.
SSSNet is an EDI community for the SSS and its trading partners consisting
of hospitals, 700 employers, and 15 banks that started in April 1997. It currently
transacts electronic monthly contribution lists, payment orders, and credit and debit
advice notices. It is the first full-cycle EDI with financial settlement. The traditional
reporting system, without EDI, took about three to six months resulting in delays of
the release of benefits and loan privileges to individual SSS members.
SSSNet is adopting two proprietary EDI messages on SSS Collection List (SSMCL)
and Acknowledgment (SSSMCA) and three UN/EDIFACT messages (CREADV,
PAYORD, FINSTA).
SSSNet not only speeds up the collection but also improves the information flow
from the employer to the employer’s bank interfaced through the SSS bank and copied
by the SSS main office.
The network will be piloting the Salary Loans Repayment and Pension Remittance Modules
starting June of this year. It started implementing EDI-over-the-Internet last January 2000.

3. Bureau of Customs (BOC) EDI Gateway


After a bidding process in November 1997, the Philippine Chamber of Commerce
and Industry (PCCI) decided to tap GEIS to set up the EDI Gateway for the BOC
as an interface between the BOC’s Automated Customs Operating System (ACOS)
and accredited VAN service providers.
In 1998 (as per Customs Memorandum Order No. 15-98, signed by Commissioner
Guillermo L. Parayno Jr., June 11, 1998), the BOC in cooperation with an association
called BIDA launched and implemented the Direct Traders Input (DiTI) facility for
remote entry lodgment and the BOC-EDI Gateway to cater to warehousing entry
lodgment. This system eliminated the need to submit declarations for encoding at the
entry-encoding centers and thereby reduced clerical errors.
EDI allows users to transact with the BOC from remote computer workstations.
Unlike DiTI, however, where users dial up the BOC directly and use the BOC’s system
to make a declaration, EDI users make use of their own computer application systems and
communicate with the BOC through commercial communication networks or VANs. All
these methods of filing the import entries eliminated the face-to-face interactions between
the importers and brokers on the one hand and Customs personnel on the other which
are characteristic of paper-based and manual operations. These new methods add to the
speed and efficiency of the Customs clearance process, as well as eliminate opportunities
for graft and corruption.
On cargo releases process, some 10 or more paper documents must be reproduced in
triplicate or more copies. These must pass through many desks and offices, be scrutinized,
initialed, approved, recorded in 20 or more logbooks, compared with each other, etc. In
one study, these documents undergo some 91 steps.
23
THE DIGITAL FILIPINO

In DiTI and EDI, the cargo release process will be truly paperless. Only important data
in the documents are entered into a Single Administrative Document, then encoded into
the Bureau’s computers which then take care of the release process. The documents are no
longer used in the release process. The DiTI and the EDI are expected to spur Customs
brokers to be more efficient to remain competitive.
The BOC-EDI gateway will do the following: facilitate document preparation and
reduce data encoding errors; use the communications networks of the VANs; allow the
client to lodge a declaration anytime of the day, and day of the week; increase the speed
and efficiency of information lodgement and exchange; and provide access to the other
global connectivity and markets.
The BOC is in the process of implementing the Super Green Lane (SGL) facility.
The top 100 importers will be allowed ship-to-truck release of goods, no documentary
check, no physical inspection, and post-release submission of documents. They can also
be entitled exemptions from the truck ban. The qualified importers will pay PhP2,000
per transaction.
Top revenue contributors to the BOC with a track record of good and honest dealings
are the prime candidates for the SGL. The objective of the SGL is to achieve a global
Customs practice that is the 90-10 rule -- i.e., 90% of revenue is derived from 10% of
the importers. Out of the 25,000 importers, 100 of them will be pre-qualified to join the
initial stage. BOC will gradually add users to the system until it reaches its target of 2,500
importers. By that time, BOC will be operating on 24x7 basis to provide quality service
to its clients.
Ford Motors, through its Customs broker Royal Cargo, made history by successfully
submitting the first EDI Import Entry Declaration just last April 2000. Other importers --
Petron, Kodak, and Sony, should have submitted theirs by the time this book sees print.
BOC hopes that the SGL project will encourage payment of duties and taxes; effect
secure, safe, and faster entry declaration; minimize congestion; and allow it to focus its
resources on high risk shipments. It intends to be the standard of Customs operation in
the future, not just a stop-gap process.
Information technology is playing a major role in this entire project. To qualify to
be part of the SGL, importers must have the facility to do e-commerce through the
use of EDI. To improve valuation studies, it will use statistical analysis software such
as Metacube and SPSS for risk analysis and post audit.
Importers and exporters who wish to participate in the BOC DiTI/EDI program
can contact:
Philippine Chamber of Commerce and Industry (PCCI)
Ricci Estrella
Assistant System Administrator
Tel: 632-5276772, 5275092
Fax: 632-5275130
E-mail: emily.pascua@geis.ge.com / susan.kuanken@geis.ge.com

4. SVINet
Established in 1985, SVI is ranked 76th among Philippine corporations with sales
of over P6 billion in 1997, over P7 billion in 1998 and estimated over P10 billion in
24
E-Commerce through EDI

1999. The company’s 2,000 employees are spread across six SM supermarkets, two
Save More supermarkets, one SuperSale Club, and one central warehouse. Its EDI
project is a small part of a bigger supply chain project that seeks to build “One Industry
Serving the Customer”. Its business processes include marketing (purchasing, product,
and supplier database); distribution (receiving deliveries and shipping store orders);
warehousing (put away, picking, replenishment, adjustments, and physical count);
store operations (merchandising, replenishment, point of sale, and customer service);
promotions; and finance (payables/receivables).
Prior to EDI, the company would fax hundreds of purchase orders a day. Also, many
products are supplied on a consignment basis. When products have to be returned for
one reason or another, it would take almost two months before they could be pulled
out, because of notification and scheduling time frames. New suppliers, for their part,
have to go SVI and line up to be able to show their products.
EDI is critical in getting business communication across in an accurate and rapid
manner, so that transactions like stock replenishments and payments can be processed
in the shortest possible time. Without it, efficient replenishment is not possible, causing
wrong decisions, wrong orders, delayed deliveries, wrong deliveries, out of stocks,
overstocks, high inventories, and high costs to SVI and its customers.
SVINet started as a pilot project in 1994 with just five major suppliers. The first EDI
purchase order transmission took place in April 1995. By this point, 11 suppliers had
given their commitment. In the first two years from 1995, the number of suppliers
grew to 22 but has since stalled.
Today, more than 150 suppliers are connected to SVINet. In the next few months,
500 suppliers will come on board. It has more than 300 suppliers in different phases
of EDI implementation, connected either through a VAN or via the Internet.
Currently, the EDI messages being implemented through SVINet, using EDIFACT
transaction sets (ECR Philippines subset), include Purchase Order, Credit Advice,
Debit Advice, Payment Order, Debit/Credit Memo, Remittance Advice, Sales Report,
Returns for Pick-up. The following are in various stages of development: Invoice,
Price Catalogue, Order Response, Dispatch Advice, Order Change, and Receiving
Advice.
5. MakroNet
Established in 1995, Pilipinas Makro (http://www.makro.com.ph) is ranked 91st
among Philippine corporations in 1997 and 73rd in 1998 with 6.5 billion revenues.
The company’s 1,000 employees are spread across its five branches (Cainta, Imus,
Sucat, Novaliches, North Harbor) head office.
MakroNet started with 40 suppliers in 1997. It is currently doing EDI but will be
moving towards Internet-based technologies.
6. Grocers Central Alliance Inc.
Big retail players in the grocery industry have always enjoyed the best deals from
their suppliers especially on pricing and terms. With the looming implementation
of retail trade and the continuous expansion of the big retail players, will our small
and medium sized retailers soon be burned by the resources - technology, clout, and
expertise - of the larger retailers?
25
THE DIGITAL FILIPINO

Fortunately, our SME grocery retailers are not allowing themselves to be left behind
despite the limited resources. In 1995, several medium sized retailers banded together
to share common facilities and agreed to form Grocers Central Alliance Inc. (Grocent).
Jose Albert is the brains behind it. Its incorporators believed in having a distribution
center (DC) to promote efficiency and take advantage of economies of scale to lower
acquisition costs. At the same time, Albert immediately envisioned the e-commerce
side of the business and rolled it out for the benefit of its members.
Grocent weighed the cost of hardware, software, and maintenance cost against the
substantial inventory reduction, lower documentation cost plus speed, and accuracy
in serving customer orders.
Through Grocent, members can avail of lower cost due to volume discounts, more
efficient distribution, and higher availability of inventory due to buffer stocks in the
distribution center. Members don’t need to invest as much in information technology
since they share the resources for the warehouse management system. It built a central
warehouse complete with staff for warehouse management, distribution management,
and purchasing. All the member companies pay a subscription fee and membership
dues to sustain the operations of Grocent.
Grocent’s business operations are currently limited to replenishment. So far, Grocent
has been brokering orders between member stores and selected principals. When it started,
Grocent acquired modern materials handling equipment. To realize the full benefits from
these equipment, it needed an enabler and that was a good warehouse management system.
Grocent then needed to link their customers to achieve efficiencies in documentation and
making the merchandise available at store warehouses in less than 48 hours. The next area
of development is linking the manufacturers themselves to Grocent.
There’s difficulty putting the system in place particularly in getting the organization
used to the new procedures. There are steps that had to be followed and shortcuts
are not allowed. For example, pulling out stocks from a pallet (the pallet location
is identified so that should be the source) has two or three people working on one
document when it should be one person so that accountability is established. And
some customers send orders in trickles and with breaks so that when large orders arrive
in between, their initial orders get delayed in shipment. But this has been remedied.
Customers are asked to send in sizeable batches.
Grocent continues to evolve. When Grocent started its system, it was all EDI but
they have decided to move on to an Internet based solution.
At present, Grocent has 47 grocery partners and 23 supplier partners. Only the
multinationals are co-evolving with Grocent. According to Grocent, trading partners
are enthusiastic particularly those with the capability and are working on their systems
to be able to link to Grocent.
Grocent expects more competition especially with retail trade liberalization in the
country. Grocent members will be better positioned for competition in terms of stock
availability and cost of acquisition when that time comes.
Company Info:
Company Name: Grocers Central Alliance Inc.
Headquarters: 1238 EDSA, Go Soc Compound, Quezon City
CEO: Jose A. Albert
26
E-Commerce through EDI

What makes an EDI/e-commerce project successful?


There are several factors that can contribute to a project’s success. Here are some:
1. Before starting any e-commerce project, its project objectives and scope must be clearly
stated. Preparation is everything!

2. The company’s commitment and support to the e-commerce project must be for the
entire duration of the project. The determination must be there to complete it. EDI
is about business rather than technology.

3. The project should have adequate funding and resources to complete and maintain
it. Cost is not the only way to justify EDI. Its benefits to the entire business process
or supply chain must be highlighted.

4. The company must have a capable implementation partner to ensure competent


execution of the project.

5. Sponsorship, commitment, and support by the company’s top executives should be there.

6. A capable project team who truly understands the system from an organizational and
technical perspective. Bringing trading partners on board is a complex project with
many phases: education, equipping, software usage training, product installation,
internal systems development, alignment/integration, parallel testing, and live
implementation.

7. Willingness to streamline business processes. In any e-commerce project, there is a


requirement to look at how existing business process is done and analyze whether
this is acceptable and practical. Some processes will need improvement and change.
The company’s willingness to re-engineer business process and improve is vital to the
success of an e-commerce project.

8. Willingness of players to participate and shoulder costs in the project. Without that
willingness, the project will not achieve quick growth. What you do internally sends
a clear message to your EDI trading partners. If you can’t mandate your trading
partners to do EDI, then pay for it. GTEB subsidized 40% of all one-time fees for
the additional 200 new entrants! SSSNet subsidized only the transmission fees but
the one-time entry fee remains the single biggest stumbling block. Fortunately, its
EDI-Over-the-Internet initiative, which reduces the entry fee, is gradually encouraging
trading partner participation.
To increase project participation by SME trading partners, companies must provide
means for small suppliers to participate without being financially burdened with
software and VAN investments.
9. Most big companies around the world that mandate the use of EDI have one thing
to tell suppliers who would want to do business with them: “Do EDI or stop doing
business!” It is a difficult stance but it’s the only way to go.
27
THE DIGITAL FILIPINO

What makes an EDI/e-commerce project fail?


We also have our own share of projects that never prospered for one reason or another.
Here are some:
1. OSEDCNet
The One-Stop Export Documentation Center (OSEDC) is an office composed of
the representatives of the Bureau of Customs and some other government agencies
(Bureau of Animal Industry, Bureau of Plant Industry, Bureau of Fisheries and Aquatic
Resources, Philippine Coconut Authority, Product Standard Agency, GTEB, Fiber
Industry Development Authority, and DTI) issuing out commodity clearances to
exporters. This office was set up to expedite the processing and approval of export
documentation needed prior to the issuance of the Authority to Load by the Bureau
of Customs.
OSEDCNet is a World Bank-funded project. Its objective is to automate the issuance
of commodity clearances in the OSEDC. With EDI, it will facilitate transmission of
electronic documents between government agencies. The project was completed in
1998 but the EDI transmission was not implemented.
2. BOC ETMS
The Export Tracking and Monitoring Project (ETMS), a project of the Bureau of
Customs, will implement EDI in facilitation and monitoring of export declaration
for all commodities. ETMS has piloted with BOC, Manila International Container
Port (MICP), ICTSI, and selected GTEBNet users. The system was completed in
1998 but not implemented.

A project can fail if the following is bound to happen:



1. Lack of participation in front-end system development. Some companies rely and
entrust on the implementation partner to do everything for them then realize later
on that the system developed was lacking and does not fit the requirements of the
company. The implementation partner, on the other hand, does need inputs from the
client, else the project will answer their needs, not the client’s.

2. Lack of push for trading partner participation. Some companies and government
agencies do e-commerce related projects but did not have the determination to
implement it in full extent, therefore realizing slow or no growth in terms of trading
partner participation.

3. Lack of post-implementation agreement. When you plan for your project, create a
provision on post-implementation. Else, you might end up encountering the mistakes
of those who never had any provision for it and the project just died a natural death
or stagnated in the sense of failing to upgrade the capabilities of the system.

4. Failure to add to initial e-commerce benefits. Never be contented with what your
system is offering. Always look for ways to increase the benefits of the system. This
will not only strengthen trading partner relationships but encourage those who are
28
E-Commerce through EDI

still hesitant in doing e-commerce into realizing its value. Trading partners, especially
the SMEs that are not mandated or not subsidized to do EDI, should see very clearly
the obvious benefit of EDI. That is the reason some believe that SSSNet will not grow
as much, even with EDI-Over-the Internet and reduced fees, unless it adds other SSS
modules especially those that benefit employers. A good example is the sickness and
maternity benefit availment and reimbursement.

5. Constant changes in top-level project leadership. Changes in management always


require rebuilding sponsorship, commitment, and participation, time that takes away
from the momentum for the project.

6. Changes in project team membership. A loss of a team member more often than not
affects the progress of the project, so make sure to document all phases of project
execution and store the documentation properly.
7. Unwillingness of trading partners to innovate, streamline processes, and adopt
e-commerce best practices. The mindset of trading partners needs to change. Investment
in enabling technologies is not to be treated as an operating expense, but an asset
investment that will drive new levels of service, competitiveness, and untapped business
opportunities.
8. Lack of direction, plan, commitment, and funding for implementation.
9. Absence of service provider contract. A service provider contract demonstrates
commitment on both parties on the extent of project implementation. It is mutually
beneficial between the company and its service provider.

What is the difference between EDI and the Internet? Which is better?

Whenever EDI is being discussed, it can’t help being compared to the Internet. More
often than not, it has caused confusion. The Internet is a public network while EDI is a
messaging format or standard in exchanging electronic documents.

Which is better, VANs or Internet?


When EDI first started, it employed VANs to send messages across to trading partners. When
the Internet became publicly available at a low cost, it provided means for EDI messages to be
transported through the Internet rather than traditional VANs. That is why VANs are reinventing
themselves by making their services available through the Internet as well.

But VANs will not be phased out. Big companies transmit hundreds, even thousands,
of messages in a day. These are the companies that would still want to have their messages
transported and maintained by a VAN, which they consider to be more secure, efficient,
and reliable, justifying its cost.

SMEs who have limited trading partners and small budget can opt to receive and send
EDI messages through the Internet.
29
THE DIGITAL FILIPINO

Are standards such as EDI important? How is it different from


free-form data structures?

If your nature of business involves import and export of goods with trading partners
who are already doing EDI both locally and abroad, then EDI matters a lot to you. Trading
partners who comply with standards find it easier to do business with big companies who are
already using it. Those who refuse to implement standards like EDI will find themselves,
sooner or later, missing out on opportunities as big businesses will only deal with those
who are EDI-capable.

But the SMEs who will not be doing with the big businesses of today can use free-form
data structures where you’re in charge of how you want your data be presented, structured,
and kept.

How many VANs do we have in the Philippines? Who are they?


There are several VANs in the country today. Two of which are:
1. EDINET Philippines, INC.
MARK ANTHONY JAVIER
President
6/F Ayala Life Building, 6786 Ayala Avenue, Makati City 1229
Tel: 632-894-3896 • Fax: 632-894-5207
e-mail: javier.man@ayala.com.ph
There was no EDI happening in the Philippines until EDINet introduced it. The
company, incorporated in May 1994, is a joint venture between Ayala Corporation and
Singapore Network Services. It offers organizations all forms of electronic commerce services,
particularly EDI at this stage, and its mission is to be a world-class provider of quality VAN
services. Its goal is to spearhead and catalyze the growth of EDI and e-commerce in the
Philippines. It has set up a lot of EDI communities from SSSNet, GTEBNet, SVINet, and
MakroNet, among others.

The company saw then the strength and benefit of EDI as one of the most established
methods of e-commerce. As the acceptance and reliability of the Internet have developed,
EDINet has begun to combine the best of both worlds so that customers can have the
choice.

EDINet started out with a single-server, single-node setup. All messages or transactions
were exchanged using a single Unix server though a dial-up or leased line connection. It has
now evolved into a multi-server environment and customers have the option to connect via
direct dial-up, leased line, or through the Internet via their own ISP. It has also expanded
its network through a nationwide frame relay network. It has points of presence in major
provinces or cities nationwide. The company plans to have a total of 23 sites nationwide
to expand the coverage of its VAN services and cater to other networking needs of clients
such as connectivity to their own proprietary networks, intranets, and the like.

30
E-Commerce through EDI

2. INTERCOMMERCE NETWORK SERVICES, INC.


FRANCIS O. LOPEZ
General Manager
Unit 1603, Antel 2000, 121 Valero Street, Salcedo Village, Makati City 1277
Tel: 632-843-8050 • Fax: 632-843-8160
e-mail: francis.lopez@geis.ge.com
G.E. Information Services started with a node of its global teleprocessing infrastructure
in 1987, with the designation of Global Teleprocessing Services, Inc. (GTSI) as a local
GEIS distributor. In the early 90’s, GEIS decided to change its network infrastructure
from a very central system based in the US to a distributed system, or what is now the EC
Center strategy - where an EC Center operated by a join venture company is established
by GEIS in each country. The concept of the GEIS EC Center is part of GEIS strategy to
provide local and global EC services to its growing number of trading partners.

GEIS started its EC business from the time-sharing era where computers were very
expensive and yet very limited in capability. In the 80s and in addition to its EDI services,
GEIS addresses the need for faster communication than cable and telex and provided email
services globally - even before the Internet was heard of. Currently, the infrastructure is
capable of WebEDI, web application hosting, multi-message format (any-to-any translation)
in addition to the conventional EDI messaging, accessible via dial-up, frame relay, internet,
VPN and leased line, on a 24x7 basis.

ICNS has an existing customer base, either with the multi-country support agreement
with GEIS, or local companies with global transactions with their trading partners. It is
the pioneer VAN in the BOC Gateway project.

31
THE DIGITAL FILIPINO

32
CHAPTER 3

ESTABLISHING
YOUR PRESENCE
ON THE INTERNET
THE DIGITAL FILIPINO

34
ESTABLISHING YOUR PRESENCE
ON THE INTERNET
What is a domain name?

A domain name is your commercial address on the Internet. When putting up a Web
site, one consideration that must be on top of the list is the registration of your domain
name. This does not apply to those though who would rather avail of free Web hosting and
subdomain pointers. Still, relying on another company for your Web hosting or domain
name is like living in a virtual condominium. While an address at a physical condominium
is a status symbol, it’s not the same in Cyberspace. Your own domain name is a sure sign
that you have arrived on the Internet. Imagine an address at the same level as ford.com,
chrysler.com, or ayala.com.ph.

Aside from URLs, you can also get an “Internet Keyword”


(http://www.realnames.com) to facilitate easy access to your web site. Go to your favorite
international search engine and see how it works. Janette Toral is a registered Internet
Keyword.

I. Domain name registration

Domain name registrations in the .ph namespace cost US$70 (for two years’
registration) and US$25 annual renewal after the second year. Registrations for .ph
names go through dotPH, Inc. (http://www.names.ph or http://www.dot.ph), except
for .gov.ph and .edu.ph, which are handled by the DOST and PHnet, respectively.
Applications for .ph names typically take two to three days. The .ph names available
are both hierarchical (.com.ph, .net.ph, .org.ph, .mil.ph, .ngo.ph, .gov.ph, and .edu.
ph) and flat, which don’t have the .com or .net before the .ph.

The .com, .org, and .net names, on the other hand, are handled by Network Solutions
Inc. (http://www.nsi.com) or their authorized resellers. Registrations cost US$70 for
the first two years, and U$35 annually after the second year. Some of NSI’s resellers
also have arrangements with country-code Top Level Domain (ccTLD) administrators,
so that you can have domain names in several countries if you choose.

It is important that you read the legal terms of agreement before proceeding from
hereon. Ignorance and the lack of due diligence in reading the terms of agreement
prior to accepting any online service does not excuse anyone from liabilities resulting
from gross negligence.

II. Choosing a Web Site Hosting Service

It is hard to identify an honest, competent, and legitimate host company. While


most local ISPs provide hosting services, a big bulk of Philippine Web sites are hosted
in the US for reasons such as downloading speed, affordable rates, and availability of
software and tools, among other things. As of this writing, digitalfilipino.com is hosted
at www.affinity.net. Nevertheless, the Web hosting business is becoming more and
more competitive.
35
THE DIGITAL FILIPINO

If you’re planning to put up your site and have many hosting services to choose from,
several criteria can help you decide as to which. Web hosting service is best for you.
The criteria used by the Web Host Guild primarily influenced the criteria mentioned
here. Please note that these are probably the minimum criteria that you should draw
up. Your needs will be more sophisticated if your Internet requirements are far more
complex.

• Technical Support
Do they have a pager or personnel available 24 hours a day, seven days a week (24/7)?
What one must realize is that putting up an e-commerce site requires you to be ready
on a 24/7 basis especially if your products are targeted to global Internet audience.
Does the Web hosting service offer guaranteed response times on emergency support
requests and emails to technical support? The Web hosting service should be able to
provide information as to how soon can they act on technical support related matters
or any other queries. At the minimum, there should direct telephone support available
for at least eight hours. If phone calls are answered by an answering machine system,
response time should be mentioned. Incremental backups should be done at least once
every 24 hours, with full backups weekly. In case your Web host’s server crashes, they
should have the capability to restore its content. As a precautionary measure, make
sure that you have back-up copies of your site. A Web page on the site where customers
can check network/system status will be a nice feature as well but it is optional.

• Background
The company must have been in business at least 12 months. Start-up companies
can also be considered provided they can demonstrate their stability in terms of
resources and infrastructure. Ask for a 30-day or longer no-questions-asked money-
back guarantee as added insurance. If the Web hosting service is offered by a reseller,
it must offer full-time hosting support and meet other criteria mentioned here. It
will be good to see that the Web hosting company already has a track record. Check
their current hosted professional Web sites with contact emails as references so you
can verify them.

• Reliability
The Web hosting service must be able to provide you the details of their connections:
T-1, T-3, etc. They should be able to identify their Internet backbone providers with
contact information for verification purposes. Web hosting companies who are
hesitant in providing such information are highly questionable in terms of reliability.
You should find out as well if the Web hosting service has a backup power system if
normal electricity goes out. These are some nice to see, non-essential features such as
Year 2000 compliance statement, downtime statistics for past year posted on site and
kept up to date, and information on speed of internal network. You can also check
for yourself and do comparisons on different Web hosting services using the simple
tool traceroute, which you can also ask your friends to try from different ISPs.
36
Establishing Your Presence on the Internet

• Features
The Web hosting service should offer intermediate-to-advanced services, although
this may vary, such as auto-responders, unlimited alias forwarding, upgrade options,
client’s use of own CGI Scripts, DNS parking, Web-based account management area,
secure server for e-commerce, and NT and/or UNIX hosting.

• Usage/Access Logs
Access logs must be available for client’s information. The log analysis software
can be provided by the Web hosting firm and there should be a minimum time that
these access logs are kept and accessible.

• Payment Options
Web hosting services should be able to provide a variety of options where clients
can make payments. They can either be online, check/money order, credit card.

III. Building Your Site

When putting up a Web site, the need for you to plan ahead is very important. The
challenges that the Internet has brought have denied us a fixed decision in our Web
sites over a period of time. You can’t cast your plans in stone.

Think long term. What do you want your Web site to be? If you intend to build an
online store catalogue, you will have to exert the necessary market study and look for
the different Web sites on the Internet with concepts similar to yours. Look at their
features. What’s hot and what’s not? What will make your site different from theirs?

On the technical side, find out what are the different strategies you can take to build
the Web site and the process of maintaining it, from the simple to the sophisticated
and the costs involved.

Depending on your technical resources, you may opt to build the site from the
ground up or lease an application on the Internet. Example, digitalfilipino.com offers
free @efilipino.org email. I did not create or code the email facility from the ground
up, instead I availed of a free service from everyone.net. If you intend to put up an
online store and don’t have the infrastructure to build the catalog, you can opt to lease
instead at http://store.yahoo.com or http://www.icatmall.com. Here, Boombayan.com
tried offering the service. As of this time, the site is currently under renovation.
On the programming and Web development aspect, don’t ever take anything for
granted. Realize that your vision, especially the great ones, can be more complicated than
you think in terms of execution - meaning the nitty-gritty part of it, programming.
The Web site part of your business should be integrated with your back-office
operations. It is the only way you can be efficient. Right now, if someone orders at your
site, you might at first check manually if you have sufficient inventory. But soon, you
need to be able to interactively tell your site visitor right away, or risk losing a sale.
37
THE DIGITAL FILIPINO

Fulfillment is also a very important issue that a lot of companies tend to ignore or
underestimate. You must plan and decide the area of coverage where you could do
business. What is your return policy? What are the terms and conditions that you
offer? If the product gets lost in transit, will you replace it? How will you monitor
your delivery shipments? These and more are the things that you have to take care of
before offering any offering any product or service online.

• Collecting Payment
If you are opening an online store and want to give your customers the convenience
of paying through credit card, then you need to sign up for a merchant account and
get your company accredited. There are now at least four companies that you can
approach and negotiate for possibly accepting payment over the Internet:

Authoriz.Net
JJ Soriano (jjsoriano@authoriz.net)
Equitable Card Network (http://www.equitablecard.com/ecnhome.html)
Robert Silerio (silerio@equitable.equicom.com)
First E-com (http://www.firstecom.com/)
Anders Green (anders@firstecom.com)
Cybersource (http://www.cybersource.com.sg/)
Jeat Wong (jswong@cybersouce.com.sg)
Please note though that an online store merchant must be able to present his concept
to the credit card merchant and it has to be approved like everybody else’s. The store
merchant has to sit down with credit card merchant and defend his model based on
certain criteria. There are technical issues and business issues the store merchant has
to comply with.

Credit card merchants follow a certain procedure. The local companies are following
a very deliberate (i.e., slow) approach and would like to work on models that they
think can work in their favor (as merchants and acquirer/issuer), considering that it
is not (yet) protected by any laws.
For Authoriz.Net, Philippine merchants pay a registration fee of US$350 to become
part of the system. It collects 5% to 8% per transaction. Currently, the system accepts
international VISA and Mastercard. Soon, it will also accept Diners Club and BPI.
Depending on the number of products that you’re going to sell, I suggest that you
think twice whether you wanted to sell your products directly or go through other
channels.
If you’re still starting, I suggest that you join existing online sites and offer them
commissions to sell your products. This way, you don’t have to worry about the
infrastructure immediately. This can be a good alternative until you’re able to set up
your own and you’re satisfied with the response of the market. Sites such as E-Store

38
Establishing Your Presence on the Internet

Exchange, I-EZ.Com and AsiaWorldOnline are open to this arrangement. If the


product is ideal for gift-giving, you can also Turoturo.com and Ayalaecenter.com.

• Securing your Site


Security can mean a lot of things. On the site operation aspect, ensure that you
protect yourself from any damages and liabilities that may arise. Have your disclaimer
notice, privacy policy, copyright notice, and terms and conditions reviewed by a good
lawyer. On the technical side, if you don’t have the expertise to guard your site 24
hours a day, you may opt to have it hosted with third-party service providers who have
security procedures, tools, and personnel in place. Make sure that all agreements that
you enter into are all properly reviewed and to prevent future disappointments and
regrets.
Once you cover the security, operations, collection, market, technical, and design
aspect it is now time to assess your capital resources.

• Getting Venture Capital: Do you need one?


One way to get rich is to start a company. The Internet presents opportunities to
aspiring entrepreneurs whether big or small, to the experienced professional or new
graduates.
What business models will click on the Internet and what will not? When is a project
proposal worth bringing to a venture capitalist?
As a potential entrepreneur, you must present an idea or concept with a business
plan, a simple document that explains the business concept is and how will it operate,
and how much money it can make. Then present it to VCs and business angels.
One good piece of advice that I got is, “Don’t waste valuable time thinking about
raising venture capital until you have convinced yourself that your venture will generate
substantial wealth for yourself and your investors. You must have the burning desire to
build an enterprise that will seize every opportunity for profitable growth and provide
liquidity for your investors. The venture must be positioned in markets that provide
such opportunities.”

The regular VC writes an equity fund and goes into business. The VC invests money
into the business and maybe in about three to five years, the VC pulls out. On the other
hand, a business angel puts its equity and value-added services, gives ideas, and provides
funding. The business angel exits after a certain period of time. The business angel is
in there actively helping the business, while the venture capitalist is there putting in
the money and taking a look at how much they are making on their investment.

VCs and business angels can invest as high as 50 million pesos. Unlike in the bank’s
pawnshop mentality (meaning it can lend you money but you must pawn your land
title), the VC takes a look at the project or concept and takes a look at the person
sponsoring the project. Then the VC will put its money as equity but not as a loan,
39
THE DIGITAL FILIPINO

and negotiate how much the entrepreneur will give the on the VC’s equity. Now the
VC and business angel become part owner of the business.

As much as possible, aim for middle-market to high- potential ventures to really


make a difference especially now that the Internet VC battlefield is dependent on the
viability of the proposition.

From our side of the world, no matter how good your product is, you may rely on
bootstrap financing and from individual investors who believe in your concept and
start building the product. Finding these people who will finance and back you up
technically is not that easy but disappointments and failures can make you stronger
and wiser.
When the right time comes, you can start tapping big venture players and put
yourself in a better position since you already have something to show that can be the
next generation’s super sites and intelligent, innovative products.

There are also many reasons why entrepreneurs fail in their dot.com proposals and
projects. These reasons, incidentally, may apply also for non-dotcoms.
- absence of a well-defined business plan; the investor’s unfamiliarity with
products, processes, or markets.
- in the case of angels, the business’s unattractiveness to the investor.
- lack of confidence in management.
- unsatisfactory risk/reward ratios.

• Marketing Your Site - Registering Your Site with Search Engines


Once you have that Web site up and running, the next step is for you to register
your URL with different Philippine and international search engines.
Typically, you browse the registration Web site and look for a link named Add URL,
Add Web Site, or Register Web Site.
What are you waiting for? Register your web site now and let the whole cyberspace
know about it!

• Philippine Search Engines


Yehey (http://www.yehey.com)
EDSA Philippines (http://www.edsa.com.ph/)
Sentro (http://www.sentro.com/)
Tanikalang Ginto - Filipino Links (http://www.filipinolinks.com/)
PinoyCentral - (http://www.pinoycentral.com/)
Go Pinoy - (http://www.gopinoy.com/)
Online Metro - (http://www.onlinemetro.com/index2.html)
Cybertambayan - (http://www.cybertambayan.com/)
Owey - (http://www.owey.com/)
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Establishing Your Presence on the Internet

RPLink - (http://www.rplink.com/)
Pinoywebsites - (http://www.pinoywebsites.com/)
Philinks - (http://www.philinks.org/)
Orientation Philippines - (http://ph.orientation.com/)
PhilShop - (http://www.philshop.com/)
RPDir - (http://www.rpdir.net/)
The Pinoy - (http://www.thepinoy.com/)
Global Pinoy - (http://www.globalpinoy.com/search.htm)
• Directories
E-YellowPages.ph - (http://www.e-yellowpages.ph/)
PhilYellow - (http://www.philyellow.com/)
PinoySearch (http://www.pinoysearch.com/)
• International Search Engines
Hotrate - (http://www.hotrate.com)
(Get paid when you submit your site here as a reviewer. I’m currently a level 3 editor here.
You can contact me via my id, Janette_Toral.)
Yahoo! (http://www.yahoo.com/)
Altavista (http://altavista.digital.com/)
Excite (http://www.excite.com/)
Hotbot (http://www.hotbot.com/)
Infoseek (http://www.infoseek.com/)
Lycos (http://www.lycos.com/)
WebCrawler (http://www.webcrawler.com/)

• Using Email and Mailing Lists


Using email as a tool for marketing can be a little bit tricky and is not as easy as
it seems. Sending unsolicited bulk email can be damaging for you and earn you a
reputation as a spammer. I never missed a day without receiving junk email. Do I read
them? I hardly do, and they almost always go directly to the trash bin. I’m sure most
people just ignore them.
One thing that you may try instead is a mailing list to promote your products and
service. This way, those who you send email to have given consent that they want to
hear more from you. It’s easy enough to add a mailing list subscription link on your Web
site. But in order to make a mailing list click, consider putting value-added information
or service to your subscribers like informative articles and special subscribers-only
promotions.
Egroups.com and listbot.com are very popular in offering these services for free.
• Affiliate Marketing and Advertising
Internet developments in the country are still very new and for that reason, there’s
little market for Internet advertising at this stage as well. This is why Webmasters and
content managers will have to be creative in making earning opportunities to make
their site pay just enough to maintain its cost per month, at the least.
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THE DIGITAL FILIPINO

Affiliate partners offer commissions in terms of flat rate or percentage fee. It is wise to
partner with the right affiliate partner to avoid scams, among others. When shopping
for the right affiliate partner, don’t just insert any advertisement in your site. Choose
the one that will appeal to your readers. Perhaps what can strike your interest and
encourage you to click might encourage your readers as well.
I only hope that time will come when our Filipino merchants will also realize the
importance of this viral affiliate marketing strategy, where merchants will only pay
those that deliver results and Webmasters can have the option of whom to partner
with.
Advertising in Philippine web sites is not that expensive actually. You can get a prime
space in a web site from 2,000 to 40,000 pesos per month. But the number of traffic,
hits and visitors will not always be the barometer as to where one should place their
advertisements. What matters more is the quality of people that one drives to their
site.
Affiliate programs like linkshare.com, reporting.net, commissionjunction.com, and
flycast.com can be a good stop for you. Our best lesson learned in this area is to have
some form of consistency with your advertisement. If each page of your site has a
different banner ad, chances are, the banners that you inserted will never be clicked.
These affiliate networks have hundreds of merchants in their roster, each one ready
to offer revenue opportunities. It is best that you get the one that is most appealing
to your site visitors.

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Establishing Your Presence on the Internet

Case Studies on internet-based sites

Pinoymail.com

Pinoymail.com is the country’s first free email service. The site started with the firm
conviction that in spite of Hotmail and other US-based free e-mail providers, Filipinos
would subscribe to a Filipino free e-mail service. It got 2,000 registrations on its first day,
March 9, 1998. From 135,000 subscribers, it now has 271,000 subscribers. It plans to
reach 1 million Internet users before the end of the year 2000.

Pinoymail’s strategy is to invest in building communities of users and developing alliances


that cater to the Filipino worldwide population. Pinoymail.com subscribers are generally
young and literate and possess spending power. Seventy-five percent of Pinoymail.com
subscribers belong to the 18-30 age bracket; 60% are professionals, college graduates or
college students. Pinoymail.com’s monthly page views average at 2 million a month,
attesting to the popularity and high usage of the site. Pinoymail.com will be available
soon in seven major Philippine languages within the month: Tagalog, Cebuano, Ilocano,
Ilonggo, Kapampangan, Bisaya, and Pangasinense.

The company intends to generate its revenues through advertising. It will have at least
10 paying advertisers in the next three months although positive bottom line revenues
are not expected to be gained this year. Soon, the site will introducing its Pinoymail.com
greeting cards project which may operate as a separate site. It is also going to launch a
points program, Pinoymail Points. This means users earn points by logging in. There will
be a prize for those points like a free drink at some popular place in town.

“Cellular phones and pagers are a part of many people’s lifestyles, and in like manner, we
would like email to be up there too,” Pinoymail co-founder Dom Danao said. The New
Pinoymail.com Pinoymail.com was sold last January 5, 2000, to New Net, a key person of
whom is Orlando Vea. Danao has a nominal share holding of 10%. The site got a PhP100
million capital infusion which is now being used in improving the infrastructure and hiring
of people on the technical and marketing field.

The site is running on a Linux server in tandem with the Apache Web server software
to assure that they get Pinoymail when and where they want it. The facility is hosted in
Virginia, US. The company started with two employees, then five, with Danao the only
one who went full-time. There are currently 12 on the team.
Trabaho.com

Trabaho.com, the Philippines’ first job site, was put up around October 1996. Setting up
and establishing trabaho.com was difficult. Companies and people did not appreciate the
value or the benefits of the Internet could bring at that time. The company has 30 staff
running the Web site. Trabaho.com charges companies PhP700 for one position job
advertisement for one week. The main criterion to have a job posting in Trabaho.com,
aside from agreeing to terms of payment and duration, is the credibility of the business.
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THE DIGITAL FILIPINO

Its concern is to avoid fictitious or fraudulent companies from posting want ads or to be
a part of such schemes. It does some due diligence on the company itself before allowing
those ads to be posted.

It offers customization of job openings to its clients. The client determines the design.
It’s not a template type, it’s the client’s unique design. Thus, each company on Trabaho.com
has their own distinct advertisements. With regard to security, applicants send an e-mail
directly to the company should a job opening interest them. The client also appreciates
the confidentiality rather than having a third party access to those materials.

Trabaho.com generated PhP375,000 worth of revenue on its first year (1997) and doubled
for the past two years. It expects to achieve it again this year. Its sources of revenue depend
on the clients which are charged based on how many positions they would like to post and
on the duration of their advertisement.

Yehey.com

Yehey.com is the Philippines’ first search engine. Its story began in 1995 when Alistair
Israel met with company vice president David Quitoriano and others from the Ateneo, got
together in yuppie meeting places like Streetlife and Pancake House to debate concepts.
Even in 1995 they felt the Internet would be big. To start off the company, they borrowed
money from their parents and started with a capital of less than PhP500,000.

They incorporated as Fiesta Online in 1997, bought some hardware and software, and in
February of 1997, Yehey.com went online. Yehey.com was Fiesta Online’s proof of concept
that it could do database, programming, and Web development work. After the launch,
the group realized that there was no outstanding, central collection of Philippine Web sites
and links, so they decided to come up with a search engine focusing on Philippine Web
sites.

The name, Yehey, is a take-off from Yahoo. Their idea of a Philippine version of Yahoo.
Yehey’s traffic has risen steadily from the time it started. It started with something like
2,000 Web sites and a little less than 100 hits a day during the first week. By the end of
1997, it was already getting something like 4,000 hits a day and that many Web sites as
well. In a span of few months, it doubled its traffic and content and it has been like that
year after year. In 1997, it was basically David Quitoriano and Alistair Israel working in
a rented apartment with two computers using a dial-up phone line - Yehey.com’s server
is co-located in IPhil Communications. Then next year, they were approached by the
WS Computer Publishing group, the company behind Philippine editions of PC World,
Computerworld, and The Web. With new financial resources and management expertise,
the company reincorporated as WS Fiesta Online with WS Computer Publishing owning
70% of` the company.

From two people in 1997, the company has grown to 25 people at present, expecting to
be a 50-employee company by the end of the year. Bringing Catcha.com in as a partner
44
Case Studies on Internet-based sites

in 1999 brought more expertise and resources and allowed faster growth. The vision of
Yehey is to retain its lead as the number 1 Philippine search engine.

Yehey’s emphasis this year is the building of its community of interest among Yehey
users. It also recently introduced Yehey Mail which provides free email to its Club Yehey
members. In February, it launched Yehey eCards and Yehey Forums which enable club
members to discuss topics of common interest. It aspires to have each and every Philippine
Internet user as Club Yehey member. A points-based rewards system, City Guides to major
Philippine cities and, by the end of the year, e-commerce opportunities will further increase
the “stickiness” of the site.

Turoturo.com

Turoturo.com is an online store featuring entertainment and lifestyle products from the
Philippines. It sells export quality products and its target market are Filipinos living abroad
and foreigners who appreciate Asian arts and crafts. It brings specialty goods which are hard
to find in the US. The site sells books, video, CDs of the Filipino Bookstore (Bookmark),
souvenirs for wedding favors or corporate giveaways, and art prints.

It offers information as well through its calendar of events, customs and traditions, in
the spotlight section sponsored by The Philippine Star and The Manila Bulletin USA.
Payment is done via Visa and Mastercard through encrypted technology. It partnered with
Escalate of Redwood Shores, CA to ensure that the shopper has a safe shopping experience.
Currently, turoturo.com has 268 (as of March 1, 2000) purchasing clients, some of whom
are repeat buyers. It seeks to grow the customer base to 2,000-3,000 by the end of the year.
Target gross sales is from PhP 500-800 thousand pesos.

The site had a soft launch end of November 1999. Most of its advertising campaign is
done outside the Philippines such as Fil-Am newspapers and newspaper websites. The
site is not just geared towards Filipino buyers. It carefully selected video titles to those that
would appeal to non-Filipinos as well (i.e., Rizal, who has an international appeal). Its
souvenir products are “one of a kind” which is why it has a limited selection for now. It is
careful with the products that it sells on the site, and careful with the suppliers they invite
to join its network. Rather than have 10x the number products just to fill up its store, it
sticks with few really good products. Its target buyers are not the people in the US who can
order gifts for people in Manila. Instead, it “brings the Philippines” to their doorsteps.

The company currently ships to the US and will be shipping to more countries by mid-
2000. Building good customer relationship is very important for Turoturo.com. When
a customer buys the first time, its job is not done. When they come back a second, or a
third time, it means it is doing something right. Soon, the site will also be offering reseller
programs where people in the US can act as a reseller of turoturo products in their area.
The program will be launched by June/July 2000.

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THE DIGITAL FILIPINO

46
CHAPTER 4

FREQUENTLY ASKED
QUESTIONS
ON THE PROPOSED
E-COMMERCE BILL
THE DIGITAL FILIPINO

48
FREQUENTLY ASKED QUESTIONS
ON THE eCOMMERCE BILL

This guide was created with the intention of helping you understand the E-commerce
Bill better. It was collated by Atty. Rudy Quimbo based from the Senate interpellation
on the Senate E-commerce Bill. Please refer to Senate Bill 1902 and House Bill 9971 for
guidance on the current structure of the pending bills. Once the House Bill is finished,
both chambers will take it to a bicameral conference and approve a final version of the bill
for President Estrada to sign.

Authentication
• Who will perform the function of authentication?
• What ensures reliability in the communication, transmission, and storage of
forms?
• How do we ensure that the people we are dealing with are who they purport to
be?
• Given that we are using electronic/digital signatures, should we not mandate the use
of third party intermediaries, e.g., certification authorities?
• Must not the bill contain a provision that if its provenance or source is not identified
with telephone numbers, etc., that such is illegal and will not be given legal effect?

Consumer Protection

• As of now, is there clear protection for buyers and those who may have interest in
e-commerce?

Contracts

• How will provisions in a contract be preserved?


• When the title to goods being purchased passes to the buyer in the Philippines, who
will bear the loss? In case one orders through the Internet, who bears the loss, if such
is lost in transit?
• If there is a variance between the electronic records of the seller and the buyer, which
one will prevail?
• How do we ensure that there is no repudiation of contracts validly entered into.
Parties may later on say that, “I did not send that message!” What do we do now?
• Will not the definition of electronic data, when it says there must be an agreed
standard, not stifle the freedom to choose whatever software then available?

Coverage

• What are the dealings covered in this bill?


• Does the bill intend to cover the rules on wills and donations?
• What is an “original” for the purposes of this bill?
• Should the term e-commerce be limited only to the Internet?
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THE DIGITAL FILIPINO

• Regarding retail trade, are we not allowing the doing of business in the Philippines
by businesses not registered here in the Philippines?

Electronic Evidence

• Will our be judges be ready for the introduction and appreciation of electronic
evidence?

Government

• How will government monitor the transactions for revenue purposes?


• Given a lot of unscrupulous businessmen, would the BIR not have an even more
difficult time what with the absence of paper receipts?
• Will the bill affect the powers of the local government units to impose taxes?
•Who in government will oversee the implementation of this bill?
• Should we not go slow in drafting a law, what with the newness of the business?

Hacking

• Why are we penalizing hacking when hacker as a term does not necessarily mean a
bad person?

Postal Service

• How will the goods ordered through the Internet or through email be delivered?
• Given the dismal record of the postal service, what with several reports of pilferage,
how do we ensure that such will not be the case here?

Service Providers

• What are the responsibilities of a service provider in this situation?

• What if pirated software is made to pass through them, should not they bear some
responsibility?

Authentication

Q Who will perform the function of authentication?


A The parties themselves may. If the matter reaches the courts, the courts themselves will
ensure authentication. Such may also be handled by third-party authenticators, e.g.,
credit card companies, or service providers, or digital signature or certificate issuers.

Q What ensures reliability in the communication, transmission, and storage of forms?


A Reliability is assured when the elements of unalterability, integrity, credibility, accuracy,
and originality are met.
50
FAQ on the eCommerce Bill and other Legal Issues

Q How do we ensure that the people we are dealing with are who they purport to be?
A The responsibility of those who enter into e-commerce in identifying the other person
works both ways. One should not deal with another whom you have no confidence
in. It would be folly for government to hold the hands of every business person for
government is utterly incapable of doing such. To answer the question, there are
several technologies available in the market from encryption to public key encryption
technologies which grant a certain amount of certainty that what you are doing is secure,
and that the person you are talking to is indeed that person who presents himself to
be.

Q Given that we are using electronic/digital signatures, should we not mandate the use
of third party intermediaries, e.g., certification authorities?
A The parties to the transaction must be allowed the freedom to choose the method in
sending and receiving messages. We must respect their autonomy. If we require the
use of certification authorities, we might be forcing the parties to a transaction to
incur unnecessary expenses, especially when the amount involved in their transaction
is minuscule.

Q Must not the bill contain a provision that if its provenance or source is not identified
with telephone numbers, etc., that such is illegal and will not be given legal effect?
A This is the problem exactly of anonymity. But if we require provenance, supposing
there is libel in cyberspace and the source is secret, do we not allow prosecution of
that libel? We should. Secondly, despite what has been said, complete anonymity in
cyberspace is hype. For whatever you try to do to render yourself anonymous, you
always leave an electronic trail in the process of logging in, navigating the Web, etc.

Consumer protection

Q As of now, is there clear protection for buyers and those who may have interest in
e-commerce?

A This bill precisely tries to address such fears and uncertainty. If there is no delivery or
mis-delivery, will I be able to seek relief in court? We are saying here in this bill that
if and when you decide to go to court, we are assuring you that the evidence you may
be presenting — in electronic form - will be admissible by courts. The weight of the
evidence presented, of course, will be another matter, for that is addressed always to
the sound discretion of the judges.

Contracts

Q How will provisions in a contract be preserved?

A The same be stored electronically, and may employ encryption and digital signature
technologies to ensure the integrity and unalterability of the documents in electronic
from.
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THE DIGITAL FILIPINO

Q When the title to goods being purchased passes to the buyer in the Philippines, who
will bear the loss? In case one orders through the Internet, who bears the loss, if such
is lost in transit?

A The answer to this question will depend on the agreement entered into. For example,
if you buy from amazon.com, you are immediately charged through your credit card
once they ship the goods. Although this arrangement will tell us that the title of the
goods has passed on to the buyer from that point, experience tells us otherwise. What
amazon does is tell you when the goods will arrive. If, on that date the goods do not
arrive, you tell amazon that they have not, so what they do is either re-send the goods
or reimburse you through the same credit card. The same rules obtain in other e-stores.
Therefore, from that point of view, it is always the seller that bears the loss. Nothing
however will prevent the parties from stipulating otherwise.

Q If there is a variance between the electronic records of the seller and the buyer, which
one will prevail?

A It will now be for the courts to decide which records appear to be more reliable.

Q How do we ensure that there is no repudiation of contracts validly entered into. Parties
may later on say that, “I did not send that message!” What do we do now?

A This question is better left then to the courts to determine who is telling the truth.
Even in transactions we currently undertake in the physical world, there still are some
problems that ensue when one party repudiates an agreement. That is why the courts
are there to decide who has the stronger evidence, or to determine when such has been
violated. It will be impossible to legislate good manners and right conduct. What is
important is that the courts are there to arbitrate an issue.

Q Will not the definition of electronic data, when it says there must be an agreed standard,
not stifle the freedom to choose whatever software then available?

A Not really, because in fact it recognizes the freedom of the parties to agree to a particular
standard that they will use in the transaction.
Coverage
Q What are the dealings covered in this bill?

A Business and non-business alike.

Q Does the bill intend to cover the rules on wills and donations?

A As it is now phrased, the bill is supposed to cover only business transactions. But a closer
reading will reveal that because we are dealing with electronic data messages, wills and
deeds of donations that are created in electronic form may eventually be included.
52
FAQ on the eCommerce Bill and other Legal Issues

Q What is an “original” for the purposes of this bill?

A It is such if it provides an assurance as to the integrity of the information, and that it


is capable of being displayed whenever required.

Q Should the term e-commerce be limited only to the Internet?

A No, it should encompass any commerce that is entered into or processed electronically:
through the wires, or through wireless applications.

Q Regarding retail trade, are we not allowing the doing of business in the Philippines by
businesses not registered here in the Philippines?

A What Amazon does is in a sense do business, but it is not doing business here in the
sense that they do not have physical presence here which is the operating consideration
when determining whether one is doing business here or not. Secondly, amazon only
does have a Web presence. Its presence does not enter the Philippines unless a Filipino
accesses its Web page while surfing from the Philippines.

Electronic Evidence

Q Will our be judges be ready for the introduction and appreciation of electronic
evidence?

A I believe by and large that they are not yet ready. But it is the duty of the Supreme
Court to make them ready. They must be trained in this new paradigm, otherwise
how will be able to adjust to the new economy?

Government

Q How will government monitor the transactions for revenue purposes?

A This is the very problem that still is a subject of very heated discussion in the US.
Even they have not been able to resolve the problem yet. That is why our bill is tax-
neutral, because we should not impose new taxes on e-commerce, for that would be
tantamount to taxing the way of doing business and not business itself. I believe that
the bulk of things that have been ordered online will still pass through either our sea
or airports, thus we may tax the goods that reach our shores through importation fees
or tariffs, which is what is happening today.

Q Given a lot of unscrupulous businessmen, would the BIR not have an even more
difficult time, what with the absence of paper receipts?

A The BIR itself in a position paper said, “electronic processing of transactions with the
BIR will be more convenient on the part of taxpayers, and therefore will encourage
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THE DIGITAL FILIPINO

compliance with our Rules and Regulations. Compared to manual processing, electronic
processing on the part of the taxpayer will: a) enable the taxpayer to electronically file
his return, thereby improving the accuracy and timeliness of the return; b) facilitate
immediate posting of returns into the taxpayers’ ledger, and immediate processing
of refund claims; c) make phone-filing possible for individuals with break-even and
non-paying returns; d) minimize cost and effort; e) enable filing anywhere, anytime;
and f ) minimize taxpayer contact with BIR personnel.

Q On the part of government, it will: a) lessen the unnecessary printing of forms; b)


virtually eliminate encoding and verification costs; c) minimize administrative costs
of receiving, handling, processing, and storing of paper returns.

Q Will the bill affect the powers of the local government units to impose taxes?

A It is not supposed to affect any tax provisions already extant. The goods when they
arrive here are still subject to duties.

Q Who in government will oversee the implementation of this bill?

A The Department of Trade and Industry.

Q Should we not go slow in drafting a law, what with the newness of the business?

A The delay is precisely what is retarding the growth of e-commerce here. Many want
to do business here but the lack of a legal framework and protection for electronic
commerce is deterring many of them. They would rather go to Singapore or Malaysia
where they are assured of legal protection.

Hacking

Q Why are we penalizing hacking when hacker as a term does not necessarily mean a
bad person?

A What basically we are punishing is unauthorized access with the intent to steal or
destroy or do harm. We had to look for a term to encompass this activity. And `hacker’
has become the most commonly used and accepted term for this activity. `Cracker’
may also be used as a term interchangeable with hacker.

Postal Service

Q How will the goods ordered through the Internet or through email be delivered?

A It may be delivered through traditional means -- through the post office, or through
private cargo handlers through land, air, and sea.

54
FAQ on the eCommerce Bill and other Legal Issues

Q Given the dismal record of the postal service, what with several reports of pilferage,
how do we ensure that such will not be the case here?

A Actually, that problem cannot be resolved here. This bill does not seek to solve all
problems of our bureaucracy. There are laws that are applicable to this problem: laws
against theft, anti-graft and corrupt practices act, etc. It also needs be stated that even
in a non e-commerce situation, the integrity of the postal system is the responsibility
of all.

Service Providers

Q What are the responsibilities of a service provider in this situation?

A The service providers or electronic data exchanges are seen as mere conduits of the
communications process. They are not allowed to alter or change the messages being
sent through them.

Q What if pirated software is made to pass through them, should not they bear some
responsibility?

A They should, but only if the passage or transmission through their system of the
pirated software was done with their active cooperation. But we should not here
create additional burden upon the ISPs, by making them responsible for the transit
of such pirated software. The consequence is that we will be making it a requirement
that they monitor the electronic traffic that passes through. The consequences may
be more than what we are bargaining for -- invasion of privacy of communications. I
would rather that they are held responsible only if they allow the traffic or participate
in the traffic themselves. At least here the burden will be on those who will be suing
them and not the other way around.

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THE DIGITAL FILIPINO

56
CHAPTER 5

E-COMMERCE
IN THE PHILIPPINES
An interview with
PRESIDENT JOSEPH ESTRADA
THE DIGITAL FILIPINO

58
E-COMMERCE IN THE PHILIPPINES
An interview with President Joseph Estrada

Philippine President Joseph Ejercito Estrada sees electronic commerce as an important


driving force that could fuel the Philippines’ economic growth and development. “For an
emerging economy like the Philippines, this is a development we cannot afford to ignore
since it presents a huge opportunity for us. This is particularly significant since we are


positioning our country to serve as host to various service-oriented businesses, especially
IT and related industries.”

E-commerce Bill
The legal framework for the country’s participation in electronic commerce is also
around the corner with the passage in the Senate of the E-Commerce bill. The bill defines
Philippine policies on electronic transactions and will enable us to participate actively in
this global trend for trade and commerce. Currently, the bill is at the deliberation stage at
the House of Representatives. The Senate version was already passed last April 2000.

Can the Philippine government adopt e-Commerce?


One of the highlights of the bill seeks to mandate the government to become e-commerce-
enabled by 2002 to allow it to compete with other countries in the region. But there has
been a lot of skepticism about whether the government can do a full re-engineering of
its business processes to competitively apply e-commerce. “I created last October 1999
the Presidential Committee for Effective Governance (PCEG), through Executive Order
No. 165, which I have directed to immediately formulate and implement measures not
requiring legislation, to streamline, simplify, and strengthen government business processes
and speed up the delivery of key services to the public. One key area that the committee is
now looking at is the wider application of information and communications technology
(ICT) to improve business processes in government,” said Estrada.

There are already several initiatives in government in the application of e-commerce. The
Garments and Textile Export Board of the Department of Trade and Industry set up the
GTEBNet, an electronic network for textile quota administration, export documentation,
and import authorization. The project has been operational since 1994. The Social Security
System, on the other hand, is in the process of implementing on-line kiosks that will allow
its members to do their transactions digitally, in lieu of the traditional over-the-counter
transactions.

Last November 5, 1998, Estrada personally launched the first Internet-based low-
denominated Philippine Treasury Issues Trading System. According to Estrada, “This will
allow our small savers, anywhere in the country, to participate in this innovative treasury
notes trading system. This is a project of the Bureau of the Treasury, in cooperation with
the Bangko Sentral ng Pilipinas and the Bankers Association of the Philippines.”
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THE DIGITAL FILIPINO

Are there special factors holding back the Philippines in doing e-commerce?

One of the factors identified is the limited access to and high cost of telecommunications
services. He said, “Under my administration’s Medium Term Philippine Development
Plan, or “Angat Pinoy 2004”, we have set as our priority over the next 4-5 years the
development of our Philippine Information Infrastructure (PII). The PII would consist
of physical telecommunications links, multipoint multimedia distribution systems, and
value-added services such as Internet access and e-commerce. We have also set as our
target the establishment of local exchange services in all municipalities by the end of my
term. To accomplish these, we are encouraging private and foreign investment in the
telecommunications sector. We are studying the possibility of increasing foreign ownership
in telecommunications and other utilities beyond the 40 percent limit.”

The Philippines’ Advantages and Disadvantages on E-commerce

The Philippines clearly enjoys a number of advantages in pursuing e-business, particularly


with international partners.

Estrada highlights, “First, we have a policy environment fully committed to the principles
of open market systems and which encourages creation and innovation, two factors that are
very critical for e-business to flourish. This commitment is evidenced by the investment-
related reforms that we have instituted and continue to pursue.”

Investment incentives have been rationalized with the passage of the Omnibus Investment
Code in July 1987 and the Foreign Investment Act of 1992 increasing the allowable
foreign equity participation in non-priority investment areas up to the limits set by the
Constitution.

In the area of trade and industry, the Philippines continues to pursue two major strategies,
which are trade liberalization and tariff reform. These are aimed at promoting more dynamic,
efficient, and competitive industries.

“Regarding intellectual property rights (IPR) protection to encourage creation and


innovation, particularly in software and multi-media development, R&D, and design,
we have in place Republic Act No. 8293, otherwise known as the new IPR Code of the
Philippines, which imposes stiffer penalties on IPR violations.” The Intellectual Property
Office (IPO), considered the guardian of IPR in the Philippines, has also been established
pursuant to the said Code.

“Over and above all this, the Philippines enjoys a strong competitive advantage over
most of its Asian neighbors in terms of our highly educated, easily trainable, very creative,
multi-skilled, English-speaking manpower and managerial pool, all of which are essential to
e-business and other knowledge-based industries. Wage and salary levels remain competitive,
while worker productivity, creativity, and a growing track record of successful IT work are
the hallmarks of the country’s labor force as known and recognized worldwide.”
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E-Commerce in the Philippines

Philippines main disadvantages at present are limited access to and high cost of
telecommunications services. “We are now addressing these by further opening up our
telecommunications sector to foreign direct investments and partnerships that will further
spur the development of our telecommunications infrastructure. Such development will
certainly redound to the benefit of the greater mass of our people and result in the wider
use and application of e-commerce and other value-added services,” said Estrada.

Phone metering: to meter or not?

Estrada directed the National Telecommunications Commission (NTC) to defer the


implementation of the telephone metering scheme until a more comprehensive study is
conducted. To date, the NTC is conducting public hearings and soliciting policy guidance
from the Department of Transportation and Communication, which is responsible for
developing telecommunications policy and for supervising the bureaucracy of the NTC.

Are Filipino businessmen endangered with the near implementation


of the Retail Trade Law? Will it kill local businesses?

Estrada answers, “The entry of foreign retailers, with their global experience and
technologies, should not be viewed as a threat to our local retailers, or to local business in
general. I have in fact urged and continue to urge our local businessmen to view this as a
challenge, to re-engineer their business processes, and bring to higher levels of efficiency
their operations for them to compete in a rapidly globalizing marketplace. It is clearly to
their advantage, and more importantly, to the benefit of the mass of Filipino consumers
that they now start re-inventing themselves and prepare for the rapid changes in the use
of information and communications technology, as well as the application of e-commerce
in their operations.

“The government is, nonetheless, doing everything to put in place measures to make them
compete on equal footing with these foreign investors. In terms of telecommunications
infrastructure, I mentioned earlier that projects are underway to ensure access to the digital
world. Old policies are being reviewed and at the same time, new policies are being drafted
to ensure equal protection to the providers, consumers, and the government.”

The amendments to the Retail Trade Law provide safety nets to protect small retailers.
These include among others, the following:

• Category C retailers (100% foreign-owned) shall be required a minimum paid-up


capital of US$7.5 million; category B retailers (foreign equity for the first two years
from effectivity of the law is limited to 60%, but thereafter, they shall be allowed to be
100% foreign-owned), US$2.5 million; or category D (100% foreign-owned retailers
selling high-end luxury goods), US$250 thousand;
• The foreign retailers shall maintain the minimum, prescribed capital while operating
in the Philippines and its actual use shall be monitored by the Securities and Exchange
Commission (SEC);
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THE DIGITAL FILIPINO

• For a period of 10 years from effectivity of the Act, at least 30% of the inventory of
retailers falling under Categories B and C and 10% for category D should be locally
manufactured.
• Qualified foreign retailers shall not be allowed to engage in certain retailing activities
outside its accredited stores through mobile or rolling stores or carts, the use of sales
representatives, door-to-door selling, restaurants, and sari-sari stores.
“I wish to specifically cite the efforts made by the SM group of companies in setting up
the SVI-Net to connect SM Supermarket and its 150 suppliers,” Estrada commended. SM
Supermarket uses the system for inventory control and to trigger the issuance of purchase
orders to suppliers. The system is expected to provide electronic price catalogs, and provide
dispatch and delivery scheduling and advice.

A number of large department stores and supermarkets have also banded together with five
major suppliers and have set up SmartLink to handle electronic fund transfers, remittance
and credit advice, and accounts reconciliation. On the supplier end, the electronic link
will maximize the resources of the supplier at any given time. Upon delivery, the pullout of
returns can also be done eliminating the need for special trips, translating into substantial
savings in operating costs, and lower prices to their consumers.

The E-commerce Czar

Estrada announced in the recent Knowledge Economy Conference, last May 8, 2000,
that he has directed Department of Trade and Industry Secretary Mar Roxas to consolidate
the number of dispersed e-commerce efforts of the national government under a reactivated
and expanded E-Commerce Promotion Council, of which Roxas is Chair. Foremost on
the agenda is to fulfill the mandate to formulate and coordinate the implementation of a
national program and strategy for the promotion of e-Commerce in the Philippines. This
plan is expected to be submitted by Secretary Roxas by the end of June 2000.

The Secretary of DTI, as Chairman of the E-Commerce Promotion Council, is effectively


the E-Commerce Czar. E-Commerce activities are coordinated at the level of the Council.
Estrada noted, “However, we need to further strengthen the Council by providing it with
full-time technical, secretariat support and the necessary funding support. We also need
to strengthen the linkage between the E-Commerce Promotion Council with the National
Information Technology Council to ensure consistency in policy directions.”

Estrada’s Vision

The Estrada E-commerce agenda revolves around the IT21 framework, the transformation
of the country into a knowledge center in Asia by the first decade of the 21st century. This
strategy is defined in the country’s National Information Technology Plan for the 21st
Century, or IT21, which calls for the exploitation of the country’s potentials to become a
key player in the digital business world.

62
E-Commerce in the Philippines

These potentials consist mainly of the country’s rich human resources, as well as highly
trainable, hard-working, and English-proficient professionals and workers. Moreover, the
country’s strategic geographic location and our accessibility to large and potentially rich
markets with high population densities further support and reinforce this strategy.

More specifically, IT21 presents the Philippines’ broad strategy to spur the country to
global competitiveness through ICT. It sets down specific time frames for achieving its
three specific goals:

• By the turn of the 21st century, the Philippines will have laid the infrastructure to
provide opportunities for every business, every agency of 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.

Achievements to Date

At the policy level, the government has put in place the environment and clear directions to
help develop and accelerate the use of ICT and the Internet and its applications, particularly
e-commerce. It has now a more focused program for ICT development in the country with
the adoption of IT21, which the President endorsed when he issued Executive Order (EO)
No. 125 in August 1999. The EO intends to streamline and strengthen the institutional
mechanism for coordinating ICT development in the country. This is done through the
National Information Technology Council (NITC). Its membership is composed of key
ICT players both in the government and the private sector.

The deregulation of the telecommunications industry starting in 1987, and which the
government continues to pursue, paved the way for a hefty build-up in investments in this
sector, estimated to exceed PhP130 billion over the next 5-10 years. By the end of 1999,
telephone density per 100 people increased to 9.18 working lines from 1.21 recorded in 1993
and 4.66 in 1996. This is expected to reach 12.73 in 2004 as provided under our “Angat
Pinoy 2004” Medium Term Philippine Development Plan to meet the growing demand
for telephone and other value-added services like Internet access and e-commerce.

Internet usage in the Philippines has been increasing exponentially over the years since
1994. The number of Philippine Internet Service Providers (ISP) increased from 2 in 1994
to 130 in 1997 to over 180 by the end of 1999. The services offered include full Internet
access, e-mail service, and walk-in access. Likewise, the number of local web sites has
increased. Furthermore, more and more ISPs are expanding their services to include not

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THE DIGITAL FILIPINO

only access but content provision and the provision of e-commerce and payment gateways
as well.

The number of Philippine-related web sites is increasing by over 200% annually, from
only a handful in 1994 to over 500 in January 1998. Internet subscribers reached 240,000
by year-end 1997, is expected to rise to 650,000 by the end of the year 2000, and to 1.3
million by the end of 2004.

The first Philippine Internet Exchange (PhIX) was launched in July 1997. PhIX is a
network access point that allows local Internet service providers to exchange local Internet
traffic within the Philippines without having to connect to servers overseas. Thus, local
Internet users will have faster access to content and exchange of information. The PhIX was
established by the Philippine Long Distance Telephone Company (PLDT) and interconnects
the country’s largest ISPs.

Early last year, the first Electronic Claims System was launched in the Philippines by
Medilink, a cooperative project of the Zuellig Group and the Equitable Card Network.
Medilink is a computerized claims clearing house network system for hospitals, health
management organizations (HMOs), health insurers, self-insured corporations, clinics,
and independent physicians’ associations. It is the first to provide electronic eligibility,
electronic claims processing, and electronic funds transfer in the Philippines. It is expected
to directly benefit some 2.0 to 2.5 million Filipinos who are presently covered by HMOs
and non-life insurance plans. The country at the moment has around 40 HMOs. This
number is expected to double in a couple of years. The annual business turnover of the
HMO sector is estimated at PhP 2 billion.

In October 1999, Estrada issued Proclamation No.171 creating and designating Eastwood
Cyber City in Quezon City, as the first Information Technology (IT) Park in the country.
This master-planned urban area, a project of Megaworld Properties, is strategically situated
a few minutes away by car from Manila’s major universities and is also very accessible to
the Makati and Ortigas business districts and major routes to the Manila international
and domestic airports. Designed mainly to cater to locators engaged in IT software and
multi-media R&D companies, which could avail of special incentives under Republic Act
No. 7916 (Philippine Economic Zone Act of 1995), as amended by Republic Act No.
8748, it combines residential, business, commercial, and leisure components. Developers
of the Cyber Park also plan to set up in the campus-like site a university of information and
communications technology. “I have approved three so far, namely the Eastwood Cyber
Park in Quezon City, the Northgate Cyber Zone in Alabang and the Fort Bonifacio-Silicon
Alley IT Park in the Fort Bonifacio, Taguig, where competitive financial and tax incentives
are offered. The first Software Development Park has also been established at the Subic
Economic Zone. And the Ayala Group has announced the proposed development of an
IT park in Cebu,” said Estrada.

On the hardware sector, the semiconductor and electronics industry has been growing at
the rate of 30% - 40% per annum since 1993. Products worth nearly $20 billion constituted
nearly 70% of the country’s total exports in 1998. Exports rose to $23 billion in 1999 and
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E-Commerce in the Philippines

are expected to grow to over $47 billion in 2004. The nearly 512 companies involved in
the industry have a total investment of over $7 billion and employ over 280,000 skilled
and semi-skilled workers.

America Online operates a customer response system at Clark. Some 600 Filipinos,
manning workstations in the Philippines, answer queries for AOL from all over the globe
on a 24-hour basis.

Professional IT services are explicitly included in the investment priorities plan for FY
2000. This means that IT related activities will enjoy prime incentives from the Board of
Investments.

Focused IT investment missions to the United States, Korea, Japan, Europe and Australia
will be launched to promote the Philippines as the IT service hub in Asia.

An ICT innovation and development fund will be created to provide venture capital
for ICT business start-ups and support for ICT research. The National Development
Corporation under the DTI has already identified IT as a priority and is exploring
mechanisms to reach techno-entrepreneurs.

Finally, IT related activities have been highlighted under the proposed amendments
to the Omnibus Incentives Act. “Our legislators anticipate that these amendments will take
effect by the 3rd quarter of this year, and will feature a number of non-fiscal incentives to
match, if not surpass, that offered by others in the region,” said Estrada.
DOST’s Comprehensive Program to Enhance Technology Enterprises or Project
COMPETE seeks to develop two very important sectors of the knowledge economy:
microelectronics and information technology. Over a period of five years, investments
amounting to around PhP7 billion will be made for the operation of Virtual Centers for
Technology Innovation, or VCTI, for the two sectors. The VCTI in microelectronics will
catalyze research and development and original product design, and develop our capability
in Application Specific Integrated Circuit (ASIC) design - while the VCTI in information
technology will develop capability for content design and software development. In
partnership with IT industry leaders like Oracle and Sun Microsystems, the project will
produce at least 5,000 internationally certified IT professionals.

The DOST is also implementing a project that will enable Philippine research and
academic institutions to participate in networking research and experimentation under a
Japanese research initiative called the Asian Internet Interconnection Initiative. Through
this, local researchers will gain operational experience that will be used in expanding the
Internet and its use in the Philippines.

“This administration is firmly behind the effort of implementing e-commerce and


boosting the knowledge economy. The key agencies have been empowered to get the job
done. I am confident that we as a people are up to the task,” Estrada ended.

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THE DIGITAL FILIPINO

66
CHAPTER 6

STATISTICS
THE DIGITAL FILIPINO

68
STATISTICS

There are so many statistical reports coming out on the number of Philippine Internet
users. This chapter intends to look at those reports to give you a picture of the state of the
Philippine Internet situation.

I. Internet Service Providers

The Philippines’ Internet Service industry boomed from around 90 providers in 1996 to
around 150 ISPs and walk-in service providers in 1999. Currently, there are an estimated
180 ISPs in the country and almost a thousand Internet cafe centers.

II. Internet Users

Metro Manila
There are several estimates as to how many Internet users the Philippines has. ACNielsen’s
NetWatch report, released first quarter of 2000, said that there are 554,000 Internet users
in the Philippines. A total of 8% of the population are on the Internet, and 3% of its male
and 2% of its female population use the Internet.

These statistics looked confusing since the figures did not match up with the country’s
actual population. ACNielsen made the following clarifications via email:

1. The population base of its NetWatch refers to total individuals aged 15 and above
from Metro Manila, projected to be 6.8 million (3.2 million males and 3.6 million
females) in 1999.

2. Out of 6.8 million, 554,000 have used the Internet in the past year (thus, the 8%).
Out of 554,000 past-year internet users, 359,000 were male and 195,000 were female
(thus, the 3:2 ratio).

Cebu
According to a report by Computer Science students of Cebu Doctors College last
October 1999, Cebu province has 200,000 Internet users. The 200,000 figure includes
those connected to the Internet through dial-ups, company networks, and Internet cafes.
Typical users are college students and young urban professionals, aged 16 to 30.

The survey also found close to 150 Internet cafes, with typically 10 to 12 terminals per
cafe and 16 to 18 operating hours per day. Net cafe access rates are from 10 to 40 pesos an
hour, lower than those in Metro Manila.

The low cost of living and a Manila lifestyle that Cebu offers make it an ideal place
to do outsourcing work. Several big companies have already located their software and
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THE DIGITAL FILIPINO

application development centers in this bustling province. In the business sector, Cebu
has always been a trading hub in the Visayas and Mindanao area, and has the potential to
become a trading hub for Internet activities for this part of the country.

Conclusion
It is now estimated that the total number of Internet users in the country is no less than
1 million. But a lot doubt this figure. Despite country’s low PC penetration, the growing
number of Internet cafes provided the facilities needed to boost the number of Internet
users. A lot of it would depend on how you define an Internet user. In most surveys, an
Internet user is defined as one who uses the Internet at least one hour per week. Some
would only classify those who have their own home computer with Internet access as the
real Internet user.

The definition of an Internet user will evolve. Our mobile phones are becoming powerful
enough to let us surf the Internet and send email. In the not-too-distant future, mobile
phone users will also be classified as Internet users.

III. User habits

In April 1999, Web Philippines said in a study that one percent or 146,516 of Philippine
households have Internet access.

• 57 percent of the Philippine Internet user population is male. About eight out of
ten fall within what is called “Generation X” (19-34 years old).

• 67 percent of Internet users are single with four to five members in their household.
It is also an educated group as eight out of ten have finished at least a college
undergraduate course. A considerable number (32 percent) are have had some graduate
education. 16 percent of present Internet users have not yet entered the workforce,
still at the high school or college levels.

• The personal income of the average working Internet user is around PhP24,000 per
month.
• E-mail is the primary reason why the local community accesses the Internet. 30-38
percent mentioned chat and updates from entertainment and business news.

• 54 percent of Internet users pay for their own Internet access averaging at PhP800
a month.

• 96 percent of Internet users own a PC with a memory of 32MB and a hard disk
space of 2GB. 31 percent use a 56K modem. Windows 95 is being used by 6 out of
ten computers that connect to the Internet. Microsoft Internet Explorer is the default
browser of 52 percent of users, while Eudora is the default e-mail program of 31 percent
of users.

70
Statistics

The DigitalFilipino.com survey

When DigitalFilipino.com did its online survey last November 1999, it was able to gather
the following information:

Profile of people surveyed:


• 1. 51% of the total respondents are male. 25% of the total male respondents
are in the 26-35 age group with an average income is PhP36,173.68 per month.
63% of them shop online. 53% have purchased products online at an average of
PhP83,920 per online spender last year. 90% of transactions are done through
the use of credit card.

• 100% of them own a personal computer. 92% with Internet access. 68% use
MS-Internet Explorer.

• 2. 57% of respondents are from the 18-25 age bracket. Of this age bracket, 36%
are female whose income is on the average of PhP15,384.50 per month. 38% of
them shop online.

• 19% have purchased products online at an average of PhP46,000 per online


spender last year. 20% of transactions are done through the use of credit card.

• 96% of them own a personal computer, 88% with Internet access, and 77%
use MS-Internet Explorer.

• 3. 64% of respondents are college graduate. 21% finished graduate school.

• 4. 85% of respondents are single. 14% are married. Of those married, the average
number of children is 2.

• 5. 36% of respondents are IT professionals. 25% are students.

A more detailed survey result will come out in the next edition of this book.

IV. WAP and PDAs

Both Globe Telecomms and Smart Communications are active in the development and
promotion of Wireless Application Protocol (WAP) technologies through its phones and
services.

The growing number of cellular phone users and all the information and conveniences
offered by the Internet offer a whole world of possibilities for WAP users and developers.

Studies by Globe indicate that the number of GSM subscribers is projected to grow from
two million today to eight million by the end of 2001. At a time when less than 1 million
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THE DIGITAL FILIPINO

Filipinos have accessed the Internet through PCs, mobile devices will be the preferred
personal transaction medium.

There aren’t a lot of people who have WAP phones at the moment in the Philippines.
There is only an estimated 3,000-5,000 people nationwide who have WAP-ready phones.
This does not include WAP phones sold in the black market. The growth of WAP in the
country will still depend highly on the commercial availability of WAP-enabled phones.
Even worldwide, there is a shortage of WAP handsets.

The number of users of the Palm Pilot and the like is also expected to grow to 15,000 to
20,000 this year. These devices are becoming more and more popular as different vendors
are coming with their own versions, with increasing levels of computing power.

This presents a huge opportunity and challenge to developers since they will have to think
about these devices when they build Web applications. At this point, what is stopping its
growth is price and availability, but we’re expecting this to be overcome in the near future
as competition brings pressure to the players in this field.

V. Worldwide Internet Population


Nearly 120 million out of the estimated 300 million Internet users worldwide have
already made a purchase or transaction online, with as many as one in four purchases made
on impulse, according to an Angus Reid Group study of Internet users in 34 countries.
Contrary to other studies, the vast majority of shoppers were very satisfied with their
online experience and only a minority voiced concerns about fraud and security issues.
Forty percent of all internet users -- about 120 million people worldwide -- have made at
least one purchase online, the study shows. More than half (54%) of all online transactions
were made in the U.S. The most frequently mentioned experience with e-commerce was
using the Internet to gather information about products and services -- 52% of Internet
users have tested the waters this way. Almost as many – 40% -- have taken the plunge and
purchased a product or service directly online. Other commercial services, such as chat
lines (37%) and sampling or downloading music (36%), have also drawn large followings,
especially among younger Internet users. Financial transactions such as banking (20%) and
stock trading (8%) also attract a sizable base of global users.

Global Internet usage is well on its way to reaching 1 billion users by 2005, with over
300 million people already logged on and as many as 150 million more people planning to
do so this year. These results are from The Face of The Web, a new study from the Angus
Reid Group, a global market and social research company.

The Computer Industry Almanac (http://www.c-i-a.com) has reported that by the year
2002, 490 million people around the world will have Internet access, i.e., 79.4 per 1,000
people worldwide, and 118 people per 1,000 by year-end 2005. The top 15 countries will
account for nearly 82 percent of the these worldwide Internet users (including business,
educational, and home Internet users). By the year 2000 there will be 25 countries where
over 10 percent of the population will be Internet users.
72
Statistics

Top 15 Nations in Internet Use at Year-End 1999


Rank Nation Internet Users(000)
1 United States 110,825
2 Japan 18,156
3 UK 13,975
4 Canada 13,277
5 Germany 12,285
6 Australia 6,837
7 Brazil 6,790
8 China 6,308
9 France 5,696
10 South Korea 5,688
11 Taiwan 4,790
12 Italy 4,745
13 Sweden 3,950
14 Netherlands 2,933
15 Spain 2,905
Source: Computer Industry Almanac

Worldwide Sales

Business-to-business (B2B) e-commerce will grow at aggressive rates through 2004,


causing fundamental changes to the way businesses do business with each other, according
to the Gartner Group.

The worldwide B2B market is forecast to grow from $145 billion in 1999 to $7.29 trillion
in 2004. By 2004, B2B e-commerce will represent 7% of the projected $105 trillion total
global sales transactions.

The catalyst for B2B e-commerce is e-market maker activity. E-market makers are
projected to facilitate $2.71 trillion e-commerce sales transactions in 2004, representing 37
percent of the overall B2B market, and 2.6 percent of projected worldwide sales transactions.
An e-market maker is an organization that develops a B2B, Internet-based, e-marketplace
of buyers and sellers within a particular industry, geographic region, or affinity group.

Gartner Group analysts say e-market makers will have a critical but subtle impact on
transactions that flow through brick and mortars’ sell-side initiatives. These sell-side
initiatives are defined as including extranets, B2B Web storefronts, EDI and flat file
transfer over the Internet, and related e-commerce activity allowing a seller to leverage the
IP network as a channel to buyers.

The worldwide B2B market is poised for explosive growth as the market is projected
to reach $403 billion in 2000 followed by $953 billion in 2001. In 2002, the market will
increase to $2.18 trillion, and at the end of 2003 worldwide B2B revenue is forecast to
reach $3.95 trillion.
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Business-to-consumer electronic commerce companies have learned their lessons from


past years as the U.S. model of consumer e-commerce is being implemented on a worldwide
basis, according to Dataquest Inc. Dataquest analysts estimate the worldwide business-
to-consumer e-commerce market to reach $31.2 billion in 1999, up from $11.2 billion
in 1998. The market will experience explosive growth through 2003 when revenue will
surpass $380 billion.

VI. Asia Pacific

Market research firm International Data Corporation (IDC) recently completed the
second of its biannual updates of Internet user forecasts and the revenue generated
online for 13 Asia/Pacific countries in 1999. IDC noted at the end of 1998 that Asia/
Pacific (excluding Japan) had an Internet user population of 12.9 million users, spending
approximately US$722.7 million online. The new research from IDC predicts growth of
the region’s online population to 21.8 million, spending over US$2.2 billion by the end
of 1999.

The IDC report predicted that the compound annual growth rate of Internet users from
Asia/Pacific (excluding Japan) for 1997-2003 would be 56%.

IDC forecasts a boom in Asia/Pacific’s Internet user population with an exponential


increase in the number of Internet users reaching an astounding 95.2 million by yearend
2004. This will generate online revenue of US$87.5 billion. China, India, and South Korea,
which experienced a rapid increase of Internet activity over the past nine months, were the
key geographies that IDC identified as areas of opportunity; however, every country still
saw consistent growth in Internet activities.

Asia Pacific Sales

Business-to-business (B2B) e-commerce in Asia/Pacific will grow at a compound average


growth rate (CAGR) of 155 percent through 2004, causing fundamental changes to the
way local companies conduct business with the world, according to the Gartner Group. The
region’s B2B e-commerce market is forecast to grow from $9.2 billion in 1999 to $995.8
billion in 2004. By 2004, B2B e-commerce in Asia/Pacific (outside of Japan) will represent
13.6 percent of the forecasted $7.3 trillion in total global B2B e-sales transactions.

Over the next five years, e-market makers will be a primary driver of e-business
transformation in the region. In Asia/Pacific, e-market makers are projected to account for
$581 billion in non-financial electronic sales transactions in 2004, representing 29 percent
of the overall value of the B2B e-commerce market in the region.

Gartner Group analysts observe that e-market makers in the region are creating new
opportunities to develop spot markets for near commodity products, as well as products
and services for which the search, selection, and purchase costs are significant, particularly
for the region’s vast small-business sector. The Gartner Group anticipates the critical but
74
Statistics

gradual impact of e-market makers on transactions that flow through brick and mortars’
sell-side e-commerce initiatives in the region.

B2B e-commerce in Asia/Pacific is set for explosive growth as e-sales transactions are
projected to reach $29.9 billion in 2000, followed by $93.4 billion in 2001. In 2002, the
region’s market will increase to $258.5 billion, and, at the end of 2003, Asia/Pacific B2B
e-commerce revenue is forecast to reach $510.7 billion.

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76
CHAPTER 7

OPPORTUNITIES
& CHALLENGES:
Making the Philippines
an Ideal Environment
for E-Commerce
THE DIGITAL FILIPINO

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Opportunities and Challenges:
Making the Philippines an Ideal Environment for E-commerce

For the Philippines to nurture the growth potential of e-commerce in the country, it needs
to rectify existing loopholes in its system. It is the only way to allow our entrepreneurs to
catch up and keep pace with the rest of the world.

These challenges can be viewed as opportunities as well. Those who wish to venture into
this arena and are currently scouting for projects to work on may find a gold mine here.

1. Government

There’s a provision in the proposed e-commerce bill that mandates the government to be
capable of electronic transactions using e-commerce technologies within two years after its
passage. But for government to do such, it needs to streamline and redesign its procedures
to facilitate such implementation. If business process re-engineering is not carried out,
there’s a big possibility that current inefficiencies will be automated without the procedures
being changed due to legislative and administrative procedural technicalities. This is a good
opportunity for consultants who specialize in this field.

Once the proposed e-commerce bill is passed, it will challenge us to look at all our existing
laws and implementing rules and regulations to assess the role of electronic documents or
data messages.

Creation and revision of policies and administrative framework will be needed to


encourage businesses to set up the infrastructure to do e-commerce, including electronic
settlement, inter-bank fund transfer, and special loans. It must encourage investments on
e-commerce and related sectors.

The Philippine IT infrastructure is vast and diverse, sourced from different parts
of the world. Integrating all of these is a big task and in some cases impossible. But
to start going in the right direction, government needs to adopt and disseminate
standards and best practices that the industry can consult when implementing
e-commerce. For starters, standards can be in the form of data structures which could lead
to information transfer across all government entities.

2. Telecommunications

There’s need to have the telecommunications infrastructure necessary to support the


growth of e-commerce in the Philippines by the year 2000. From most studies we read,
the countries with the lowest telecommunication and Internet access costs have the highest
number of Internet users. Conversely, those with the highest telecommunications costs
have low Internet usage -- either a small number of subscribers, or a large number who
don’t stay online long enough for e-commerce activity.

We need to look into telecommunication policies that will adversely affect


e-commerce growth, such as phone metering and interconnection. Phone metering, if
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implemented on a mandatory scheme, has the potential of killing the entire Internet
industry. Internet access through cable can cushion such impact, but it needs to be made
available to more locations. The removal of the service area scheme is still an issue that is
being studied. It is still a deterrent to the growth of telecommunication facilities in the
country. Nevertheless, opportunities did arise from it and led to the growth of the mobile
phone industry. Projects that will allow universal and affordable access have good chances
of succeeding although the field will be very competitive.
The future of convergent technologies including voice and video over IP, cable Internet, and
Internet via satellite by the year 2000 is still in doubt. Even if they are allowed to be rolled out,
there are existing bureaucracies to deal with. Take the case of cable Internet companies who
can’t install in some districts in the country. Even though the NTC granted them the license to
install in the area, local government unit officials are giving them a hard time.
The NTC’s technical, legal, and enforcement capabilities should be strengthened
to the protect the public interest. This includes the application of penalties for erring
telecommunication carriers. As of now, its powers are not enough, and the position of its
Commissioner is political, not constitutional, so he serves at the
pleasure of the head of state.
The telecommunication infrastructure is expensive, and few local companies have the
resources to invest in telecommunications. As much as foreign companies would like to come
in and explore these opportunities, there are constitutional restrictions on foreign investment
in public utilities and the ban on foreign investment in mass media. We need to fully upgrade
our infrastructure to world-class standards if we want to compete in this field.
3. Education

Admittedly, a lot of people still don’t understand what e-commerce has to offer. There
are those who are afraid of it or have wrong interpretations about it.

It is expected that there will be a big shortage of e-commerce professionals in the country.
There’s a need to develop and offer an e-commerce education curriculum either as a special
course or a degree course through various state colleges, universities, and learning centers.
So far, there are schools who are taking advantage of this.

But the Commission on Higher Education (CHED) must relax its standards in regard
to instructors’ qualifications. There’s a current requirement that they need to have Master’s
units before they can teach. This should not apply to the IT and e-commerce industry since
changes occur so quickly. Most of the top-notch practitioners do not have the education
standard that the CHED requires.

Educating the youth on these technologies is also key to boost our competitiveness.
Teaching e-commerce and related subjects in existing collegiate, secondary and elementary
education can be of great help to our country.
There’s still the basic issue such as the lack of access to computers in public schools. Perhaps
certain collections from telecommunication and Internet facilities can be earmarked to a
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Opportunities and Challenges:
Making the Philippines an Ideal Environment for E-commerce

government agency to procure computers and provide Internet access for schools. Special
rates can also be provided to schools to facilitate this.
Seminars and briefings on e-commerce to the various government agencies and private
groups are needed to boost further knowledge on this subject matter. Despite the many
books, magazines, and newspaper columns that have been written to tackle this subject
matter, seminars and briefings are still effective in spreading and clarifying perceptions and
fears about e-commerce.

E-commerce resource and knowledge centers that will assist SMEs in conducting
e-commerce with government, consumers, and private entities are another mechanism to
promote e-commerce awareness.

4. Security
The recent “I Love You Virus” incident has badly affected our country in terms of image
and raised questions in regard to our capability to compete in this arena. No matter how
much we dream of becoming a knowledge or e-commerce hub, we still need to address the
issue of security for secure e-commerce transactions. The Internet operates so quickly that
it has created its own concept of time -- Internet time”. Once news hits the wire, it can
spread like wildfire anywhere in the world, similar to how the “I Love You Virus” spread
and caused damage to the big economies and companies of the world. The incident also
coincided with other political issues that have really hurt the image of the country. Victor
B. Valdepenas, President and Chief Operating Officer, Union Bank of the Philippines,
spoke about how there were new forms of warfare emerging during the ADTEX’99 event.
Key points of his speech are mentioned here.
We have to be ready for the new forms of warfare, their implications on overall security
risks, and suggested solutions to threats to national security and to the country, especially
to our financial structure.
Information, especially negative information, whether valid or invalid, real or faked
information, can slash nations’ wealth and purchasing power by 50%, and swell the ranks
of the poor. An enemy or competitor can undertake a misinformation or sabotage operation
targeting our financial information infrastructure. It is a new kind of warfare that attacks
the integrity of information systems. It can be used as a first-wave weapon, to cause chaos
and confusion in the financial markets before the actual, full-force attack begins.
As the economic crisis blows up and the prospect of recovery seems to be a distant possibility,
the market panics and begins to doubt the ability of its political leadership to deal with the
crisis. As doubt ensues, socio-political pressures build up. Political and social crises often
happen at the height of an economic turmoil. The probability of a political fall-out subsides
as economic conditions improve or at the least, as the prospect of recovery improves.
There are new forms of warfare emerging.
• The first one is Information Warfare. These are actions taken to degrade or manipulate
an adversary’s information systems while actively defending one’s own.

• Second is Cybernetic Warfare. This is a distinct form of warfare involving operations
to disrupt, deny, corrupt, or destroy information resident in computers and computer
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THE DIGITAL FILIPINO

networks. It defies traditional rules of time and distance, speed and tempo, and the
conventional or traditional military capabilities of the opposing elements.
• Third, Transnational Infrastructure Warfare. This is attacking a nation’s key industries
and utilities, including telecommunications, banking and finance, water, government
operations, emergency services, energy and power, and manufacturing. Because these
industries have key linkages and interdependencies, an attack on a single component
is magnified and renders significant damage.
Will it happen? It’s a distinct possibility. That is why the development of Filipino’s IT
capabilities is very important not only to the economic development of the nation and its
ability to compete on the world market, but also for the nation’s future security.
The warfare now and of the future no longer relies on physical force. Information
technology is playing a critical role and is being used as a weapon to communicate strategies,
mount a misinformation campaign, and attack other systems, among others.
It is time to devise systems that are secure from all kinds of security threats. To shield
the country and businesses against financial threats, our security controls
must catch up with the requirements of the “fast forward pace” of the times. Our law
enforcers will have to take this challenge.
The establishment of incident response teams in both government and private sector is
crucial especially for companies who are managing a group of companies
or government agencies. We can’t compete if we can’t defend our own infrastructure From
anyone who may seek to challenge it.
Security experts, front and center! You will be major contributors in the new Internet economy.
5. Financial Markets / Investments
The Philippine Stock Exchange should improve listing conditions. Its rules are not
competitive vis-à-vis those of the other countries in the region. The country can lose a lot
of opportunities as countries like Hong Kong and Singapore are even inviting Philippine
companies to list in their exchanges which are far more friendly than ours. It also needs to
extend its trading hours to attract the interest of global players to invest.
Currently, BOI-registered IT initiatives have an Initial Public Offering requirement.
This is not strictly implemented at this stage.
Although the number of venture capital and business angel companies increases, there’s
still a need for bigger players in the region to get involved. Currently, the Philippines has
three incubator networks.
Is the Philippines Worth Investing In?
Export growth
According to the Department of Trade and Industry, Philippine exports grew between
1997 and 1999, despite the worst years of the financial crisis. Export growth was 23% in
1997, 17% in 1998, and 19% in 1999, to total US$35 billion. Total exports are again
expected to increase in year 2000 to around US$40 billion.
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Opportunities and Challenges:
Making the Philippines an Ideal Environment for E-commerce

The performance of Philippine exports may be attributed to the restructuring of its export
sector over the last 22 years. From a 49% share in 1976, agriculture now claims only 3%
of total exports. From 3% of total exports, electronics claimed 67% in 1998 and 72% in
1999. In year 2000, it is expected to reach 75%.
This growth performance happened despite the Asian financial crisis -- a testimony to
the resilience of the Philippine economy and tenacity of Filipinos as well in moving on
despite tough times. Nevertheless, rehabilitating the economy of the country is ongoing.

Investment Opportunities
The Philippines is currently being packaged as Asia’s IT Services (E-Services) Hub. To
start off, the Investments Priorities Program 2000 of the government is now being revised
and will cover Information Technology Services. Companies who do software development
projects (system software, middleware, applications software), IT-enabled services, support
and knowledge-based services, and business process outsourcing are qualified to apply in
this program.
IT services would include IT project management, application systems and development,
applications services, web development and management, content
creation and knowledge management, database design and development, computer
networking and data communications, software development, and other services directly
tied to the information technology industry. IT-enabled services would refer to other
business lines which can be transformed through the means of information technology.
These would include any business outsourcing and shared services as well as call centers,
engineering and design centers, financial management and accounting records, healthcare
and medical records, legal records, and travel services.

Globally, traditional outsourcing market revenues reached US$99 billion in 1998. This
is estimated to increase to US$120 billion by 2002.
The Philippines is aggressive in targeting the outsourcing market. It has a positive track
record that we could use to market the country. A big number of multinational IT companies
are located in the Philippines doing back-office operations such as America Online (technical
and billing support), Arthur Andersen (custom software), Barnes and Noble (inventory
management and on-line purchasing), and James Martin (software development), among
others. It has been estimated that there are about 100,000 people in the IT industry. There
are about 8,000 Filipino firms engaged in outsourcing.
Incentives are now being revised to encourage the flow of foreign investment in the
country. Forthcoming are: 12-year income tax holiday for IT projects; tax and duty
exemption on imported capital equipment; tax credit on the purchased component of
locally-produced equipment; double deduction on training and R&D;
net operating loss carry over; accelerated depreciation; deferred imposition of 2% minimum
corporate income tax; and investment/reinvestment tax allowance.
For service exporters, ecozone/freeport enterprises: 4-6-8 years income tax holiday (ITH);
special 5% tax rate after the lapse of ITH; tax and duty exemption on imported capital
equipment; unrestricted use of consigned equipment; additional deduction for training
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expenses; deduction for labor expenses; exemption from wharfage dues and any export
tax, duty impost and fees; permanent resident status for foreign investors and immediate
family; employment of foreign nationals; and simplified custom procedures.
For regional operating headquarters: only 10% tax payment on taxable income; exemption
from contractor’s tax; exemption from local licenses, fees, dues and imports or any other
local taxes and burden except from real property tax; and tax and duty-free importation of
training materials and equipment without prior BOI
approval.
We are more than ever challenged by international competition. As globalization and the
borderless economy emerge, the battle for the foreign investment cake is fierce. Estimates
made by the Institute of International Finance say that China will capture US$43 billion
of an estimated US$72 billion in net direct and portfolio investments in Asia’s emerging
economies this year. A chunk of US$11 billion will go to South Korea. The remaining
US$18 billion will be fought over by other Asian countries such as Malaysia, Indonesia,
Thailand, India, and the Philippines.
The Philippines offers some advantage in pursuing the IT services strategy. First, there
is availability of an English-speaking workforce in many field of business and professions.
Second, a reasonably high-degree of education and literacy. Third, the country’s culture
lifestyle, a blend of East and West, appeals to expatriates and multinational companies.
Fourth, there is untapped creative skill and energy among people in both IT and non-IT
field which can be nurtured.
But still, there’s still a lot of work that needs to be done to achieve our IT21 Vision to
become Asia’s Knowledge Center.

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ANNEX A

SENATE BILL 1902


AN ACT PROVIDING FOR
AN ELECTRONIC COMMERCE LAW
AND FOR OTHER PURPOSES
THE DIGITAL FILIPINO

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ANNEX A: SENATE BILL 1902

This is the approved E-commerce Bill at the Senate which was passed last April 12. The House
of Representatives counterpart measure, The Electronic Commerce Act of 2000 (see Annex B),
needs to be passed in order for Congress to proceed to the bicameral level and enact a final version
for President Estrada to sign and become a law.
ELEVENTH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES
Second Regular Session
SENATE
S.B. No.1902
Introduced by Senators Flavier, Ople, Magsaysay, Jr., Sotto III, Roco, Defensor Santiago,
Drilon, Enrile, Honasan, Cayetano, Guingona, Jr., Revilla, Pimentel, Jr., and Aquino-
Oreta
AN ACT PROVIDING FOR AN ELECTRONIC COMMERCE LAW
AND FOR OTHER PURPOSES

Be it enacted by the Senate and House of Representatives of the Philippines in Congress


assembled:

PART I. SHORT TITLE AND DECLARATION OF POLICY

SECTION 1. Short Title. – This act shall be known and cited as the “Electronic Commerce
Act”.

SEC. 2. Declaration of Policy. - The State shall promote Philippine products in domestic and
foreign markets through electronic commerce. For that purpose, the State shall supplement
traditional means of trade and adopt the necessary and appropriate legal, financial diplomatic
and technical framework, system and facilities.

PART II.

Electronic Commerce in General


Chapter I - General Provisions
SEC. 3. Objective. - This Act aims to encourage and facilitate domestic and international
exchange of information, dealings, transactions, arrangements, agreements and contracts
through the utilization of electronic, optical and similar medium, mode and instrumentality,
and to ensure security and recognize the authenticity and reliability of data messages related
to such activities.

SEC. 4. Sphere of Application. – This Act shall apply to any kind of data message used in the
context of commercial activities and other exchange of information, dealings, transactions,
arrangements, agreements and contracts.

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THE DIGITAL FILIPINO

SEC. 5. Definition of Terms. – For the purposes of this Act, the following terms are
defined, as follows:

(a) “Addressee” of a data message means a person who is intended by the originator
to receive the data message, but does not include a person acting as an intermediary
with respect to that data message;

(b) “Computer” refers to any device or apparatus singly or interconnected which, by


electronic, electromechanical, optical and/or magnetic impulse, or other means with the
same function, can receive, record, transmit, store, process, correlate, analyze, project,
retrieve and/or produce information, data, text, graphics, figures, voice, video, symbols
or other modes of expression or perform any one or more of these functions;

(c) “Data” means representations, in any form, of information or concepts;

(d) “Electronic Contract” refers to all records generally processed, communicated or


used for any purpose in any commercial or governmental transaction.

The term “commercial” should be given a wide interpretation so as to cover matters


arising from all transactions whether contractual or not, to include, but are not limited
to, the following: any trade transaction for the supply or exchange of goods or services;
distribution agreement; commercial representation or agency; leasing; construction of
works; consulting; engineering; licensing; investment; financing; banking; insurance;
exploitation agreement or concession; joint venture and other forms of industrial or
business cooperation; carriage of goods or passengers by air, sea, rail or road;

(e) “Electronic Data Interchange (EDI)” means the electronic transfer from computer
to computer of information using an agreed standard to structure the information;

(f ) “Electronic Data Message” means data that is generated, recorded, sent, received
or stored on any medium in or by a computer system or other similar device, that
can be read or perceived by a person or a computer system or other similar device. It
includes a display, printout or other output of that data;

(g) “Electronic Data Message System” means a system for generating, sending,
receiving, storing or otherwise processing data messages. It includes the computer
system or other similar device by or in which data is recorded or stored and any
procedures related to the recording or storage of electronic data message;

(h) “Electronic Signature” refers to any distinctive mark, characteristic and/or sound
in electronic form, representing the identity of a person and attached to or logically
associated with the data message or any methodology or procedures employed or
adopted by a person and executed or adopted by such person with the intention of
authenticating or approving an electronic document;

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ANNEX A: Senate Bill 1902

(i) “Information” refers to data, text, images, sound, codes, computer programs,
software and database, or to a collection or combination thereof;

(j) “Intermediary”, with respect to a particular data message, means a person who,
on behalf of another person, sends, receives or stores that data message or provides
other services with respect to that data message;

(k) “Originator” of a data message means a person by whom, or on whose behalf, the
data message purports to have been sent or generated prior to storage, if any, but it does
not include a person acting as an intermediary with respect to that data message.

SEC. 6. Statutory Interpretation. - Unless otherwise expressly provided for, the interpretation
of this Act shall give due regard to its international origin and the need to promote
uniformity in its application and the observance of good faith in international trade relations
and E-commerce. The generally accepted principles of international law and convention
on electronic commerce shall likewise be considered.

SEC.7. Variation by Agreement. - (1) As between parties involved in generating, sending,


receiving, storing or otherwise processing data message, and except as otherwise provided,
the provisions of Part II, Chapter III, may be varied by agreement. (2) Paragraph (1) does
not affect any right that may exist to modify by agreement any rule of law referred to in
Part II, Chapter II.

CHAPTER II.
LEGAL RECOGNITION OF DATA MESSAGES

SEC. 8. Legal Recognition of Data Messages. - Information as defined in this Act, shall
not be denied legal effect, validity or enforceability solely on the grounds that it is in the
form of a data message, or that it is incorporated by reference in the data message. For
evidentiary purposes, a data message or electronic writing shall be the functional equivalent
of a written document under existing laws.

This Act does not modify any statutory rule relating to the admissibility of records, except
the rules relating to authentication and best evidence.

SEC. 9. Legal Recognition of Electronic Writing. - (1) Where the law requires information
to be in writing that requirement is met by a data message if the information contained
therein is accessible so as to be usable for subsequent reference. (2) Paragraph (1) applies
whether the requirement therein is in the form of an obligation or whether the law simply
provides consequences for the information not being in writing.

SEC. 10. Legal Recognition of Electronic Signatures. - (1) Where the law requires a
signature of a person, proof of the signature may be deemed established if the identity of
the person concerned is shown by appropriate evidence aliunde and that he/she has the

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information contained in the data message. (a) a method is used to identify that person
and to indicate that person’s approval of the information contained in the data message;
and b) that method is as reliable as was appropriate for the purpose for which the data
message was generated or communicated, in the light of all the circumstances, including
any relevant agreement.

(2) Paragraph (1) applies whether the requirement therein is in the form of an obligation
or whether the law simply provides consequences for the absence of a signature.

SEC. 11. Original Documents. - (1) Where the law requires information to be presented or
retained in its original form, that requirement is met by a data message if: (a) the integrity
of the information from the time when it was first generated in its final form, as a data
message by evidence aliunde or otherwise; and (b) where it is required that information
be presented, that information is capable of being displayed to the person to whom it is
to be presented. (2) Paragraph (1) applies whether the requirement therein is in the form
of an obligation or whether the law simply provides consequences for the information not
being presented or retained in its original form. (3) For the purposes of subparagraph (a)
of paragraph (1): (a) the criteria for assessing integrity shall be whether the information
has remained complete and unaltered, apart from the addition of any endorsement and any
change which arises in the normal course of communication, storage and display; and (b)
the standard of reliability required shall be assessed in the light of the purpose for which
the information was generated and in the light of all the relevant circumstances.

SEC. 12. Authentication of Data Messages. - Until the Supreme Court by appropriate rules
shall have so provided, the electronic writings, data messages and electronic signatures,
shall be authenticated by demonstrating, substantiating and validating a claimed identity
of a user, device, or another entity in an information or communication system, among
other ways, as follows:

(a) The electronic signature shall be authenticated by proof that a letter, character,
number or other symbol in electronic form representing the persons named in and
attached to or logically associated with a data message, electronic writing, or that the
methodology or procedures were employed or adopted by a person and executed or
adopted by such person, with the intention of authenticating or approving an electronic
document;

(b) The electronic data message or writing shall be authenticated by proof that a
security procedure was adopted and employed for the purpose of verifying the originator
of an electronic data message, or detecting error or alteration in the communication,
content or storage of an electronic writing or data message from a specific point which
using algorithm or codes, identifying words or numbers, encryptions, answers back
or acknowledgement procedures, or similar security devices.

The Supreme Court may adopt such other authentication procedures, including
the use of electronic notarization systems as necessary and advisable, as well as the
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ANNEX A: Senate Bill 1902

certificate of authentication on printed or hard copies of the electronic writings or


data messages by electronic notaries, service providers and other duly recognized or
appointed certification authorities.

The person seeking to introduce an electronic data message in any legal proceeding
has the burden of proving its authenticity by evidence capable of supporting a finding
that the electronic data message is what the person claims it to be.

In the absence of evidence to the contrary, the integrity of the electronic data message
system in which an electronic data message is recorded or stored may be established
in any legal proceeding -

(a) By evidence that at all material times the computer system or other similar device
was operating in a manner that did not affect the integrity of the electronic data message,
and there are no other reasonable grounds to doubt the integrity of the electronic data
message system;
(b) By showing that the electronic data message was recorded or stored by a party to
the proceedings who is adverse in interest to the party using it; or
(c) By showing that the electronic data message was recorded or stored in the usual
and ordinary course of business by a person who is not a party to the proceedings and
who did not act under the control of the party using the record.

SEC. 13. Admissibility and Evidential Weight of Data Messages. - (1) In any legal
proceedings, nothing in the application of the rules of evidence shall apply so as to deny
the admissibility of a data message in evidence:

(a) on the sole ground that it is a data message;


(b) if it is the best evidence that the person adducing it could reasonably be expected
to obtain, on the grounds that it is not in its original form;
(c) subject to paragraph (d), the best evidence rule in respect of an electronic data
message, is satisfied on proof of the integrity of the electronic data message system in
or by which the data was recorded or stored; or
(d) that it is an electronic data message in the form of a printout that has been
manifestly or consistently acted on, relied upon, or used as the record of the information
recorded or stored on the printout.

(2) Information in the form of a data message shall be given due evidential weight. In
assessing the evidential weight of a data message, regard shall be had to the reliability of
the manner in which the data message was generated, stored or communicated, to the
reliability of the manner in which the integrity of the information was maintained, to the
manner in which its originator was identified, and to any other relevant factor.

(3) For the purpose of determining under any rule of law whether an electronic data message
is admissible, evidence may be presented in any legal proceeding in respect of any standard,
procedure, usage or practice on how electronic data messages are to be recorded or stored,
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THE DIGITAL FILIPINO

having regard to the type of business or endeavor that used, recorded or stored the electronic
data message and the nature and purpose of the electronic data message.

SEC. 14. Retention of Data Messages - (1) Where the law requires that certain documents,
records or information be retained, that requirement is met by retaining data messages:
Provided, That the following conditions are satisfied:

(a) the information contained therein is accessible so as to be usable for subsequent


reference;

(b) the data message is retained in the format in which it was generated, sent or received,
or in the format which can be demonstrated to represent accurately the information
generated, sent or received; and (c) such information, if any, is retained as enables the
identification of the original and destination of a data message and the time when it
was sent or received.

(2) An obligation to retain documents, records or information in accordance with paragraph


(1) does not extend to any information the sole purpose of which is to enable the message
to be sent or received.

(3) A person may satisfy the requirement referred to in paragraph (1) by using the services
of any other person: Provided, That the conditions set forth in subparagraphs (a), (b) and
(c) of paragraph (1) are met.

SEC. 15. Proof By Affidavit. - The matters referred to in Section 13, paragraph (d), on the
use of the record, Section 12, on the presumption of integrity, and Section 13, paragraph
(3) on the standards, may be presumed to have been established by an affidavit given to
the best of the deponent’s knowledge subject to the rights of parties in interest as defined
in the following section.

SEC. 16. Cross-Examination. - (1) A deponent of an affidavit referred to in Section 15


that has been introduced in evidence may be cross-examined as of right by a party to the
proceedings who is adverse in interest to the party who has introduced the affidavit or has
caused the affidavit to be introduced.

(2) Any party to the proceedings has the right to cross-examine a person referred to in
Section 12, fourth paragraph, subparagraph (c).

CHAPTER III. COMMUNICATION OF DATA MESSAGES

SEC. 17. Formation and Validity of Contracts. - (1) In the context of contract formation,
unless otherwise agreed by the parties, an offer and the acceptance of an offer may be
expressed by means of data messages. Where a data message is used in the formation of
a contract, that contract shall not be denied validity or enforceability on the sole ground
that a data message was used for that purpose.
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ANNEX A: Senate Bill 1902

SEC. 18. Recognition by Parties of Data Messages. - (1) As between the originator and the
addressee of a data message, a declaration of will or other statement shall not be denied
legal effect, validity or enforceability solely on the grounds that it is in the form of a data
message.

SEC. 19. Attribution of Data Messages. - (1) A data message is that of the originator if it
was sent by the originator itself.

(2) As between the originator and the addressee, a data message is deemed to be that of
the originator if it was sent:

(a) by a person who had the authority to act on behalf of the originator in respect of
that data message; or

(b) by an information system programmed by, or on behalf of the originator to operate


automatically.

(3) As between the originator and the addressee, an addressee is entitled to regard a data
message as being that of the originator, and to act on that assumption, if: (a) in order to
ascertain whether the data message was that of the originator, the addressee properly applied
a procedure previously agreed to by the originator for that purpose; or (b) the data message
as received by the addressee resulted from the actions of a person whose relationship with
the originator or with any agent of the originator enabled that person to gain access to a
method used by the originator to identify data messages as its own.

(4) Paragraph (3) does not apply: (a) as of the time when the addressee has both received
notice from the originator that the data message is not that of the originator, and has
reasonable time to act accordingly; or (b) in a case within paragraph (3) subparagraph (b),
at any time when the addressee knew or should have known, had it exercised reasonable
care or used any agreed procedure, that the data message was not that of the originator.
(5) Where a data message is that of the originator or is deemed to be that of the originator,
or the addressee is entitled to act on that assumption, then, as between the originator and the
addressee, the addressee is entitled to regard the data message as received as being what the
originator intended to send, and to act on that assumption. The addressee is not so entitled
when it knew or should have known, had it exercised reasonable care or used any agreed
procedure, that the transmission resulted in any error in the data message as received.
(6) The addressee is entitled to regard each data message received as a separate data message
and to act on that assumption, except to the extent that it duplicates another data message
and the addressee knew or should have known, had it exercised reasonable care or used
any agreed procedure, that the data message was a duplicate.
SEC. 20. Effect of Error or Change. - If an error or change in an electronic document
occurs in a transmission between parties to a transaction, the following rules apply: (1) If the
parties have agreed to use a security procedure to detect changes or errors and one party has

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conformed with the procedure, but the other party has not, and the non-conforming party
would have detected the change or error had that party also conformed, the conforming
party may avoid the effect of the erroneous or changed electronic document.
(2) In an automated transaction involving an individual, the individual may avoid the
effect of an electronic document that resulted from an error made by the individual in
dealing with the electronic agent of another person. If the electronic agent did not provide
an opportunity for the prevention or correction of the error and, at the time the individual
learns of the error, the individual: (a) Promptly notifies the other person of the error and
that the individual did not intend to be bound by the electronic document received by
the other person; (b) Takes reasonable steps including steps that conform to the other
person’s reasonable instructions, to return to the other person or, if instructed by the other
person to destroy the consideration received, if any, as a result of the erroneous electronic
documents; and (c) Has not used or received any benefit or value from the consideration,
if any, received from the other person.

(3) If neither paragraph (1) nor paragraph (2) applies, the error or change has the effect
provided by other law, and the parties’ contract, if any.

(4) Paragraphs (2) and (3) may not be varied by agreement.

SEC. 21. Acknowledgement of Receipt. - (1) Paragraphs (2) to (4) of this article apply
where, on or before sending a data message, or by means of that data message, the
originator has requested or has agreed with the addressee that receipt of the data message
be acknowledged.
(2) Where the originator has not agreed with the addressee that the acknowledgement be
given in a particular form or by a particular method, an acknowledgement may be given by:
(a) any communication by the addressee, automated or otherwise; or (b) any conduct of the
addressee, sufficient to indicate to the originator that the data message has been received.
(3) Where the originator has stated that the data message is conditional on receipt of the
acknowledgement, the data message is treated as though it has never been sent, until the
acknowledgement is received.
(4) Where the originator has not stated that the data message is conditional on receipt of the
acknowledgement, and tire acknowledgement has not been received by the originator within
the time specified or agreed or, if no time has been specified or agreed, within a reasonable
time, the originator: (a) may give notice to the addressee stating that no acknowledgement
has been received and specifying a reasonable time by which the acknowledgement must
be received; and (b) if the acknowledgement is not received within the time specified in
subparagraph (a), may, upon notice to the addressee, treat the data message as though it
had never been sent, or exercise any other rights it may have.
(5) Where the originator receives the addressee’s acknowledgement of receipt, it is presumed
that the related data message was received the addressee. That presumption does not imply
that the data message corresponds to the message received.

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ANNEX A: Senate Bill 1902

(6) Where the received acknowledgement states that the related data message met technical
requirements, either agreed upon or set forth in applicable standards, it is presumed that
those requirements have been met.

(7) Except in so far as it relates to the sending or receipt of the data message, this article
is not intended to deal with the legal consequences that may flow either from that data
message or from the acknowledgement of its receipt.
SEC. 22. Time and Place of Dispatch and Receipt of Data Messages. - (1) Unless otherwise
agreed between the originator and addressee, the dispatch of a data message occurs when
it enters an information system outside the control of the originator or of the person who
sent the data message on behalf of the originator.

(2) Unless otherwise agreed between the originator and the addressee, the time of receipt of
a data message is determined as follows: (a) If the addressee has designated an information
system for the purpose of receiving data messages, receipt occurs: (i) at the time when the
data message enters the designated information system; or (ii) if the data message is sent
to an information system of the addressee that is not the designated information system,
at the time when the data message is retrieved by the addressee; (b) If the addressee has
not designated an information system, receipt occurs when the data message enters an
information system of the addressee.
(3) Paragraph (2) applies notwithstanding that the place where the information system is
located may be different from the place where the data message is deemed to be received
under paragraph (4).
(4) Unless otherwise agreed between the originator and the addressee, a data message is
deemed to be dispatched at the place where the originator has its place of business, and is
deemed to be received at the place where the addressee has its place of business. For the
purposes of this paragraph: (a) if the originator or the addressee has more than one place of
business, the place of business is that which has the closest relationship to the underlying
transaction or, where there is no underlying transaction, the principal place of business;
(b) if the originator or the addressee does not have a place of business, reference is to be
made to its habitual residence.
PART THREE.

ELECTRONIC COMMERCE IN SPECIFIC AREAS


CHAPTER I. CARRIAGE OF GOODS

SEC. 23. Actions Related to Contracts of Carriage of Goods. - Without derogating from
the provisions of part two of this law, this chapter applies to any action in connection with,
or in pursuance of, a contract of carriage of goods, including but not limited to:
(a) (i) furnishing the marks, number, quantity or weight of goods;
(ii) stating or declaring the nature or value of goods;
(iii) issuing a receipt for goods;
(iv) confirming that goods have been loaded;
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(b) (i) notifying a person of terms and conditions of the contract;


(ii) giving instructions to a carrier;

(c) (i) claiming delivery of goods;


(ii) authorizing release of goods;
(iii) giving notice of loss of, or damage to, goods;

(d) giving any other notice or statement in connection with the performance of the
contract;

(e) undertaking to deliver goods to a named person or a person authorized to claim


delivery;

(f ) granting, acquiring, renouncing, surrendering, transferring or negotiating rights


in goods;

(g) acquiring or transferring rights and obligations under the contract.

SEC. 24. Transport Documents. - (1) Subject to paragraph (3), where the law requires that
any action referred to in Section 23 be carried out in writing or by using a paper document,
that requirement is met if the action is carried out by using one or more data messages.

(2) Paragraph (1) applies whether the requirement therein is in the form of an obligation
or whether the law simply provides consequences for failing either to carry out the action
in writing or to use a paper document.

(3) If a right is to be granted to, or an obligation is to be acquired by, one person and no
other person, and if the law requires that, in order to effect this, the right or obligation must
be conveyed to that person by the transfer, or use of, a paper document, that requirement
is met if the right or obligation is conveyed by using one or more data messages: Provided,
That a reliable method is used to render such data message or messages unique.

(4) For the purposes of paragraph (3), the standard of reliability required shall be assessed
in the light of the purpose for which the right or obligation was conveyed and in the light
of all the circumstances, including any relevant agreement.

(5) Where one or more data messages are used to effect any action in subparagraphs (f ) and
(g) of Section 23, no paper document used to effect any such action is valid unless the use
of data message has been terminated and replaced by the use of paper documents. A paper
document issued in these circumstances shall contain a statement of such termination. The
replacement of data messages by paper documents shall not affect the rights or obligations
of the parties involved.

(6) If a rule of law is compulsorily applicable to a contract of carriage of goods which


is in, or is evidenced by, a paper document, that rule shall not be inapplicable to such a
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ANNEX A: Senate Bill 1902

contract of carriage of goods which is evidenced by one or more data messages by reason
of the fact that the contract is evidenced by such data message or messages instead of by
a paper document.

PART FOUR.

DATA MESSAGES IN GOVERNMENT TRANSACTIONS

SEC. 25. Government Use of Data Messages and Electronic Signatures. - Notwithstanding
any law to the contrary, within two (2) years from the date of the effectivity of this Act, all
departments, bureaus, offices and agencies of the government, as well as all government-
owned-and-controlled corporations, that pursuant to law require or accept the filing of
documents, require that documents be created, or retained and/or submitted, issue permit,
license or certificates of registration or approval, or provide for the method and manner of
payment or settlement of fees and other obligations to the government, shall –

(a) accept the creation, filing or retention of such documents in the form of data
messages;

(b) issue permits, licenses, or approval in the form of data messages;

(c) require and/or accept payments, and issue receipts acknowledging such payments,
through systems using data messages; or

(d) transact the government business and/or perform governmental functions using data
messages and, for the purpose, are authorized to adopt and promulgate, after appropriate
public hearing and with due publication in newspapers of general circulation, the appropriate
rules, regulations, or guidelines, to, among others, specify-

The manner and format in which such data messages shall be filed, created, retained
or issued;

1) where and when such data messages have to be signed, the use of a digital signature
or other secure electronic signature, the type of electronic signature required; and

2) the format of the data message and the manner the electronic signature shall be
affixed to the data message;

3) the control processes and procedures as appropriate to ensure adequate integrity,


security and confidentiality of data messages, records or payments;

4) other attributes required of data messages or payments; and

5) the full or limited use of the documents and papers for compliance with the
government requirements: Provided, That this Act shall by itself mandate any
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department or ministry of the government, organ of state of statutory corporation


to accept or issue any document in the form of data messages upon the adoption,
promulgation and publication of the appropriate rules, regulations, or guidelines.

SEC. 26. Authority of the Department of Trade and Industry and Participating Entities.
- The Department of Trade and Industry (DTI) shall direct and supervise the promotion
and development of electronic commerce in the country. This will be in consultation and
coordination with the National Information Technology Council and National Computer
Center, as well as the government offices and agencies, and representatives of the private
sector concerned. Further, the DTI and the participating government and private entities
shall have the authority to

a) recommend policies, plans and programs to further enhance the development of


electronic commerce in the country;

b) coordinate and monitor the implementation of said policies, plans and/or


programs;

c) provide fora and mechanisms in addressing issues and concerns affecting the other
government offices and agencies;

d) within sixty (60) days after the effectivity of this Act, promulgate rules and regulations
and perform such other functions as are necessary and advisable for the implementation
of this Act in the area of electronic commerce. Failure to issue rules and regulations
shall not in any manner affect the executory nature of the provisions.

PART FIVE.

Final Provisions

SEC. 27. Taxes on E-Commerce Transactions. - Value-added, sales and other appropriate
taxes shall be collected on E-commerce transactions by the central and local governments
concerned.

SEC. 28. Reciprocity Provision. - All benefits, privileges, advantages or statutory rules
established under this Act, including those involving practice of one’s profession, shall be
enjoyed only by parties whose country of origin grants the same benefits and privileges or
advantages to Filipino citizens.

SEC. 29. Penalties. - The following Acts shall be penalized by fine and/or imprisonment,
as follows:

a) Hacking or cracking which refers to unauthorized access into or interference in a


computer system/server by or through the use of a computer or a computer system in
the computer or in another computer, without the knowledge and consent of the owner
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ANNEX A: Senate Bill 1902

of the computer or system, including the introduction of computer viruses and the like,
resulting in the corruption, destruction, alteration, theft or loss of data messages shall
be punished by a minimum fine of One hundred thousand pesos (P100,000.00) and
a maximum commensurate to the damage incurred and a mandatory imprisonment
of six (6) months to three (3) years;

b) Violations of the Consumer Act or Republic Act No. 7394 through transactions
covered by or using data messages, to be penalized with the same penalties as provided
in that Act;

c) Other violations of the provisions of this Act, to be penalized with a maximum


penalty of One million pesos (P1,000,000.00) or six (6) years imprisonment. Non-
disclosure of proper identification or point of origin of any data message shall render
such data message of no value.

Non-disclosure of proper identification or point of origin of any data message shall render
such data message of no value.

SEC. 30. Separability Clause. - The provisions of this act are hereby declared separable
and in the event of any such provision is declared unconstitutional, the other provisions
to remain in force and effect.

SEC. 31. Repealing Clause. - All other laws, decrees, rules and regulations or parts thereof
which are inconsistent with the provisions of this act are hereby repealed, amended or
modified accordingly.

SEC. 32. Effectivity. - This act shall take effect immediately after its publication in the
Official Gazette or in at least two (2) national newspapers of general circulation.

Approved

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ANNEX B

HOUSE BILL 9971


The Electronic Commerce Act of 2000
THE DIGITAL FILIPINO

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ANNEX B: HOUSE BILL 9971
This is the House Bill presented in Committee Report 685. The interpellation of the bill started
May 24, 2000. Once the House of Representatives version is passed, Congress will meet in a
bicameral conference in coming up with a final bill to be signed by President Estrada and enact
it as a law.

Republic of the Philippines


House of Representatives
Quezon City

ELEVENTH CONGRESS
First Regular Session

House Bill No. (Substitute Bill of House Bill Nos. 1756, 4123, 7104 and 8046)

Introduced by Representatives Angping, Golez, Verceles, Punzalan, Lopez, Badelles, Bunye,


Valera, Calalay, Unde, Lorenzo-Villareal, Teodoro, Jr., Liban

AN ACT PROVIDING FOR PROTECTION OF


ELECTRONIC COMMERCIAL TRANSACTION,
PENALTIES FOR UNLAWFUL USE THEREOF
AND FOR OTHER PURPOSES

Be it enacted by the Senate and the House of Representatives of the Republic of the
Philippines in Congress assembled:

PART I
SHORT TITLE AND DECLARATION OF POLICY

Sec. 1. Short Title. - This Act shall be known and cited as the “Electronic Commerce Act
of 2000”.

Sec. 2. Declaration of Policy. - The State recognizes the vital role of information technology
and telecommunication in nation-building; the need to create an information-friendly
environment which supports and ensures the availability, diversity and affordability of
telecommunication and information technology products and services; the primary
responsibility of the private sector in contributing investments and services in
telecommunications and information technology; the need to develop, with appropriate
training programs and institutional policy changes, human resources for the information
technology age, a labor force skilled in the use of telecommunication and information
technology and a population capable of operating and utilizing electronic appliances and
computers; its obligation to facilitate the transfer and promotion of adaptation technology,
to ensure network security, connectivity and neutrality of technology for the national
benefit; and the need to marshal, organize and deploy national information infrastructures,

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comprising in both telecommunications network and strategic information services,


including their interconnection to the global information networks, with the necessary
and appropriate legal, financial, diplomatic and technical framework, systems and facilities.
PART II - GENERAL PROVISIONS

Sec. 3. Objective. This Act aims to simplify and facilitate domestic and international
exchange of information, dealings, transactions, arrangements, agreements and contracts
through the utilization of electronic, optical and similar medium, mode and instrumentality,
and to promote security and recognize the authenticity and reliability of electronic
documents related to such activities.

Sec. 4. Application. This Act shall apply to any kind of data message used in the context
of commercial activities and other exchange of information, dealings, transactions,
arrangements and contracts.

Sec. 5. Definition of Terms. For the purposes of this Act, the following terms are defined,
as follows:

(a) “Access” refers to entry to an open system and/or an electronic document for any
purpose whatsoever;

(b) “Addressee” refers to a person or party who is intended by the originator to receive
the electronic document. The term does not include a person acting as an intermediary
with respect to that electronic document.

(c) “Authentication” refers to a process for establishing the identity of a person,


device, an electronic document, or entity participating in or a part of an information
or communication system or network.

(d) “Computer” refers to any device or apparatus which, by electronic, electro-


mechanical or magnetic impulse, or by other means, is capable of receiving, recording,
transmitting, storing, processing, retrieving, or producing information, data, figures,
symbols or other modes of written expression according to mathematical and logical
rules or of performing any one or more of those functions including two or more
computers carrying one or more of those functions in combination or in succession
or otherwise howsoever conjointly which shall be treated as a single computer.

(e) “Electronic contract” refers to a contract created and entered into in accordance
with the provisions of this Act.

(f ) “Electronic document” refers to information or the representation of information,


data, figures, symbols or other modes of written expression, described or however
represented, by which a right is established or an obligation extinguished, or by which
a fact may be proved and affirmed, which is received, recorded, transmitted, stored,
processed, retrieved or produced electronically.
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ANNEX A: House Bill 9971

(g) “Electronic signature” refers to any letter, character, numeric figure or symbol, or
any methodology or procedure, in electronic form, attached to or logically associated
with an electronic document, representing and employed or adopted by a specified or
nominated person and used, executed or adopted by such person with the intention
of authenticating or approving the electronic document.
(h) “Hacking” refers to acts including, but not limited to, any unauthorized access into
or interference in a computer system / server or any access in order to corrupt, destroy,
alter, or steal data messages using computers or other similar communication devices.

(i) “Information system” refers to a system intended for and capable of generating,
sending, receiving, storing or otherwise processing electronic documents and
information.

(j) “Intermediary” refers to, with respect to a particular electronic document, a


person who, on behalf of another person, sends, receives and/or stores or provides
other services in respect of that electronic document.

(k) “Originator” refers to a person by whom, or on whose behalf, the electronic


document purports to have been created, generated and/or sent . The term does not
include a person acting as an intermediary with respect to that electronic document.

(l) “Service provider” refers to a provider of -



i) On-line services or network access, or the operator of facilities therefor,
including entities offering the transmission, routing, or providing of connections
for online communications, digital or otherwise, between or among points
specified by a user, of electronic documents of the user’s choosing; or
ii) The necessary technical means by which electronic documents of an originator
may be stored and made accessible to a designated or undesignated third party.
Such service providers shall have no authority to modify or alter the content of
the electronic document received or to make any entry therein on behalf of the
originator, addressee or any third party unless specifically authorized to do so,
and who shall retain the electronic document in accordance with the specific
request or as necessary for the purpose of performing the services he was engaged
to perform.

(m) “Piracy in Electronic Commerce” refers to the unauthorized copying,


reproduction, dissemination, distribution, use, removal, alteration, substitution,
modification, storage, uploading or downloading of protected material or
copyrighted works including legally protected sound recording, phonograms or
information materials or protected works.

Sec. 6. Interpretation. - (1) In the interpretation of this Act, regard is to be had to its
international origin and to the need to promote uniformity in its application and the
observance of good faith.
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(2) Questions concerning matters governed by this Act, which are not expressly settled in
it are to be settled in conformity with the general principles on which this Act is based.

PART III
LEGAL RECOGNITION OF DOCUMENT AND ELECTRONIC CONTRACTS

Sec. 7. Legal Recognition of Electronic Documents. – Electronic documents shall have the
legal effect, validity or enforceability as any other document or legal writing, and -

(a) Where the law requires a document to be in writing, that requirement is met by
an electronic document if the said electronic document maintains its integrity and
reliability and can be authenticated so as to be usable for subsequent reference, in that
-
(i) The electronic document has remained complete and unaltered, apart from
the addition of any endorsement and any authorized change, or any change which
arises in the normal course of communication, storage and display; and
(ii) The electronic document is reliable in the light of the purpose for which it
was generated and in the light of all the relevant circumstances.

(b) Paragraph (a) applies whether the requirement therein is in the form of an obligation
or whether the law simply provides consequences for the document not being presented
or retained in its original form.

(c) Where the law requires that a document be presented or retained in its original
form, that requirement is met by an electronic document if -

(i) There exists a reliable assurance as to the integrity of the document from the
time when it was first generated in its final form; and
(ii) That document is capable of being displayed to the person to whom it is
to be presented: Provided, That no provision of this Act shall apply to vary any
and all requirements of existing laws on formalities required in the execution of
documents for their validity.

Sec. 8. Legal Recognition of Data Messages. - Information shall not be denied legal effect,
validity or enforceability solely on the grounds that it is in the data message purporting to
give rise to such legal effect, but is merely referred to in that data message.

Sec. 9. Retention of Electronic Documents. - Notwithstanding any provision of law, rule


or regulation to the contrary -

(a) The requirement in any provision of law that certain documents be retained in
their original form is satisfied by retaining them in the form of an electronic document
which -
i. Remains accessible so as to be usable for subsequent reference;
ii. Is retained in the format in which it was generated, sent or received, or in a
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ANNEX A: House Bill 9971

format which can be demonstrated to accurately represent the electronic document


generated, sent or received;
iii. Enables the identification of its originator and addressee, as well as the
determination of the date and the time it was sent or received.

(b) The requirement referred to in paragraph (a) is satisfied by using the services of
a third party, provided that the conditions set forth in subparagraphs (i), (ii) and (iii)
of paragraph (a) are met.

Sec. 10. Additional Requirements Imposed or Agreed Upon. – Nothing under this Act shall
preclude any parties to an electronic document from specifying additional requirements for
the creation, generation, retention verification and authentication of electronic documents,
nor shall the parties concerned be prevented from adopting additional requirements as
they may mutually agree upon for as long as the requirements do not lead to functional
equivalence.

Sec. 11. Originator’s Electronic Documents. - An electronic document is deemed to be


that of the originator if -
(a) It was sent by - i) The originator himself; or ii) A person who had the authority to act
on behalf of the originator in respect of that electronic document; or iii) An information
system programmed by or on behalf of the originator to operate automatically.

(b) It has the originator’s electronic signature.

Sec. 12. Reliance as Originator’s Electronic Documents. - An addressee is entitled to regard


electronic documents as being that of the originator and to act on that assumption if –

(a) The addressee properly applied a procedure previously agreed upon or provided in
the electronic document released and sent directly by the originator for that purpose; or

(b) The electronic document received by the addressee resulted from the actions of
a person whose relationship with the originator or with any agent of the originator
enabled that person to gain access to a method used by the originator to identify the
electronic document as that of the originator.

The foregoing provisions of this section shall not apply —


i. From the time the addressee receives a notice from said originator that the
electronic document is not his own and the addressee has had reasonable time to
act accordingly; or
ii. At any time that the addressee knew or ought to have known, had the addressee
exercised reasonable care or used the appropriate procedure, that the electronic
document was not that of the originator; or
iii. If under the circumstances of the case, it is unconscionable to regard the
electronic document as that of the originator or for the addressee to act on that
assumption.
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Sec. 13. Error on Electronic Documents. - The addressee is entitled to regard the electronic
documents received as that which the originator intended to send, and to act on that
assumption, unless the addressee knew or should have known, had the addressee exercised
reasonable care or used the appropriate procedure –

(a) That the transmission resulted in any error therein or in the electronic document
when the electronic document enters the designated information system; or

(b) That electronic document is sent to an information system which is not so


designated by the addressee for the purpose.

Sec. 14. Separate and Duplicate Electronic Document. - The addressee is entitled to
regard each electronic document received as a separate electronic document and to act on
that assumption except to the extent that it duplicates another electronic document and
the addressee knew or should have known, had it exercised reasonable care or used the
appropriate procedure, that the electronic document was a duplicate.

Sec. 15. Agreement on Acknowledgment of Receipt of Electronic Documents. - The


following rules shall apply where, on or before sending an electronic document the originator
and the addressee have agreed, or in that electronic document the originator has requested,
that receipt of the electronic document be acknowledged:

(a) Where the originator has not agreed with the addressee that the acknowledgment
be given in a particular form or by a particular method, an acknowledgment may be
given by or through any communication by the addressee, automated or otherwise, or
any conduct of the addressee, sufficient to indicate to the originator that the electronic
document has been received;
(b) Where the originator has stated that the effect or significance of the electronic
document is conditional on receipt of the acknowledgment thereof, the electronic
document is treated as though it has never been sent, until the acknowledgment is
received;

(c) Where the originator has not stated that the effect or significance of the electronic
document is conditional on receipt of the acknowledgment, and the acknowledgment
has not been received by the originator within the time specified or agreed or, if no time
has been specified or agreed, within a reasonable time, the originator may give notice
to the addressee stating that no acknowledgment has been received and specifying a
reasonable time by which the acknowledgment must be received; and
(d) If the acknowledgment is not received within the time specified in subparagraph
(c), the originator may, upon notice to the addressee, treat the electronic document
as though it had never been sent, or exercise any other rights it may have.

Sec. 16. Effect and Significance of Acknowledgment of Receipt of Electronic Documents.


- Where the received acknowledgment states that the related electronic document met the
technical requirements, either agreed upon or set forth in applicable standards, it shall be
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ANNEX A: House Bill 9971

conclusively presumed that those requirements have been met; and, where the originator
only receives the addressee’s acknowledgment of receipt, it is presumed that the related
electronic document was received by the addressee, but that presumption does not imply
that the said electronic document corresponds to the electronic document received.

Sec. 17. Time of Dispatch of Electronic Documents. – Unless otherwise agreed between
the originator and the addressee, the dispatch of an electronic document occurs when it
enters an information system outside the control of the originator or of the person who
sent the electronic document on behalf of the originator.

Sec. 18. Time of Receipt of Electronic Documents. - Unless otherwise agreed between the
originator and the addressee, the time of receipt of an electronic document is as follows:
(a) If the addressee has designated an information system for the purpose of receiving
electronic documents, receipt occurs at the time when the electronic document enters
the designated information system; or

(b) If the electronic document is sent to an information system of the addressee that is
not the designated information system, receipt occurs at the time when the electronic
document is retrieved by the addressee;

(c) If the addressee has not designated an information system, receipt occurs when
the electronic document enters an information system of the addressee.

These rules apply notwithstanding that the place where the information system is
located may be different from the place where the electronic document is deemed to
be received.

Sec. 19. Place of Dispatch and Receipt of Electronic Documents. - Unless otherwise agreed
between the originator and the addressee, an electronic document is deemed to be dispatched
at the place where the originator has its place of business and received at the place where
the addressee has its place of business. For the purposes hereof -

( a) If the originator or the addressee has more than one place of business, the place
of business is that which has the closest relationship to the underlying transaction or,
where there is no underlying transaction, the principal place of business;

(b) If the originator of the addressee does not have a place of business, reference is
to be made to its habitual residence; or

(c) The “usual place of residence” in relation to a body corporate, means the place
where it is incorporated or otherwise legally constituted.

Sec. 20. Choice of Cryptographic Methods. - Subject to applicable laws and/or rules and
guidelines promulgated by the Department of Trade and Industry, users of cryptography
shall be free to determine the type and level of electronic document security needed, and
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to select and use or implement appropriate cryptographic methods, including the key
management system that suit their needs.

Sec. 21. Admissibility and Evidential Weight of Electronic Documents. - In any and
all legal proceedings, nothing in the application of the rules on evidence shall deny the
admissibility of an electronic document in evidence -

(a) On the sole ground that it is in electronic form; or

(b) On the ground that it is not in the standard written form and electronic document
meeting and complying with the requirements under Section 6 hereof shall be the best
evidence of the agreement and transaction contained therein.

In assessing the evidential weight of an electronic document, the reliability of the


manner in which it was generated, stored or communicated, the reliability of the
manner in which its originator was identified, and other relevant factor shall be given
due regard.

CHAPTER III - RECOGNITION OF ELECTRONIC SIGNATURES

Sec. 22. Recognition of Electronic Signatures. A electronic signature on the electronic


document shall be equivalent to the signature of a person on a written document if that
signature is proved by showing that a prescribed procedure, not alterable by the parties
interested in the electronic document, existed under which -

(a) A method is used to identify the party sought to be bound and to indicate said
party’s access to the electronic document necessary for his consent or approval through
the electronic signature;

(b) Said method is reliable and appropriate for the purpose for which the electronic
document was generated or communicated, in the light of all the circumstances,
including any relevant agreement;

(c) It is necessary for the party sought to be bound, in order to proceed further with
the transaction, to have executed or provided the electronic signature; and

(d) The other party is authorized and enabled to verify the electronic signature and to
make the decision to proceed with the transaction authenticated by the same.

Sec. 23. Presumption Relating to Electronic Signatures. - In any proceedings involving an


electronic signature, it shall be presumed that -

(a) The electronic signature is the signature of the person to whom it correlates;
and

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ANNEX A: House Bill 9971

(b) The electronic signature was affixed by that person with the intention of signing or
approving the electronic document unless the person relying on the electronically signed
electronic document knows or has notice of defects in or unreliability of the signature
or reliance on the electronic signature is not reasonable under the circumstances.

Sec. 24. Legal Recognition of Electronic Writing - (1) Where the law requires information
to be in writing that requirement is met by a data message if the information contained
therein is accessible so as to be usable for subsequent reference.
PART III
ELECTRONIC CONTRACTS.
Sec. 25. Formation of Electronic Contracts. Except as otherwise agreed by the parties, an
offer, the acceptance of an offer and such other elements required under existing laws for
the formation of contracts may be expressed in, demonstrated and proved by means of
electronic documents and no contract shall be denied validity or enforceability on the sole
ground that it is in the form of an electronic document, or that any or all of the elements
required under existing laws for the formation of the contracts is expressed, demonstrated
and proved by means of electronic documents.

Sec. 26. Jurisdiction. An electronic contract dealing with the use of a key management
system shall indicate the jurisdiction whose laws apply to that system or whose law shall
apply to the contract. In the absence of such indication, jurisdiction over the contract shall
be acquired in accordance with existing laws.

PART IV
ELECTRONIC DOCUMENTS IN GOVERNMENT TRANSACTIONS

Sec. 27. Government Use of Electronic Records and Signatures. Notwithstanding any
law to the contrary, all departments, bureaus, offices and agencies of the Government, as
well as all government owned and controlled corporations, that pursuant to law require
or accept the filing of documents, require that documents be created, or retained and/or
submitted, issue permit, license or certificates of registration or approval, or provide for
the method and manner of payment or settlement of fees and other obligations to the
government, shall -
(a) Accept the creation, filing or retention of such documents in the form of electronic
documents;

b) Issue permits, licenses or approval in the form of electronic documents;

(c) Require and/or accept payments, and issue receipts acknowledging such payments,
through systems using electronic documents; or

(d) Transact the government business and/or perform governmental functions using
electronic documents and, for the purpose, are authorized to adopt and promulgate,

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after appropriate public hearing and with due publication in newspapers of general
circulation, the appropriate rules, regulations, or guidelines, to, among others, specify-
a) The manner and format in which such electronic documents shall be filed,
created, retained or issued;
b) Where and when such electronic documents have to be signed, the use of
a digital signature or other secure electronic signature, the type of electronic
signature required; and
c) The format of the electronic document and the manner the electronic
signature shall be affixed to the electronic documents;
d) The control processes and procedures as appropriate to ensure adequate integrity,
security and confidentiality of electronic documents , records or payments;
e) Other attributes required of electronic documents or payments; and
f ) The full or limited use of the documents and papers for compliance with
the government requirements: Provided, that nothing in this Act shall by itself
compel any department or ministry of the Government, organ of State of
statutory corporation to accept or issue any document in the form of electronic
documents until the adoption, promulgation and publication of the appropriate
rules, regulations, or guidelines.

Sec. 28. Authority of the Department of Trade and Industry. - The Department of Trade and
Industry shall direct and supervise the promotion and development of electronic commerce
in the country in consultation and coordination with the National Information Technology
Council and National Computer Center, as well as the government offices and agencies and
representatives of the private sector concerned, further authority and power to -

(a) Recommend policies, plans and programs to further enhance the development
of electronic commerce in the country;

b) Coordinate and monitor the implementation of said policies, plans and/or programs;

c) Provide fora and mechanisms in addressing issues and concerns affecting the other
government offices and agencies;

d) Promulgate rules and regulations, as well as quality standard or issue certification,


as the case may be, and perform such other functions as are necessary for the
implementation of this Act in the area of electronic commerce.

PART V
ELECTRONIC COMMERCE IN SPECIFIC AREAS

CHAPTER I. CARRIAGE OF GOODS

SEC. 29. Actions Related to Contracts of Carriage of Goods. - Without derogating from
the provisions of part two of this law, this chapter applies to any action in connection with,
or in pursuance of, a contract of carriage of goods, including but not limited to:
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ANNEX A: House Bill 9971

(a) (i) furnishing the marks, number, quantity or weight of goods;


(ii) stating or declaring the nature or value of goods;
(iii) issuing a receipt for goods;
(iv) confirming that goods have been loaded;

(b) (i) notifying a person of terms and conditions of the contract;


(ii) giving instructions to a carrier;

(c) (i) claiming delivery of goods;


(ii) authorizing release of goods;
(iii) giving notice of loss of, or damage to, goods;
(d) giving any other notice or statement in connection with the performance of the
contract;
(e) undertaking to deliver goods to a named person or a person authorized to claim
delivery;
(f ) granting, acquiring, renouncing, surrendering, transferring or negotiating rights
in goods;
(g) acquiring or transferring rights and obligations under the contract.

SEC. 30. Transport Documents. - (1) Subject to paragraph (3), where the law requires that
any action referred to in Section 19 be carried out in writing or by using a paper document,
that requirement is met if the action is carried out by using one or more data messages.

(2) Paragraph (1) applies whether the requirement therein is in the form of an obligation
or whether the law simply provides consequences for failing either to carry out the action
in writing or to use a paper document.

(3) If a right is to be granted to, or an obligation is to be acquired by, one person and no
other person, and if the law requires that, in order to effect this, the right or obligation must
be conveyed to that person by the transfer, or use of, a paper document, that requirement
is met if the right or obligation is conveyed by using one or more data messages: Provided,
That a reliable method is used to render such data message or messages unique.

(4) For the purposes of paragraph (3), the standard of reliability required shall be assessed
in the light of the purpose for which the right or obligation was conveyed and in the light
of all the circumstances, including any relevant agreement.

(5) Where one or more data messages are used to effect any action in subparagraphs (f ) and
(g) of Section 19, no paper document used to effect any such action is valid unless the use
of data message has been terminated and replaced by the use of paper documents. A paper
document issued in these circumstances shall contain a statement of such termination. The
replacement of data messages by paper documents shall not affect the rights or obligations
of the parties involved.
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(6) If a rule of law is compulsorily applicable to a contract of carriage of goods which


is in, or is evidenced by, a paper document, that rule shall not be inapplicable to such a
contract of carriage of goods which is evidenced by one or more data messages by reason
of the fact that the contract is evidenced by such data message or messages instead of by
a paper document.

PART VI
MISCELLANEOUS PROVISIONS
Sec. 31. Lawful Access. - Access to a plain text, a cryptographic keys or an electronic signature
of electronic document will only be authorized to and enforced in favor of the individual
or entity having a legal right to the possession or use of the plaintext, cryptographic key
or electronic signature and solely for the authorized purposes.
A cryptographic key for identity or integrity shall not be made available to any person or
party without the consent of the individual or entity in lawful possession of that key.
Sec. 32. Obligation of Confidentiality. - Except for the purposes authorized under this Act,
no person who has, pursuant to any powers conferred under this Act, obtained access to
any cryptographic key, electronic document, book, register, correspondence, information,
or other material shall disclose such cryptographic key, electronic document, book, register,
correspondence, information, or other material to any other person.
Sec. 33. Purpose and Construction. This Act shall be construed to give effect to the State
policies and objectives declared in this Act and

(a) To facilitate electronic communications by means of reliable electronic


documents;

(b) To facilitate electronic commerce, eliminate barriers to electronic commerce


resulting from uncertainties over writing and signature requirements;

(c) To promote the development of the legal and business infrastructure necessary
to implement secure electronic commerce;
d. To facilitate electronic filing of documents with government agencies and statutory
corporations, and to promote efficient delivery of government services by means of
reliable electronic documents;

(e) To minimize the incidence of forged electronic documents, intentional and


unintentional alteration of electronic documents, and fraud in electronic commerce
and other electronic transactions;

(f ) To help establish uniformity of rules, regulations and standards regarding the


authentication and integrity of electronic documents; and

(g) To promote public confidence in the integrity and reliability of electronic


documents and electronic commerce, and to foster the development of electronic
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ANNEX A: House Bill 9971

commerce through the use of electronic signatures to lend authenticity and integrity
to correspondence in any medium.

Sec. 34. Variation by Agreement. - As between parties involved in generating, sending,


receiving, storing or otherwise processing electronic records, any provision of this Act may
be varied by agreement between and among them.

Sec. 35. Liability of a Service Provider. - Except as otherwise provided in this section, no
person or party shall be subject to any civil or criminal liability in respect of the electronic
document for which the person or party acting as a service provider as defined in Sec.5 (l),
merely provides access if such liability is founded on -

(a) The obligations and liabilities of the parties under the electronic document;

(b) The making, publication, dissemination or distribution of such material or any


statement made in such material, including possible infringement of any right subsisting
in or in relation to such material: Provided, That –


i. The network service provider does not have actual knowledge, or is not
aware of the facts or circumstances from which it is apparent, that the making,
publication, dissemination or distribution of such material is unlawful or infringes
any rights subsisting in or in relation to such material; and
ii. The network service provider does not knowingly receive a financial benefit
directly attributable to the unlawful or infringing activity.
iii. The service provider does not directly commit any infringement or other
unlawful act and does not induce or cause another person or party to commit any
infringement or other unlawful act and/or does not benefit financially from the
infringing activity or unlawful, act of another person or party. Provided, further,
That nothing in this Section shall affect -
a) Any obligation founded on contract;
b) The obligation of a network service provider as such under a licensing
or other regulatory regime established under written law; or
c) Any obligation imposed under any written law.
d) The civil liability of any party to the extent that such liability forms the
basis for an injunctive relief issued by a court under any law requiring that the
service provider take or refrain from actions necessary to remove, block or deny
access to any material, or to preserve evidence of a violation of law.

Provided, finally, That obligations and responsibilities of an individual or entity, including


a government office or agency, which offers cryptographic services, or holds or has access
to cryptographic keys, or offers services as a service provider under this Act shall be those
provided hereunder, in contract it enters into and in international agreements or conventions
in which the Philippines is a party and/or signatory, but said individual or entity, including
a government office or agency shall not be held liable for providing cryptographic keys or
plaintext of encrypted electronic document in accordance with lawful access.
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Sec. 36. Penalties. - The following acts shall be subject penalized by fine and/or
imprisonment, as follows:

(a) Hacking as defined in Part II, Section 5 (h) and any violations of this Act and
forgery, alteration, infliction of damages, violation of the secrecy, misuses, or other illegal
use of electronic documents sent, received, stored or compiled by any persons, including
ex-director, ex-officers, ex-employees, director, officer or employee of a third party, shall
be punished by a minimum fine of One Hundred Thousand Pesos (P100,000.00) and
a maximum commensurate to the damage incurred and a mandatory imprisonment
of six (6) months to three (3) years;

(b) Violations of the Consumer Act or RA 7394 through transactions covered by or


using electronic documents, to be penalized with the same penalties as provided in
that Act;

Sec. 37. Implementing Rules and Regulations - An inter-agency committee to be composed


of Secretary of the Department of Trade and Industry (DTI) and the different heads of
Bangko Sentral ng Pilipinas (BSP) thru the Monetary Board, Commission on Audit (COA),
Securities and Exchange Commission (SEC), Bureau of Internal Revenue (BIR), National
Telecommunications Commission (NTC) and National Computer Center (NCC)shall
promulgate all rules and regulations necessary to carry out their respective functions under
this Act within thirty (30) days after its approval.

Sec. 38. Separability Clause. - The provisions of this Act are hereby declared separable
and in the event of any such provision is declared unconstitutional, the other provisions
to remain in force and effect.

Sec. 39 Repealing Clause. - All other laws, decrees, rules and regulations or parts thereof
which are inconsistent with the provisions of this Act are hereby repealed, amended or
modified accordingly.

Sec. 40 Effectivity. - This Act shall take effect immediately after its publication in the Official
Gazette or in at least two (2) national newspapers of general circulation.

Approved,

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ANNEX A: House Bill 9971

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118
ANNEX C

SENATE BILL 2025


AN ACT PROVIDING PROTECTION AGAINST
COMPUTER FRAUD AND ABUSES AND
OTHER CYBER-RELATED FRAUDULENT ACTIVITIES,
PROVIDING PENALTIES THEREFORE
AND FOR OTHER PURPOSES
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ANNEX C: SENATE BILL 2025
This bill was filed by Senator Ramon B. Magsaysay, Jr. in the growing challenges presented by
cybercrime. This is only a proposed bill at this stage and no action has been taken on it yet. Your
comments and feedback is highly appreciated. Please email me at janette@digitalfilipino.com
and let me know what you think of this proposed bill.

ELEVENTH CONGRESS OF THE REPUBLIC


OF THE PHILIPPINES
Second Regular Session

SENATE
S.B. 2025

Introduced by Senator Magsaysay, Jr.

AN ACT PROVIDING PROTECTION AGAINST COMPUTER FRAUD AND


ABUSES AND OTHER CYBER-RELATED FRAUDULENT ACTIVITIES,
PROVIDING PENALTIES THEREFOR AND FOR OTHER PURPOSES
Be it enacted by the Senate and the House of Representatives of the Republic of the
Philippines in Congress assembled:

SECTION 1. Title - This Act shall be known and cited as the “Anti-Computer Fraud
and Abuses Act of 2000”

SECTION 2. Policy Statement - It is hereby declared a policy of the State to create
the appropriate policy and institutional environment to rationalize, accelerate the use,
application and exploitation of information technology as a tool and as a development
strategy for modernization and economic development.
In furtherance of the said policy statement, the government shall exert positive efforts
to provide protection against all forms of computer fraud and abuses and other cyber-
related fraudulent activities committed against vital government and private financial
institutions.
SEC. 3. Punishable Acts. - The following acts/offenses are punishable under this Act:
• Computer Fraud - The input, alteration, erasure or suppression of computer data
or computer programs, or other interference in the course of data processing, that
influences the result of data processing thereby causing economic or possessory loss of
property of another person with the intent of procuring an unlawful economic gain
for himself or for another persons;
• Computer Forgery - The input, alteration, erasure or suppression of computer data
or computer programs, or other interference in the course of data processing, in a
manner or under such conditions, as prescribed by national law, that would constitute
the offense of forgery if it had been committed with respect to a traditional object an
offense;
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• Damage to Computer data or Computer Programs - The erasure, alteration


damaging, deterioration or suppression of computer data or computer programs
without right;
• Computer sabotage - The input, alteration, erasure or suppression of computer
data or computer programs, or interference with computer systems, with the intent
to hinder the functioning of a computer or of a telecommunications system;
• Unauthorized Access - The access without right to a computer system or network
by infringing security measures;
• Unauthorized Interception - The interception, made without right and by technical
means, of communications to from and within a computer system or network.
• Whoever;
– knowingly accesses a computer without authorization or exceeds authorized
access, and by means of such conduct obtains information that has been
determined by the Government pursuant to regulations requiring protection
against unauthorized disclosure for reasons of national security or foreign relations,
or any restricted data, with the intent or reason to believe that such information
so obtained is to be used to the injury o the Philippines, or to the advantage of
any foreign nation;
– internationally access a computer without authorization or exceeds authorized
access, and thereby obtains information contained in a financial record of a
financial institution, or of a card issuer or contained in a file of a consumer
reporting agency on a consumer internationally without authorization to access
any computer of a department or agency of the government of the Philippines
or any public or private financial institution operating under Philippine Laws,
accesses such a computer of the department or agency that is exclusively for
the use of the Government of the Philippines, or in the case of a computer not
exclusively for such use, it is used by or for the Government of the Philippines
or, in the case of a computer not exclusively for such conduct affects the use of
the Government’s operation of such computer;
– knowingly and with intent to defraud, accesses a vital government or private
financial institution or agencies as indicated in the IRR without authorization, or
exceeds authorized access, and by means of such conduct furthers the intended
fraud and obtain anything of value, unless the object of the fraud and the thing
obtained consist only of the use of the computer;
– internationally accesses a national government computer without authorization
and by means of one or more instances of such conduct alters, damages, or destroys
information in any computer, or prevents authorized use of any such computer
or information, and thereby ---
– causes loss to one or destroys property of value;
– modifies or impairs, or potentially modifies or impairs the medical examination, medical
diagnosis, medical treatment, or medical care of one or more individuals; or
– knowingly and with intent to defraud traffics in any password or similar
information through which a computer may be accessed without authorization,
if such trafficking affects inter-country or foreign trade or such computer is used
by the government of the Philippines in its transactions.
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ANNEX C: SENATE BILL 2025

For purposes of this above-mentioned enumeration of offenses, the following terms shall
be defined as follows:

• Computer shall refer to an electronic, magnetic, optical, electromechanical, or other


high speed data processing device performing logical, arithmetic, or storage functions, and
includes any data storage facility or communications facility directly related to or operating
in conjunction with such device, but such term does not include an automated typewriter
or typesetter, a portable hand held calculator, or other similar device;
• National government computer shall refer to a computer exclusively for the use of a
government and private financial institutions operating under Philippine laws, or, in
the case of a computer not exclusively for such use, by a financial institution or any
of the agencies of the government and the conduct constituting the offense the use of
the financial institution’s operation or the Government’s operation of computer; or
• which is one of the two or more computers used in committing the offense, not all
which are located in the same place/area.

SEC. 4. Penal Provisions - Any person who violates any provision of this Act shall be
punishable with imprisonment for not less than eight (8) years nor more than twenty (20)
years and a fine of one hundred thousand pesos (Php100,000.00) or equal in amount to
the damage involved in the violation, whichever is applicable: Provided, That if the person
violating any provisions of this Act is a juridical person, the penalty herein provided shall
be imposed on its president or secretary and/or members of the board of directors or any
of its officers and employees who may have directly participated in the violation.

Any government official or employee who directly commits the unlawful acts defined in this
Act or is guilty of gross negligence of duty or connives with or permits the commission of
any of the said unlawful or prohibited acts shall, in addition to the penalty prescribed in the
preceding paragraph, be dismissed from the service with prejudice to his reinstatement and
with disqualification from voting or being voted for in any election and from appointment
to any public office.

SECTION 5. Authority of the National Security Council - The National Security Council
(NSC) shall have, in addition to other government agencies concerned, the authority to
investigate offenses under this section, particularly if the violation committed affects the
national security of the country.

SECTION 6. Miscellaneous - Without prejudice to the provisions of this Act, nothing


herein provided shall divest or deprive courts of justice, civil or military, of their jurisdiction,
in the proper cases, over civil or criminal suits or actions arising from acts or omissions
under this law.

SECTION 7. Implementing Rules and Regulations (IRR) - The National Computer


Center in cooperation with the Departments of Finance and Science and Technology, the
National Security Council and other concerned agencies shall formulate the necessary rules
and regulations for the effective implementation of this Act.
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SECTION 8. Separability Clause - If for any provision of this Act is held invalid, the
other provisions of this Act not affected shall remain in full force and effect.

SECTION 9. Repealing Clause - All laws, decrees, orders, rules and regulations, or portion
thereof inconsistent with this Act are hereby repealed or modified accordingly.

SECTION 10. Effectivity - This Act shall take effect fifteen (15) days after its complete
publication in the Official Gazette or in at least two (2) newspaper of general publication,
whichever comes earlier.

Approved,

124
ANNEX D

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WEBRING
THE DIGITAL FILIPINO

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THE DIGITAL FILIPINO WEBRING

Last February 7, 2000, the DigitalFilipino Webring was created. It intends to create a solid
community of e-commerce related web sites that current and future Filipino Internet users can
refer to.

Any Philippine web site that offers products and services that are part of the e-commerce lifecycle
can be part of the ring. This include Philippine web sites that are, but not limited to, portals,
ISPs, VANs, consulting firms, web development/design, web hosting, banks, payment gateways,
delivery/fulfillment, trading hubs, e-commerce sites, hardware/software provider, communities,
enthusiasts, and more.

DigitalFilipino.com is not responsible for any action and dealings of its webring members.

Arts/Crafts/Literature

1. Nunez Online Gallery (http://www.nunezonlinegallery.com/)


- Features the modern art of Pablo Nuñez.

Auctions

1. PhilAuctions.com (http://www.philauctions.com)
- Free online auctions and classified ads, as well as bulletin boards for user-to-user
ecommerce.

Automotive

1. Silverwind Light Alloy Wheels (http://www.silverwind.net/)


- The Official Silverwind Magwheels online catalog and website.

Classifieds

1. PinoyAds.com (http://www.pinoyads.com/)
- The newest Filipino free online classified ads. Advertise on the net for free using full
featured classified ads. Win prizes just by posting your ads.

Communities

1. Iskul.Org (http://www.iskul.org)
- The First Filipino website offering Free Internet Services solely for Student
Organizations. Our comprehensive service is dedicated to the future professionals,
our country’s future.

2. pinoyDentist.com (http://www.pinoydentist.com)
- Online community of Filipino Dentists.
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THE DIGITAL FILIPINO

3. CyberPromdi Homepage (http://www.cyberpromdi.net)


- CyberPromdi is Cebu’s Net Entrepreneur Community. We’re in business on the
internet!

4. #Cavite Channel UnderNet


(http://www.geocities.com/TimesSquare/Corridor/7914/index.htm)
- The #CAVITE CHANNEL on UnderNet Server, the home chatlane of ALL THE
FILIPINO, Caviteños.

Companies - Internet Consultancy / Web development

1. Adcom Virtual (http://www.adcomvirtual.com/)


- Adcom Virtual is a professional web development and hosting company, based in
Davao City, Philippines.

2. Liquid Soul Studios (http://www.geocities.com/liquidsoulstudios/)


- Graphic and web design company.

3. Island Code Web Design (http://sites.netscape.net/islandcode)


- Offers web design deals! Free web hosting www.yourdomain.com with any web
design package, the easiest way to put your company on the web. Starts from $349,
complete design, hosting and marketing solutions.

Entertainment

1. PlanetGimmick (http://www.planetgimmick.com)
- The one and only cyber-guide to the most interesting places, events and people in
the Metro-Manila area.

2. Likha Online (http://www.adinfiniti.com/index_test.html)


- Likha Online is a collection of original work by various artists. Their creativity is
expressed through both visual art and literature. Browse through the collection, or
contribute your own.

E-Zine

1. Buyncell.com (http://www.buyncell.com)
- The Philippines’ premiere online cellular classified ads. Pinoys’ one stop cellular
portal.

Food

1. Pinoydelikasi.com (http://www.pinoydelikasi.com)
- An online delicacy store that offers a variety of delicious mouthwatering Filipino
delicacies delivered right at your doorstep.

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The Digital Filipino Webring

2. Food for the Soul (http://foodforthesoul.hypermart.net/)


- Offers a wide variety of comfort food. From the famous Ube & Strawberry Jam of
the Good Shepherd Nuns in Baguio to the mountain grown coffee of the Benedictine
Monks in Bukidnon. Food that not only pleases the palate but lifts the spirit as
well.

ISP

1. Icalitrac Corporation (http://www.i-trac.com/)


- i-TRAC is the official MosCom Internet Franchisee for the Province of Cavite. We
offer the most reliable and fastest internet connection in the whole province of Cavite
catering to all types of access.

Online Mall

1. PhilShop (http://www.philshop.com)
- A shopping portal. Create your own online store catalogue. Find products before
you visit the stores. Search for other shopping sites in the Philippines.

Online Shopping

1. Ninong.com - (http://www.ninong.com)
- A Filipino online toy store delivering toys within the Philippines.

2. The Ayala eCenter (http://www.ayalaecenter.com)


- Internet Shopping for the Filipino family back at home.

Personal homepage (independent web developers)

1. ..::gra-Fi-KAS::.. (http://www.grafikas.com)
- An analog and digital study on sentiments. An online portfolio of Arnida Europeo,
Filipino Artist.

Photography

1. Philippine Calendars and Wedding Photography (http://www.jadephoto.com)


- Your exclusive online source for the Philippines 2001 Calendar. It
features full-color images of the country’s picturesque places and top
tourist destinations.

2. VisualEyes Designs (http://www.visualeyes.cjb.net/) - Online portfolio of Allan Abella.


Web design and print design showcase. You can also find valuable resources and links
on other great graphic sites.

3. razorblade smiles (http://www.geocities.com/eyean.geo/index.html)


- a lethargic non-eventful journal of a pinoy in Switzerland.
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THE DIGITAL FILIPINO

4. Groundzero (http://www.geraldworks.com/)
- Personal website of Gerald De Guzman. Fully flash animated site.

5. nonofelipe.com (http://www.nonofelipe.com)
- Nono Felipe’s web portfolio.

6. Ang munting bahay ni jose (http://i.am/kaken)


- Personal homepage of Allan Joseph S. Batac

Recruitment/Jobs/Careers

1. MAC Search Partner International, Inc.


(http://www.recruit.com.ph/index1.htm)
- We are one of the Philippines’ first Professional Recruitment Companies backed by
twenty-seven years work experience in Human Resources Management focusing on
Recruitment.

2. Philippine Job Opportunities (http://geocities.com/cianoy/home2.htm)


- Mail list and site for the newest jobs in the Philippines and abroad.

Sports

1. The Gokongwei Cup 2000 (http://www.gokongweicup.cjb.net/)


- Gokongwei Cup 2000 - the premier league for the NBA LIVE SERIES modem
game.

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ANNEX E

eFILIPINO
WEB AWARDEES
THE DIGITAL FILIPINO

132
eFILIPINO WEB AWARDEES

The website, DigitalFilipino.com, has a submit url feature that allows companies and individuals
with web sites to submit their url and be included in our database. For the month of March 2000
and April 2000, we reviewed 53 sites and found 14 sites worth recognizing. Here they are:

Auctions
eAuctions Philippines (http://www.eauctions.ph/)
Philippines’ first free online auctions site. A place to buy, sell and collect items. The
site has a lot of auction content in it and user-friendly in its structure. Site operator
shows great concern on the integrity of both buyer and seller in its registration and
monitoring system. Although its site interface is not consistent throughout.

Automotive

Outlast Battery by JVSP Marketing Corporation (http://www.outlast.cjb.net/)


Distributor of Outlast batteries. Very informative site. The site structure and design
is well done. A good role model to small and medium sized enterprises on how they
can use the Internet to promote their products and services online.

E-Zine

Localvibe.com (http://www.localvibe.com/)
A Metro Manila-focused on-line magazine and city guide. One of the best lifestyle
e-zine online. Refreshing articles and insights from its eloquent contributors can spark
any site visitor’s interest to read. The city guide is extremely useful to those planning
to go out with limited budget. A must visit site for the night owl.

Free Email

Balikbayan Mail (http://www.balikbayanmail.com/)


The Philippines’ first free multilingual scanmail service and on-line postal service.
The concept of this site is commendable. It answers an important need in the
Philippine market. Very useful and practical. The site is user-friendly in its design and
structure.

Government

Department of Trade and Industry - Cebu (http://www.dticebu.net.ph/)


A one-stop information website business information and investment guidelines on
Cebu, Philippines. This site is very informative. The content provided are useful for
researchers and potential investors in Cebu. The effort exerted in putting this site is
commendable. Although few links have errors.
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THE DIGITAL FILIPINO

Movies and Film

Bayaning 3rd World (http://www.bayaning3rdworld.com/)


Mike De Leon’s masterpiece film on the life of Dr. Jose Rizal, Philippine’s National
Hero. The site design is creatively done. Provides a good insight on what the movie
is all about. The retraction section creates an intriguing twist further increasing the
interest of the person in the film.

Music and MP3


Radio Insect Records (http://www.radioinsectrecords.com/)
An independent record label based in Canada who produces and promotes original
Pinoy artists from its website. The concept and purpose of this site amazes me knowing
the fact that promoting ethnic music in another country isn’t that easy. This record
outfit has gone a long long way in its web site. Site design is very hip although you
may encounter script errors in the initial loading of the site.

Mp3Manila (http://mp3manila.com/)
The Philippines first free all original Filipino music site. Good site design. It is cool to
know that this site also provides opportunity to unsigned but talented musicians, is a
very commendable concept. Filipino’s creativity through music, at its best, available
for free!

Online Shopping

Ninong.com (http:/www.ninong.com)
Enables Filipinos from around the globe to send gifts and toys to their children in the
Philippines. Site design is very user-friendly. Provides a lot of toys that gives buyers
the flexibility and choices it needs. The site takes advantage of the various seasons
and trends in the country.

Online Mall

PhilShop (http://www.philshop.com)
A Philippine directory of virtual and real stores. Allows a Filipino to create a shopping
site free. One of the best facilities I found online for Filipino entrepreneurs. I tried
creating my own store and I was able to do it minutes. I hope more people will realize
how powerful this site is and how can it benefit them. Site is well structured but only
needs to add more attraction in the front page.

Personal Homepage

gra-Fi-KAS (http://www.philonline.com/~drew)
An online portfolio of Arnida Europeo. An analog and digital study on sentiments.
A feast for the eyes. What the site has to offer is astounding as Drew’s page take you
to her different levels of creative and breathtaking work. Awesome.
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eFilipino Web Awardees

Portal

Central Visayas Information Sharing Network (http://www.cvis.net.ph/)


A one-stop-shop information website for government and non-government agencies in
Central Visayas. Very informative. The site’s content can be of great use to researchers
who wanted to know the trends, development, and situation of Central Visayas,
Philippines.

Society and Culture

The Beggar’s Hand: The Plight of Poverty (http://library.advanced.org/25009)


A website about poverty sectors in the Philippines. Well designed and highly
informative web site. It is a must read for all Filipinos to understand the root causes of
poverty in certain sectors of our society and what should we do to eradicate it. Every
Filipino must take action to stop it for the sake of generations to come.

Travel

Davao Travel NetGuide (http://davao.net/)


An information site for travelers, promoting Davao City as a business and tourist
location. Highly informative as it provides a-z guidelines about the city. The color
interface of the site is very appealing. Although the navigation menus are not consistent
in its presentation throughout the site. Listing of Internet cafes in the area is very
useful for people who just can’t Net enough.

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THE DIGITAL FILIPINO

136
Acknowledement

There are so many people that I should thank in making this book a reality. Team members
in this book such as Norelyn Babiera, Danny Escasa, and Antonio Bucu.

The Philippine Internet Expo 2000 in Cebu will always remain memorable to me where
this book is first launched.

To the DigitalFilipino.com web team such as Jonard Soriano, Jherlie Cheng, and Jhermie
Cheng for helping me out in this ever-growing web site.

Friends who have allowed me to interview them for this book such as Mel Nepomuceno,
and Francis Lopez. Those who have shared their knowledge and have provided information
that can of be help to this book such as Louie of NSCB Region 9, Atty. Rudy Quimbo,
Atty. JJ Disini, David Paraiso Jr., Presidential Consultant Chito Kintanar, and friends in
the E-Commerce Promotion Council.

Special thanks to Senator Ramon B. Magsaysay Jr. for granting my request to write the
foreword of this book.

To the officers and members of the Philippine Internet Commerce Society who have
supported and believed in the cause of the organization all this time.

To my family, parents, sisters, relatives who have patiently supported me all


throughout.

To the different mailing list communities that I managed. Thank you for supporting my
site and responding to the surveys and article questionnaires.

Most especially to the eFilipino to whom this book is written for. For the growth of
e-commerce in the Philippines! Let us not allow anything to stand on its way!

137
About the Author

Janette Toral has always pushed for e-commerce development in the Philippines since
she founded the Philippine Internet Commerce Society last September 1997.

She’s very active in lobbying for the passage of the Electronic Commerce Law in the
Philippines.

She started her own E-commerce Research Portal last December 1999 with DigitalFilipino.
com. She’s also a freelance journalist since 1995 writing e-commerce and IT developments
in the Philippines. She has written articles for international publications such as Business
Online, asia.internet.com, and World Executive Digest.

Since September 1997 to the present, she has been frequently invited to various IT
conferences in the country to talk about e-commerce developments in the Philippines.

As an IT practitioner, Janette Toral has more than 11 years of combined experience


in the areas of training, management, sales, technical support, web development, event
management, media relations, and project management.

You can e-mail her at janette@digitalfilipino.com and janette@infotech.com.ph.


T
his book is all about e-commerce in the Philippine
and Asian marketplace. Yes, there are a lot of e-
commerce books available in the bookshelves but most
are published in Western countries and cover only situations in
their part of the world. There’s a need for a book that speaks
more about our country that can be a reference for aspiring
entrepreneurs who want to venture into e-commerce.

The book should be useful as well to students in understanding


the e-commerce paradigm and giving flesh to the theories that
they may have already read. Most schools and universities around
the world are gearing up to offer an e-commerce course. I hope
this book will be a useful educational and reference material.

Why do we need a book on e-commerce? You might say,


“There’s already a lot of information on the Internet. A book on
e-commerce might just become useless in a short span of time.”
True, there’s a lot of information on the Internet and we’re now
even experiencing information overload. But note that only those
who have access to information and know how to use it to their
advantage will be the ones to succeed. The information is there
but how you organize and analyze it to come up with bright
decisions is a different story.