Is the Philippines ready to face foreign competition in the financial sector? Does it have enough supply of professionals who are capable of meeting the human resource requirements of domestic and foreign financial corporations in this kind of liberalized environment? Professor Tullao seeks to provide the answers in this Policy Notes.financial sector, financial liberalization, human resource development

Calderon-Kabigting, Leila Y.

Tullao, Tereso Jr. S.

Villanueva, Cheryl

English

Research Papers in Economics

25
No. 2002-07 October 2002
Leila Calderon, Cheryl Villanueva
and Tereso Tullao Jr.*
Policy Notes
Can the Philippines'
Human Resource Base
Meet the Challenge of a
Liberalized Financial Sector?
T T T T T
PHILIPPINE INSTITUTE
FOR DEVELOPMENT STUDIES
Surian sa mga Pag-aaral
Pangkaunlaran ng Pilipinas
1977 1977 1977 1977 1977
2002 2002 2002 2002 2002
__________
*The authors are Associate Professor of Finance, Research Assistant
and Professor of Economics, De La Salle University–Manila, respectively.
PIDS Policy Notes are observations/analyses written by PIDS
researchers on certain policy issues. The treatise is holistic in approach
and aims to provide useful inputs for decisionmaking.
This Notes is based on PASCN Discussion Paper No. 2001-10
entitled "Human Resource Requirements of the Financial Sector Un-
der a Liberalized Regime" by the same authors under the auspices of
the Philippine APEC Study Center Network (PASCN). The views ex-
pressed are those of the authors and do not necessarily reflect those
of PIDS or PASCN or any of the study's sponsors.
he financial sector has undergone extensive
liberalization and deregulation in recent
years. An essential element of success in
this kind of environment is the readiness of
various parties to compete. Readiness can be viewed in
terms of the capability of the domestic firms to face foreign
competition and the capacity of the host economy to pro-
vide the necessary infrastructure to reap the benefits of
liberalization.
With regard to the soft infrastructure of the economy—
the availability and quality of human resources—does the
Philippines have a sufficient supply of professionals who
are capable of meeting the human resource requirements
of domestic and foreign financial corporations in an inte-
grated world economy?
This is what this Policy Notes will look into and pro-
vide some answers to.
The GATS and financial liberalization
in the Philippines
When the Philippines acceded to the General Agree-
ment on Trade in Services (GATS)—a multilateral agreement
covering rights to trade internally in all services except the
exercise of government—it committed to open up banking
operations, services offered by nonbank financial institu-
tions and insurance. This meant allowing foreign players to
establish and expand various financial operations.
What areas are affected by this liberalization?
In commercial banking, it involves the liberalization of
the acceptance of deposits and other repayable funds from
the public; all types of lending; all payment and money trans-
mission services; trading for own account or for account of
customers of money market instruments, foreign exchange,
derivative products and interest instruments, participation
in issues of all kinds of securities, and asset management.
In financial advisory services, it covers the liberalization of2 October 2002
Policy Notes
underwriting guarantees and commitments, credit reference
and analysis, investment and portfolio research and advice.
And in insurance services, it liberalizes the life insurance
subsector, the general nonlife, marine, casualty motor car,
health and accident, burglary, engineering, suretyship fidel-
ity/surety, and bonds.
Based on these areas, what types of human resources
are needed? And what kind of competencies is needed?
Demand for professionals in the financial sector
The finance industry, consisting of banks, nonbanks
and insurance companies, contributed an estimated gross
value added of P130.3 billion to the economy in 1998. This
amount is approximately 5 percent of the gross domestic
product (GDP) and 9 percent of the gross value added of
the services sector. The bulk of this income comes from
the banking sector (72 percent).
Although the banking sector employs only a small por-
tion of the labor force, its capacity to absorb additional
employment has been growing rapidly, as evident in its an-
nual average employment growth of 7 percent. This employ-
ment growth has been attributed to the expansion of the
industry brought about by the liberalization measures imple-
mented in the 1990s.
In terms of human resource requirements, the com-
petencies needed in the financial sector cover two catego-
ries: (a) competencies common to all workers, and (b) spe-
cific competencies of various workers.
The old generalist and administrative competencies
for upper-tier workers, procedural competencies for middle-
tier workers, and specialized skills for lower-tier workers are
being replaced by new expertise and entrepreneurship for
upper-tier workers, customer assistance  and sales compe-
tencies for middle-level workers, and the disappearance of
the low-skilled jobs. The desired skills for the future include,
among others, the learning to learn, communication, per-
sonal management, adaptability, group effectiveness and
influence.
According to a report of the Bankers Association of
the Philippines (BAP), the minimum competencies required
of college graduates to be employed at entry level in the
banking industry are oral and written communication skills,
work knowledge and specific banking courses taken.
Key informants in the industry reveal that the human
resource requirements can be categorized by: (a)  educa-
tional qualifications, (b) skills and competencies, and (c)
personal characteristics. Necessary skills and competen-
cies include communication skills, analytical skills, computer
literacy, accounting and finance background. For personal
characteristics, the graduate should have ethical integrity
and honesty, industry, and high emotional quotient.
Can the country respond to these demand and require-
ments?
Supply of professionals in the financial sector
According to the Commission on Higher Education
(CHED), there are very few schools offering a degree in bank-
ing and finance in the country. The practice in many schools
is to incorporate finance as a major course in business
management, accountancy, business administration, eco-
nomics and other commerce programs. Although the accoun-
tancy program in many schools is geared towards the train-
ing of certified public accountants (CPAs) and auditors
through the passing of the CPA licensure examinations, many
accounting graduates as well as a large number of CPAs are
attracted to the finance-related occupations and jobs.
For schools offering degrees in finance, the curricu-
lum, like in any other major business program, is composed
of three broad categories of courses, namely, general edu-
cation, business professional courses and core professional
courses. Since the CHED curriculum sets only the minimum
requirement, many schools have the option of offering more
courses to enhance their programs.
The quality of academic programs, however, is influ-
enced to a great extent by a single factor: the quality of
teachers. Thus, the qualifications of the teachers in the
schools' academic programs determine the type of subject
offerings, content of the course, selection of instructional
materials and delivery of instructional activity.
Aside from undergraduate programs, there are sev-
eral colleges and universities all over the country offering
graduate programs in business. The most prestigious is the3 No. 2002-07
Policy Notes
Asian Institute of Management (AIM). De La Salle Univer-
sity–Manila, University of the Philippines–Diliman, Ateneo
de Manila University, University of Santo Tomas and almost
all colleges and universities cited by CHED as centers of
development in business and management education are
offering Master of Business Administration (MBA) programs.
However, very few institutions offer graduate programs in
finance. Each of these institutions has certain thrusts and
market niches in terms of the scope of finance courses
offered. One weakness, though, is their inadequate founda-
tion in economics. In contrast, in many graduate courses in
finance abroad, a solid foundation in advanced
microeconomics and macroeconomics, together with the
tools of advanced statistics and econometrics, is required
among the students.
Meanwhile, what complements the degree programs
in finance in the country are nondegree programs offered
by various organizations and institutions. The Ateneo Bank-
ers Association of the Philippines Institute of Banking, for
instance, offers periodic seminars on various aspects of
banking. The Association of Investment Management and
Research (AIMR), together with the AIM, offers review ses-
sions for the Chartered Financial Analyst (CFA) exam. The
Financial Executives Association of the Philippines (FINEX),
on the other hand, has developed the Financial Manage-
ment and Analysis Test (FMAT). In addition, various internal
training programs are also conducted by banks, the Insur-
ance Commission, the Securities and Exchange Commis-
sion (SEC) and the Philippine Stock Exchange (PSE) to suit
the needs of their finance professionals.
Issues and concerns
As the Philippines continues to liberalize its financial
sector amidst a growing globalization of the sector, it has to
address certain issues and concerns in human resources
to be able to face the challenges brought about by said
developments.
Some of these are:
@ Adequacy of existing training programs in fi-
nance. While there are some positive features contributing
to the relevance and potential strength of the undergradu-
ate finance education in some schools in the country, the
overall quality and other academic constraints make such
undergraduate programs inadequate to meet the demands
of the industry resulting from globalization and the advances
in information technology. This deficiency is supposed to be
addressed by the various graduate programs in finance and
related fields. However, inspite of the growth of the gradu-
ate programs in the financial sector, the number of students
in these programs is very few compared to that in the MBA
programs.
Moreover, what appears to be the emerging role of
schools is not just the training of human talents with highly
specialized skills in finance but also the development of
individuals with good communication skills and analytical
skills. In other words, highly trainable and adaptable indi-
viduals. Undergraduate programs in finance should be well
grounded in the foundation courses that stress the training
of students in communication skills, critical analysis and
human relations skills. The relevant and appropriate train-
ing programs for financial specialists, therefore, are the
nondegree continuing professional education programs con-
ducted by several professional organizations. These pro-
grams are task-specific, skills-oriented and tailor-made to
suit the needs of financial professionals.
@ Quality of graduates. In many schools, finance
students are perceived to be inferior to accounting students.
Even in the labor market, this perception occurs as many
firms hire accounting graduates, with special premium for
CPAs for finance-related jobs. If the labor market for finan-
cial services continues to hire CPAs and MBAs first before
considering those with finance degrees, then the latter may
end up in the second tier of jobs and firms.
@ Matching industry needs with educational capac-
ity. There is a perception in the industry that there is more
than enough finance graduates to fill in the available posi-
tions but too few graduates, most of whom come from the
top universities, who can meet the standards set by the
industry. Aside from poor communication skills, firms also
often cite inadequate computer literacy and inappropriate
knowledge of finance as problems in hiring new graduates.
This calls for a continuing review and upgrade of its curricu-
lum by the educational system to be responsive to the chang-
ing needs of the industry.4 October 2002
Policy Notes
@ Human resources issues confronting the finan-
cial sector. In terms of recruitment and selection, a person
with a degree in commerce, accounting, finance and eco-
nomics, and even computer science is usually hired for en-
try positions in the financial sector. Although there are no
professional license requirements, some degree of screen-
ing is observed in many banking institutions. For training
and development, there is a need to update and upgrade
existing programs. The focus should be towards the devel-
opment and requirements of an integrated financial mar-
ket.
@ Improving undergraduate education and quality
of faculty in finance. Although the undergraduate educa-
tion in finance should not be too specialized and consid-
ered as the sole training ground for skills in financial ser-
vices, there are various ways of improving the program. Aside
from the emphasis on the foundation courses, specialized
courses in banking should be offered or at least introduced.
The undergraduate curriculum can also be improved in terms
of focus, content and relevance to the needs of the finan-
cial sector. However, the key issue is the improvement in
the quality of teachers.
@ International cooperation. It is possible that with
the liberalization of the financial sector, training programs
on the innovations in the field developed by foreign finan-
cial institutions may also accompany the entry of foreign
service providers. Thus, the entry of foreign financial insti-
tutions should be welcomed. They serve as conduits in up-
grading the skills and competencies of Filipino profession-
als in the field of finance. Because the need for highly trained
professionals in finance is not only a requirement in the
Philippines but also in other countries in the region, it may
be wise for professional organizations in banking, finance
and insurance to establish a consortium arrangement with
the key universities in the region for the conduct of special-
ized training programs in finance.
Recommendations
In conclusion, the following recommendations ad-
dressed to officials of higher education, private industry
and professional associations are meant to ensure the avail-
ability and quality of Philippine human talents in a liberal-
ized financial sector.
@ Quality of finance education. There is a need to
continually review and upgrade the curriculum in finance to
reflect the dynamic changes in the financial sector under a
liberalized regime. The accountancy program should be re-
focused away from public accounting by developing a pro-
gram towards financial accounting or management account-
ing. The role of financial economics should also be empha-
sized in the finance curriculum.
@ Faculty qualifications. The competencies of fac-
ulty in business and finance need to be upgraded through
graduate education and continuing professional education.
A balance of full-time and part-time faculty should comple-
ment the improvement of the academic curriculum.
@ Skills and competency building. Undergraduate
programs should be well grounded in courses that train stu-
dents in communication skills, critical thinking and human
relations skills. The training of specialized skills in finance,
on the other hand, can be done through nonacademic train-
ing programs conducted by professional organizations.
@ Specialization. There is a need to professionalize fi-
nance specialists through an examination for financial analyst.
@ Adequate compensation. An upgrade in the skills
of finance specialists to meet international competition
should be matched with an adequate upgrading of compen-
sation packages. This may help to arrest the outflow of pro-
fessionals.
@ Industry participation. Professional organizations
in banking, finance and insurance should establish consor-
tium arrangements with key universities in the region for
the conduct of specialized training programs in finance.      
For further information, please contact
The Research Information Staff
Philippine Institute for Development Studies
NEDA sa Makati Building, 106 Amorsolo Street
Legaspi Village, Makati City
Telephone Nos: 8924059 and 8935705;
Fax Nos: 8939589 and 8161091
E-mail: tullaot@dlsu.edu.ph
jliguton@pidsnet.pids.gov.ph
The Policy Notes series is available online at
http://www.pids.gov.ph

Can the Philippines' Human Resource Base Meet the Challenge of a Liberalized Financial Sector?

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