Looking at the central business district of Manila, I find it easy to see the progress and its effects on the city – busy streets, construction of high rises, a consumer-driven economy highlighted by some of the world’s largest malls, and a buzzing 24-hour culture driven largely by a Business Process Outsourcing (BPO) boom. Over the past four years, the country has experienced rapid economic growth of around 5-7% and its GDP will continue to flourish due to the continued depression of oil prices; additionally, the Philippine stock exchange just recently closed at an all-time high.
Yet in the midst of this larger growth picture, it’s easy to forget that there are numerous areas in the Philippines where it becomes immediately apparent that it is still a developing nation. Multi-million dollar apartments are being sold just a few miles away from urban shanties and a good majority of the 7,107 islands still have no access to reliable electricity, financial services and disaster preparedness. There is still quite a way to go before the common Filipino can experience the benefits and opportunities of an emerging economy.
This can be seen not just in the Philippines but in large parts of Asia – from Bangkok, to Jakarta, and Delhi.
Moving from Silicon Valley to an emerging market
In November 2011, my family and I made a decision to move back to the Philippines after almost 12 years in the US, in the hopes of helping build the innovation ecosystem in the country. With an invitation from Manuel Pangilinan, Managing Director of First Pacific, a publicly listed investment holding company focused on infrastructure for Asia with assets primarily in the Philippines and Indonesia, I was convinced that the impact I would be able to create would be more effective if I was inside the country rather than outside.
As an engineer, a Stanford MBA graduate and having worked for the R&D teams of some of the largest tech companies in the world, I had the impression that innovation is synonymous with pushing the limits of technology. With a flurry of mobile applications, enterprise software and high tech gadgets, it would be easy to see that these would be the problems entrepreneurs would want to solve all around the world. For the most part this is true, but what surprised me is that they use these tools as a means to solve pressing problems in their local community and broader society.
In March 2012, with the seed endowment from the First Pacific Group, we started IdeaSpace, a non-profit foundation that aims to inspire, incubate and invest in the most promising science and technology ideas in the Philippines and emerging countries. I was surprised to find that in the first applicant pool of close to 700 teams, a large portion of the applications proposed the use of technology to solve emerging market issues such as disaster preparedness, safety, transportation, clean water, affordable health care, saving time and distributed energy.
Corporate innovation initiatives in Asia
Innovation has been one of the major buzzwords in the corporate world in recent years, spreading not only among Silicon Valley companies but also corporate institutions in Emerging Asia. Recently, conglomerates have invested in e-commerce, with Indonesian conglomerate Lippo Group investing $500 million to create an online mall called Matahari Mall and the Philippine Long Distance Company investing $445 million into Rocket Internet to develop online payment services focusing on emerging markets. These are prime examples that even in emerging countries in Asia, local businesses are betting a lot of their resources on de-risking themselves from potential future forces and disruptors that can be seen to exist in the US or Europe.
The e-commerce story in a lot of these markets will be dependent not only on the growth of the under 30 demographic, mobile phone penetration and access to the internet, but also on how economies focus on inclusion – the unbanked, uncarded, unconnected, with the consideration of building an educated population and having reliable energy to power the devices to be part of the information age.
The most pressing opportunities in emerging markets come mainly from creating basic infrastructure in the system. There are basic types of infrastructure enjoyed in more developed countries that might seem like a luxury in emerging ones. Health, education, energy, water, transportation, efficiency are all a key part of the United Nations Sustainable Development Goals (SDGs) and have highlighted the need for countries to also foster an environment to encourage innovation in these sectors.
The question remains, are the best entrepreneurial minds in the world trying to think about solving these biggest problems in the world? Is early-stage capital flowing towards supporting these types of start-ups?
While there is a lot of clamour to help create the next digital social platform, there are a number of entrepreneurs and companies who have realized the value of addressing these sustainable development goals with a start-up mindset – a laser focus on building repeatable, scalable, technology-driven businesses. The motivation is not just to get grants from government or aid organizations, but to follow the same standard growth metrics as a company that you can find in Silicon Valley. This is impact infrastructure – building creative solutions to augment, amplify and leapfrog the gaps in the basic infrastructure of a developing economy in a scalable, affordable and sustainable way.
In the Philippines, there a number of promising concepts in the intersection of impact, technology and scalability. These innovators are finding solutions to pain points emblematic of the emerging economy way of life such as light poverty, disaster preparedness and financial inclusion.
Take for example SALT.ph, a lamp and mobile charger that can be powered with two tablespoons of salt and a glass of water. Aisa Mijeno, an engineering professor, spent time as an environmental volunteer in the mountains of Northern Philippines. She experienced firsthand the challenges encountered by the large population of the country that to this day relies on kerosene lamps and has no stable source of electricity. She realized that in spite of the fact that some of these remote areas have cellular signal, there was no way to charge mobile devices and worse, no means of providing light at night to cook or for children to study. In the area of disaster preparedness, Tudlo developed a mobile app to teach, inform and guide so that citizens can get the right information before, during and post calamities.
The financial services start-ups are some of the hottest in emerging markets. There has been a flurry of activity to create platforms for the uncarded and unbanked. MePay aims to bridge the uncarded population to participate in the online commerce shopping. In the lending space, Lenddo, gives workers access to loans using a credit score based on their social network.
Participating in the remittance corridor is another high-impact opportunity that a number of local and international start-ups have attempted to tackle. It is estimated that there are more than $20 billion in remittances into the Philippines per year by the over 10 million diaspora outside the country. Some companies that want to improve efficiency and transparency in the remittance space are Coins.ph, a bitcoin-based service that can instantly send money through a mobile app; Qwikwire, which gives overseas wage-earners the ability to pay utility and mortgage bills for loved ones at home while they are working abroad, and Ayannah, an online platform that focuses on giving gifts and gift cards. All three of these companies have received subsequent funding rounds from US and Singapore based venture funds.
As economies grow and develop their own version of an innovation ecosystem, all stakeholders such as the government, academia, the private sector, aid organizations, non-profits and investors will have to define what society needs the most and how to support the entrepreneurs and corporations trying to address these challenges. Trade-offs may have to be made to balance what appears to be a conflicting interest between investor rate of returns and development impact potential of ideas. No matter what, these innovators, who feel these real world pain points, will keep on finding solutions to make their own lives a little better. Who will step up to support these innovators who want to solve the most pressing needs of the world? This question still remains unanswered.
Author: Earl Martin Valencia is the President and Co-Founder of IdeaSpace Foundation and a Young Global Leader.
Image: Residents charge their mobile phones using a generator set after electric power was shut off due to damage from an earthquake Buenavista, Bohol, October 16, 2013, a day after an earthquake hit central Philippines. REUTERS/Charlie Saceda