By Francis Mark A. Quimba, Senior Research Fellow, Philippine Institute for Development Studies (PIDs)

Recent data from the Philippine Statistics Authority underscores the role of the digital economy as a crucial driver of growth and innovation in the Philippines. In 2023, the digital economy contributed 8.4% to the country’s Gross Domestic Product (GDP), valued at USD 36.9 billion (PHP 2.05 trillion). This marks a substantial increase from USD 31.32 billion (PHP 1.74 trillion) in 2021 and USD 34.2 billion (PHP 1.90 trillion) in 2022, demonstrating robust growth in the sector.

The digital economy’s composition in 2023 reveals diverse contributions, with telecommunication services leading at 32.9% (USD 12.12 billion), followed by professional and business services at 30.1% (USD 11.11 billion). Computer, electronic, and optical products contributed 17.1% (USD 6.29 billion), while e-commerce accounts for 14.0% (USD 5.16 billion). Other segments include digital media/content, wholesale trade of ICT equipment, repair of computers and communication equipment, and government digital services. Employment in the digital economy has also shown significant growth, increasing from 8.69 million persons in 2021 to 9.68 million in 2023, representing about 20% of the total employed population.

As highlighted in the Philippine Development Plan 2023-2028, the country recognises the transformative potential of digital technologies in fostering economic development, improving public services, and enhancing overall quality of life for its citizens. In line with this recognition, Philippines has actively undertaken steps to leverage its digital economy for sustainable growth and improved competitiveness within the ASEAN region.

The Evolving Regulator’s Landscape

To effectively manage the rapidly evolving digital economy, several new regulatory bodies have been established, and existing ones have seen their mandates expanded.

The E-Commerce Bureau, for example, is a new regulatory body under the Department of Trade and Industry (DTI) established under the Internet Transactions Act of 2023 (Republic Act No. 11967). It is tasked with formulating policies, monitoring compliance, and overseeing various aspects of e-commerce. With the increased regulation of the e-commerce sector, the establishment of the E-commerce Bureau is expected to enhance consumer protection, promote fair competition, and encourage the growth of the digital economy by regulating online transactions, fostering innovation, and building trust between consumers and online merchants.

Additionally, the Cybercrime Investigation and Coordinating Center (CICC) has seen its role also expanded to address growing cybersecurity challenges in the digital economy. This expansion is supported by the proposed amendments to the Cybercrime Prevention Act (Senate Bill No. 2570), which aims to strengthen cybercrime prevention measures. The agency now plays a more significant role in coordinating cybercrime prevention and investigation efforts across government agencies. This is because of the CICC’s enhanced mandate to collaborate more closely with various agencies like the Department of Justice (DOJ) Cybercrime Office, the Philippine National Police (PNP) Anti-Cybercrime Group, and the National Bureau of Investigation (NBI) Cybercrime Division. Additionally, the CICC will now be responsible for ensuring the implementation of updated cybercrime laws, which cover broader offenses such as data interference and computer-related fraud, and will oversee the integration of new service providers, including those in the outsourcing sector, into cybercrime prevention efforts. Senate Bill No. 2570 also extends regulatory coverage to include business process outsourcing and foreign entities, reflecting the need to address evolving cyber threats and growing digital outsourcing activities.

In the data protection landscape, the National Privacy Commission (NPC), the primary policy-making body in the county mandated to protect the data of Filipinos, has seen its role expand as well. Its powers have been reinforced through recent amendments to the 2021 Rules of Procedure of the National Privacy Commission (NPC Circular No. 2024-01). NPC Circular No. 2024-01, which took effect on 10 February 2024, intended to streamline processes related to receiving complaints as well as those related to conducting investigations on privacy matters to improve the handling of personal data privacy violations. It includes specific provisions to address complaints from minors and outlines procedures for breach notifications, compliance checks, and alternative dispute resolution. The update ensures the protection of personal data in the digital space and provides clearer guidelines for data processing.   

To keep pace with trends in emerging technologies, in early 2024, the Center for Artificial Intelligence Research (CAIR) was officially launched by the Department of Trade and Industry (DTI) as a hub for AI research and development. Led by Chief AI and Data Officer Erika Fille Legara, CAIR aims to drive innovation, support industries through advanced research, and establish the Philippines as a regional leader in AI technologies.

In addition to changes in the Executive Branch, the Senate has also undergone strategic realignments in committees central to digital economy initiatives. The Committee on Science and Technology, now under Senator Alan Peter Cayetano’s leadership after Senator Nancy Binay’s tenure, continues its mission of advancing science-driven initiatives and bolstering research and development in emerging technologies. In a complementary move, Senator Cayetano also assumed chairmanship of the Committee on Trade, Commerce, and Entrepreneurship, positioning him to address matters crucial to both domestic and international trade as well as the digital economy.

Finally, the Committee on Economic Affairs, currently chaired by Senator Juan Miguel “Migz” Zubiri, crafts policies that will impact the digital and technological sectors. Senator Mark Villar, the former Chair of the committee, was involved in promoting economic reforms, particularly those impacting industries that intersect with technology.

These institutional adjustments across executive agencies and legislative committees demonstrate the Philippines’ evolving response to digital economy governance. The establishment of new bodies like the E-Commerce Bureau and CAIR, alongside expanded roles for the CICC and NPC, shows steps toward addressing both opportunities and challenges in the digital space. Combined with the realignment of Senate committees, these changes lay the groundwork for a more coordinated approach to digital economy governance, though the effectiveness of these reforms will ultimately depend on their implementation and adaptation to emerging challenges.

The Evolving Tech Policy Landscape

Recognising the great potential of the digital economy to deliver robust economic growth, the country has been proactive in developing a regulatory framework to support its digital economy. Several new and proposed regulations aim to address various aspects of the digital landscape.

Enacted Legislation:

• While The Internet Transactions Act of 2023 (Republic Act No. 11967) was published in December 2023, the impacts were felt in 2024. The act aims to protect online consumers and merchants by regulating internet transactions. Complementing the Law on Sales, the Consumer Act of the Philippines, and the E-commerce Act, this act is expected to boost consumer confidence in online transactions, potentially accelerating e-commerce growth. This landmark legislation mandates that the DTI set up a new E-Commerce under its purview in no more than six months of the Act’s effect, significantly expanding the DTI’s mandate in the digital economy. The E-Commerce Bureau will be responsible for enforcing registration of digital platforms and online merchants.
• The Anti-Financial Account Scamming Act (AFASA) of 2024 protects consumers and financial institutions from cybercriminals and criminal syndicates engaged in financial account scamming. It defines and prohibits various forms of financial account scamming and enhances the investigative powers of the Bangko Sentral ng Pilipinas (BSP).

Proposed Bills:

• The proposed Konektadong Pinoy Bill (Connected Filipinos Bill) aims to establish a comprehensive framework for data transmission and connectivity in the Philippines. It includes provisions for open access in data transmission, spectrum management, and the promotion of infrastructure sharing. In doing so, the bill facilitates inclusive participation of individuals and businesses in the digital economy by providing affordable internet access to every Filipino citizen.
• The Digital Skills and Technology Education Bill of 2023, currently under consideration, aims to mandate the inclusion of digital skills and relevant technology courses in the educational curriculum across all levels of education in the Philippines.
• A proposed bill to amend the National Internal Revenue Code aims to include digital services in the Value Added Tax (VAT) system and regulate digital service providers. This initiative will be spearheaded by the Department of Finance (DOF) and the Bureau of Internal Revenue (BIR) to address taxation in the digital economy.
• Proposed amendments to the Cybercrime Prevention Act seek to strengthen the country’s cybersecurity framework by addressing gaps in the existing law and expanding its coverage to include emerging forms of cybercrime.

The rapid growth of the digital economy and the evolving regulatory landscape have significant implications for the Philippines.

First, the bills proposing the expansion of the use of digital technology in government services (e.g. Konektadong Pinoy Act) would require digital infrastructure development as services and transactions transmitted online require robust internet connectivity and digital infrastructure.  Currently, connectivity is one of the key challenges in the country’s digital economy development. Addressing this challenge could lead to more inclusive growth and increased digital adoption across various sectors.

The regulations being proposed also reveal the importance placed by this administration on Filipino consumers’ digital transactions through enhanced consumer protection. The Internet Transactions Act and AFASA are expected to boost consumer confidence in digital transactions, potentially accelerating e-commerce growth and digital financial services adoption.

Related to enhanced consumer protection, the strengthened mandates of cybersecurity regulators and proposed amendments to cybercrime laws signal a more robust approach to digital security. This could enhance trust in digital services but may also increase compliance costs for businesses.

Recognising the disruptions to employment and the need to equip the future workers with digital skills, the proposed Digital Skills and Technology Education Act could significantly enhance the digital literacy and skills of the Filipino workforce, preparing them for the demands of the digital economy and potentially improving the country’s competitiveness in the global digital services market.

As the digital economy expands and the number of transactions continue to grow, the proposed amendments to tax laws for digital services could increase government revenue but may also impact the competitiveness of digital businesses operating in the Philippines. Striking the right balance will be crucial for sustaining growth in the digital sector.

Looking Ahead

While the digital economy continues to grow in importance to the Philippine economy, the country stands at a crucial juncture. The expanded mandates of key agencies and comprehensive legislation addressing various aspects of the digital economy provide a solid foundation for growth. However, continued effort, innovation, and adaptive policy making will be necessary to keep pace with the rapidly evolving digital landscape and ensure that the benefits of the digital economy are widely shared across Philippine society. The challenge lies in balancing regulation to protect consumers and maintain fair competition, while also fostering an environment that encourages innovation and growth in the digital sector.

About the writer:

Francis Mark A. Quimba is a Senior Research Fellow at the Philippine Institute for Development Studies. His research interests include digital economy policy, international trade and innovation policy.

The views and recommendations expressed in this article are solely of the author/s and do not necessarily reflect the views and position of the Tech for Good Institute or of the Philippine Institute for Development Studies.