The Philippines is one of the fastest-growing digital economies among major ASEAN member states, registering a 93 percent expansion from 2020 to 2021. In 2021, the country earned a gross merchandise value of $17 billion through digital transactions and is expected to expand to $40 billion by 2025. One of the key factors influencing the sector’s drastic growth is the effects of COVID-19 pandemic restrictions which made consumers, especially in the urban areas, shift to digital platforms to gain access to goods and services.
This article identifies four (4) key priority areas in the Philippines that relate to the development and expectations of the country’s digital economy. They include:
- Growing key digital economy industry sectors;
- Addressing the digital divide;
- Driving digital inclusion for vulnerable and marginalised populations;
- Pursuing regional commitments in Southeast;
This article also highlights opportunities where Digital Economy Companies (DECs) with operations in the country are best positioned to support and deliver shared outcomes.
Priority 1: Growing Key Digital Economy Industry Sectors
The Philippine Development Plan (PDP) 2023-2028 serves as the country’s overall blueprint for development planning and reflects the priorities of the current Philippine administration. One of the PDP’s cross-cutting strategies is developing a dynamic innovation ecosystem. Given the ever-changing and fast-paced growth and development when it comes to technology, a dynamic innovation ecosystem will mean new products, more efficient processes, and an even bigger market share. In the Philippines, the major key digital economy industries contributing to the dynamic innovation ecosystem include:
- E-Commerce. The Philippine e-commerce sector is valued at $17 billion and thus makes up roughly 80 percent of the country’s $20 billion digital economy. The most cited reasons for e-commerce adoption are: the pandemic; higher profit, ease of communication, wider customer reach, the growing popularity of e-commerce platforms, and improved speed of transactions. The government is currently working towards some policies that would support the development of the sector including: Republic Act (RA) 8792 (Electronic Commerce Act of 2000); E-Commerce Philippine Roadmap 2022 (currently being updated); and Inclusive, Innovation and Industrialization Strategy (i3s) which prioritises the e-commerce.
- Fintech. The Philippine FinTech industry is identified as among the fast-growing in Southeast Asia. The increasing trend in payments and adoption of digital technology was driven by the restrictions imposed to curb the spread of the virus. Key initiatives in supporting FinTech include: RA 11127 (The National Payment Systems Act) and Digital Payments Transformation Roadmap (DPTR) 2020-2023.
- Platform Work. With COVID-19 enabling remote work, Filipinos resorted to the Gig Economy / Platform Work during the pandemic. The government supports jobs in the digital economy initiatives such as “DigitalJobsPH” and “Philippine Go” – a venue where job seekers may find jobs, learn new digital skills, and enhance their chosen careers platform work. Additionally, there are proposed bills, such as the National Digital Transformation Act and the Philippine Digital Competitiveness Act which aims to foster economic opportunities through online work.
Where DECs may play a part
In creating a dynamic digital ecosystem, DECs can help advance this national priority by actively collaborating with the government to co-create policies, regulations and new legislations. Collaboration between DECs and regulators would ensure that innovation is not stifled and at the same time consumer interests are well protected.
In line with this, supporting the growth of the ecosystem means promoting trust in the digital economy. DECs can promote trust across e-commerce, fintech, and platform work by respecting data of the consumers, ensuring data privacy, and adopting global best practices in cybersecurity. DECs can also promote trust by increasing consumer awareness on the risks and threats in the digital economy. This can be done through bite-sized sharing content through their channels.
Priority 2: Addressing the Digital Divide
Digital connectivity is important to link local markets to each other; connect urban centres to rural areas; and facilitate the movement for employment, business and marketing transactions, or even socialization and recreation. However, the major divide in digital connectivity due to uneven access and lack of physical infrastructure.
The COVID-19 pandemic revealed substantial gaps in the country’s digital infrastructure. A 2021 survey by Pulse Asia found that only 63 percent of adult Filipinos have access to the internet, with internet access and usage lowest in Mindanao at 47 percent. One of the proposed initiatives to make the internet more accessible for Filipinos include the Open Access in Internet Services Act. The PDP also recognises enhanced connectivity as a key priority.
Where DECs may play a part
DECs can partner with the government through public-private partnerships to increase access and connectivity by sharing technical expertise. As the government identifies areas of investment for physical infrastructure, DECs can proactively give their inputs and align their expansion plans with government roadmaps to allow for efficient implementation and roll-out.
Priority 3: Inclusion of the Vulnerable Groups
The current administration recognizes the importance of MSMEs for economic growth and development in the Philippines. As President Ferdinand Marcos emphasised during the 2022 MSME Summit, MSMEs have a critical role to play in the economic recovery from COVID-19, job creation, and poverty reduction. During his speech, the President noted that MSMEs are “among the administration’s top priorities” and that the government will ensure that they are “provided with ample opportunities”. Moreover, the President also expressed his support for the promotion of women’s economic empowerment during the 17th East Asia Summit (EAS) last November 17, 2022, including initiatives aimed to support the upskilling of women and empowering women entrepreneurship, particularly of MSMEs in ASEAN.
There are several government programs to support the vulnerable sectors such as:
- Negosyo Center Seminars, SME Roving Academy, and Kapatid Mentor ME which offers mentoring to help foster an entrepreneurial mindset;
- the Innovative Start-Up Act which will help MSMEs to link with startups and multinational corporations (MNCs) or companies to accelerate innovation and digital transformation; and
- the Small Enterprise Technology Upgrading Program (SETUP) which aims to aid MSMEs in deploying technology innovation to improve operations, productivity, and competitiveness.
Where DECs may play a part
DECs play a pivotal role in ensuring the digital economy growth will be inclusive. For example, in mentoring initiatives, DECs can leverage their experience and expertise to share key learnings to MSMEs and startups. DECs can also help smaller MSMEs access new markets and consumers through their networks, products, and services. There is also great opportunity for DECs, including platform companies, to offer economic opportunities and platform work to vulnerable groups such as persons with disabilities and women.
Priority 4: Pursuing regional commitments in Southeast Asia
The Association of Southeast Asian Nations (ASEAN) is making efforts to further its digital integration journey as the region holds tremendous potential considering its economy, young and tech-savvy population, and rising internet penetration. Early agreements such as the E-ASEAN Framework Agreement in 2000 and the ASEAN Single Window Agreement in 2005 are proof that the region has recognized the important value of digitalization. ASEAN has since then developed regional frameworks for digital integration spanning all Member States’ economies, through its ASEAN Digital Integration Framework, consistent with the AEC Blueprint. This includes framework agreements on Information Technology and Community, connectivity, data protection measures, and MSME development. Through these regional commitments, ASEAN and the Philippines would embrace and foster seamless trade, encourage data protection, enable seamless digital payments, broaden the digital talent base, foster entrepreneurship, and harmonise Member States’ digital activities.
Where DECs may play a part
DECs can actively participate in the consultation process as countries align rules and regulations on the digital economy. DECs, especially those who operate in several markets in Southeast Asia, can offer their perspective on what areas of policies need to be improved and how to lower barriers to digital trade in the region. DECs can also offer digital solutions to realise key regional initiatives such as the ASEAN Single Window and the ASEAN Economic Community.
This article is part of a series which covers national-level priorities of SEA-6 economies for digital economy development. As part of the “Tech for Good” study, the Tech For Good Institute also conducted roundtable discussions with policymakers, regulators, industry, and the academia in SEA-6. Summary of the Philippine’s roundtable discussions can be found here.
 Southeast Asia-6 markets refers to the six biggest economies in the region, namely Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam