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Philippine Animation Industry:Issues, Strategies for

Competitiveness, and Options forTrade Negotiations

Gloria O. PasadillaSenior Research Fellow

PIDS

May 23, 2005

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Background

Brief History of Philippine Animation

Global Market for Animation Services Current State and Domestic Issues

Implications for Trade Negotiations

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Brief History

Animation was first introduced in thePhilippines in the 1950s 47 years after itbegan in the US

The industry blossomed only in the late60s to the late 80s after Japanese animewas introduced

First Philippine animation production wasintroduced in 1979 a 60-minute storybased on the adventures of Lam-ang

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Brief History

Beginning the late 80s, the Philippines has

emerged as a competitive country forsubcontracted animation works (Optifex,AsianAnimation and Filcartoons)

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15000.04010 - 35Medical Transcription

2500-30000.0211.3Animation

0.005-0.006

**20 -25BPO

60,000 est0.1736.5Call Centers

Emplolyees (2004)RP

Revenues*

Global

market sizeService

*Figures in $ billions. Global 2002; RP2001

** Finance and accounting only

Source: BOI

Global outsourcing market: A long way to go for RP

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Animation to grow fast albeit atmuch lower rates than other BPOs

Domain 2001 2004 AAGR Benchmark

Contact Center 173 864 50% 20% Global

Medical Transcription 40 483 130% 20% USA

Software Development 115 268 30% 55% India

Animation 21 40 25% 25% Global

TOTAL 349 1,655 68%Source:: DTI Business Plan for ITES

Projected Philippine ITES Revenue in US$ Million

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Global prospects

Recently, countries like China, South Korea

and India are major global destination foroutsourced animation services

India and South Korea are taking over themarket with at least 50% of global

outsourcing revenues

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S W O T

In the past, Filipinos natural creativity

and affinity with Western humor andculture together with competitive wages,made the animation industry highlycompetitive

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Some identified Issues: Strengths

and Weaknesses

Strengths

Large pool of possibletalents for animation

Natural affinity withwestern humor andculture

Historical tradition

Weaknesses

Increasing wages Limited technical

knowledge of advanceanimation technologies(3-D, flash animation)

Low end of the valuechain

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Some identified Issues: Opportunities

and Threats

Opportunities

Availability of andaccess to technology

Sustained growth inthe global outsourcingmarket for animation

Threats

Rise of India andpossible emergence ofChina

Brain drain of localpool

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Current state of the industry

21 animation companies with about 7 companiesfocused on export services

Export-oriented firms are mainly subcontractorsof large global animation studios

Limited backward and forward linkages (e.g.,limited original Filipino animation programs).

Activities remain focused on low value addedactivities

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Addressing the issues

What is the state of competition in the local andforeign animation industry? How can the local

animation industry respond to it? What value-added activities in animation the

Philippines can go into? What are the strategies needed (a) to hurdle the

current brain drain problem affecting theindustry; and (b) to move up the value chain Technical capacity needs and education curriculum

assessment

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Options for Trade Negotiations

What are the technical capacity needs whereforeign assistance can be tapped?

How can international trade negotiations be usedto help improve the sector?

Identify barriers to trade on market access, nationaltreatment, regulation in destination markets, if any

Facilitating policies in markets which can be locked in

through negotiations Other trade support (e.g. promotion) which government

can extend

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Philippine Animation Industry:

Issues, Strategies forCompetitiveness, and Options for

Trade Negotiations

Gloria O. PasadillaSenior Research Fellow

PIDS

May 23, 2005