electronic transactions and should have adequate powers, initiative, and competence to provide effective oversight of the system. Efforts should focus on protecting retail investors and the overall integrity of the system.

The Central Bank of the Philippines is responsible for supervising banks in terms of providing reliable services and data centers for information storage. Effective monitoring will rest on the processes that the Central Bank requires banks to have in place for ensuring authentication of customers when they open accounts and provide their digital signatures for storage by the Data Center, a wholly owned subsidiary of the Development Bank of the Philippines. The obligations and liabilities of the Development Bank and its supervision by multiple agencies—including the Treasury, National Telecommunications Commission, and Central Bank—will also be important given the bank’s critical role as an application service provider and data storage entity.

The Securities Exchange Commission is responsible for regulating dealers of government securities and for promulgating regulations related to electronic securities fraud, which will be essential to the protection of retail investors. As part of such efforts, the commission’s capacity to monitor Internet-based securities transactions will need to be improved.

The National Telecommunications Commission needs to ensure that companies provide reliable services, competitive pricing, and adequate security systems. Operating in 11 regions throughout the country, the commission monitors all telecommunications service providers, authorizes rates for public telecommunications services, establishes standards and regulations for telecommunications facilities, and fosters competition in the sector. The commission has deregulated rates to move toward cost-based pricing and has democratized ownership of telecommunications and broadcast services. It is also responsible from registering value-added service providers, such as Internet providers.

# **Telecommunications infrastructure**

Telecommunications infrastructure is a major part of the infrastructure required for the success of the Expanded Small Investors Program. The main issues are the availability and affordability of services such as the Internet and mobile telephones. Over the past 10 years the Philippine telecommunications sector has grown exponentially, with services once available only in Manila and other major cities now covering more remote areas—reaching the point that will enable the Expanded Small Investors Program to reach to most prospective clients. Still, limited competition and weaknesses in the industry’s ownership structure pose challenges in terms of the affordability of these services.

# **Electronic security issues**

E-security is a major—and often neglected—concern for systems like the Expanded Small Investors Program. In recent years the incidence and cost of e-fraud and hacking cases have skyrocketed (KPMG Global Information Security Survey 2002, Ernst & Young Global Information Security Survey (2002), 3i White Paper (2002), PWC Information Security Breaches Survey 2002). Any e-security threat could undermine the trust of retail investors and reduce demand.

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