The country’s digital economy could expand 12-fold to P1.9 trillion by 2030 if the government would hike investments in information and communications technology (ICT), and ease border frictions to facilitate greater trade within the Asia-Pacific region, according to the Hinrich Foundation (HF).
In its study, titled “The Data Revolution: How the Philippines Can Capture the Digital Trade Opportunity at Home and Abroad,” the HF estimated that the country’s digital economy today is valued at about P160 billion. This is equivalent to the 1.8 percent of the country’s gross domestic product.
The HF defines digital trade as the production, selling and distribution of goods and services enabled by cross-border data flow, said HF Research Fellow Stephen Olson.
Olson said the Philippines is in a great position to expand its digital economy due to its high smart-phone penetration rate and fairly open digital trade environment.
However, if the Philippines wants to expand and benefit more from the digital economy, then it should address two key bottlenecks: lack of ICT infrastructure and minimizing border frictions, Olson added.
Despite the country’s high smart-phone usage, it lags behind its Southeast Asian peers in terms of Internet connectivity due to lack of infrastructure, he explained.
“The problem is that the nation hasn’t scratch the surface in terms of opportunities of Internet economy. This is closely linked on how slow the internet is and the accessibility to connectivity,” he said in a round-table discussion with reporters on Thursday.
“So, despite very high degree of social-media usage, [the Philippines] is still not really [taking] full advantage of [digital] economy,” he added.
Olson said it is imperative for the Philippine government to hike investments in ICT infrastructure if it wants to see its digital economy to boom in the future.
This include improving Internet speed nationwide and providing wider access for connectivity, especially for small and medium enterprises (SMEs), Olson added.
“Digital trade economy is a real game changer for SMEs as it would lower their cost and reduces the scale needed to go global,” he said.
“We are at the point where small businesses can act as micro-multinational companies,” he added.
Another thing that Olson pointed out is that the government should address to facilitate growth in digital economy in increasing Customs valuation threshold.
Citing studies, a hike on the Customs valuation threshold in the entire Apec region to $200 would generate a $30 billion worth of economic benefit to its 21 member-states.
Customs valuation determines the minimum value of an imported commodity that would be slapped with tariffs or duties.
If the Philippines would be able to address these two concerns while keeping a fair and open digital trade environment, then its digital economy could hit P1.9 trillion by 2030.
Likewise, Philippine digital exports, which currently accounts for 5.4 percent of its total exports today, could expand by 218 percent to P594 billion by 2030, from the current P187 billion estimated amount.
At present, the country’s digital economy is led by financial services sector, which is estimated to contribute about P85 billion.
Other sectors of the digital economy that contribute to Philippine digital economy are: infrastructure (P17 billion), agriculture and food (P17 billion), education and training (P16 billion), manufacturing (P1 billion), health (P16 billion), consumer and retail (P5 billion) and resources (P3 billion).
HF is a philanthropic organization focused on promoting sustainable global trade.