CRISES present opportunities, and when the pandemic hit, many Filipinos found their hope online. Many Filipinos, including those who lost jobs because of the lockdowns, put up online businesses.
Last year, the Department of Trade and Industry (DTI) estimated that 73,276 online businesses registered during the pandemic between March 16 and August 31, the height of the lockdowns.
According to experts, online businesses represent not only a coping mechanism for individuals and companies who could not operate through face-to-face interactions.
The online economy will outlive the pandemic and continue in the new normal. With the possibilities opened by the Internet for businesses, it will be difficult to live in the new normal without them.
“The online platform economy can indeed catalyze inclusive growth but we need to get the whole of government to make that happen, especially in developing countries such as the Philippines,” Philippine Competition Commission (PCC) Chairman Arsenio M. Balisacan said in a recent forum of the Asian Development Bank (ADB).
Sailing stormy seas
THE Philippines has imposed one of the longest lockdowns and strictest quarantine measures in the world. This includes the imposition of an enhanced community quarantine (ECQ) in Metro Manila and other high-risk provinces on March 16, with select extensions in May.
In order to help people cope, ADB said the government provided a comprehensive set of support measures for households and businesses, such as an emergency subsidy program for families and wage supplements to employees of small businesses.
But these were not enough to prevent millions from going hungry or joining the ranks of the poor and unemployed.
Data shared by Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the economic shutdown forced 23.7 million Filipinos to go hungry and 4.5 million into poverty last year.
Further, a total of 2.7 million Filipinos became unemployed and some 438,809 Filipinos died between January and October 2020 due to non-Covid-19 reasons.
He noted that based on data from the PSA, between January and October 2020, only 5,746 Filipinos died due to Covid-19, while 100,676 Filipinos died of other causes.
This is on top of the 78,850 who died due to ischemic heart diseases; 50,195 deaths caused by neoplasms or cancers; and 43,182 deaths due to cerebrovascular diseases.
Chua added that 29,638 Filipinos died of diabetes mellitus; 27,684 deaths due to hypertensive diseases; and 26,219 caused by pneumonia.
Opportunities in digitalization
However, ADB Chief Economist Yasuyuki Sawada said that while the pandemic reversed the gains in poverty reduction, it also highlighted the growth opportunities offered by digitalization.
In a recent survey, Sawada said e-commerce accelerated during the pandemic. B2B companies became more digitalized by increasing their online support and e-commerce transactions.
ADB estimates supported these findings as their own estimates showed online purchases as of May 2020 increased. It was particularly high in South Korea where the increase in online purchases increased by around 50 percentage points. In the Philippines, the increase was around 20 percentage points.
“I think there’s going to be a permanent impact of digitalization and I think there are lots of positive aspects because online platforms can enhance market functioning and there’s a huge potential to make transactions more inclusive,” Sawada said.
“But at the same time, I think there are also challenges [such as] infrastructure and affordability of technology, cybersecurity, etc. So I think connections between agencies and ministries and also partnership between private and government as well as MDBs [is important],” he, however, said.
Challenges
SOME of these challenges mentioned by Sawada were identified by Best Accounting Software, which reviews and rates financial software for small and medium enterprises, as the reasons for the low ranking of the Philippines in its recent study when it comes to setting up online businesses.
In the study, Best Accounting Software ranked the Philippines 78th out of 99 countries in terms of the Best Countries to Set Up an Online Business. The country only recorded an overall score of 34.34.
Why the low ranking? The country scored poorly in indicators that pertained to Internet, broadband connectivity, and especially in Internet security.
Best Accounting Software measured the performance of economies according to Internet Coverage and Penetration as well as Country Wealth and Ease of Processes.
In terms of mobile Internet speed, the country averaged 17.83 mbps and scored 7.47 overall; Broadband Internet Speed, 27.07 and scored 9.85; Number of Fixed Broadband Subscriptions, 3.87 people per 100 population; and Internet Users, 67 percent of the population and scored 57.33.
For Social Media Users, the Philippines averaged 67 percent of the population and scored 65.59 overall; and Bills Online, 9.9 percent of the population and scored 10.11 overall.
In terms of Secure Internet Servers, only 111 Filipinos per 1 million people had secure servers and gave the country a score of 0.04 overall. This is the lowest performance for this category compared to other Asean countries included in the ranking.
In terms of Country Wealth and Ease of Processes, this included Corporate Tax Rate; GNI (Gross National Income) per Capita; Individuals with a Finance Account; Payment Processing Providers; Economic Freedom; Number of Start-Up Procedures; Days Required to Start a Business; Cost of Start-Up Business Procedures; and Time Zones.
The Philippines Corporate Tax Rate is at 30 percent, the highest among the Asean countries in the ranking. This gave the country a score of 14.29 overall.
There’s an urgent push to bring down the corporate tax rate to 25 percent in the first year of implementation of the CREATE bill, now under deliberation in a bicameral conference committee of Congress.
GNI per capita of the country is at $3,850, which enabled the country to get a score of 3.62; about 34.5 percent of the population have finance accounts, which earned for it an overall score of 16.8; and economic freedom, a score of 61.21 overall.
Doing business
In doing business, the country recorded 13 procedures to register a business, the most number among the Asean countries on the list. It takes 33 days to register a business in the country and costs 23.33 percent of GNI.
There are six countries with the same timezone as the Philippines; 237 co-work spaces, the second highest among the Asean countries on the list; digital skills, a score of 77.22, the third highest in the Asean nations on the list; logistics, a score of 39.53 overall; and postal development index score, 37.93.
These challenges initially made the digital economy unattractive to many Filipinos. The results of the National ICT Household Survey (NICTHS) showed more than half or 63.7 percent of interviewed communities do not have telecommunication towers in their areas.
Further, the NICTHS data showed majority or 70.2 percent of interviewed barangays do not have fiber-optic cables installed in their communities. The data also showed 87.8 percent of these barangays did not have free Wi-Fi.
As a result, only 2 percent or 643 of survey respondents are selling online and only 8.8 percent or 3,000 respondents said they buy products online.
Most of these online sellers and shoppers still prefer to pay on a cash-on-delivery scheme instead of other digital modes of payment such as electronic wallet or online banking.
The data even showed that majority or 54 percent of sampled individuals in the NICTHS said they were unaware that financial transactions can be performed online.
In terms of region, Filipinos living in the Bangsamoro Autonomous Region in Muslim Mindanao (BARMM) were the most unaware that financial transactions can be made online at 89.3 percent.
Future is still digital
IN 2019, the government said it is eyeing to attract some half a million micro, small and medium enterprises (MSMEs) to do business online by 2022 as part of the new road map on e-commerce aimed at digitalizing trade in the Philippines for the next three years.
Trade Secretary Ramon M. Lopez said the tentative target for the new road map on e-commerce is to get 500,000 MSMEs ready to transact with consumers online. Should it be approved, this is a 400-percent increase from the existing target of 100,000 MSMEs doing e-commerce.
With this, Lopez is mulling over to hike the contribution of e-commerce to the economy to 50 percent of the country’s gross domestic product. At present, the objective is to make e-commerce contribute 25 percent to GDP by 2020, from 10 percent in 2015 based on data from i-Metrics Asia-Pacific Corp.
Despite the issues that prevent the Philippines from maximizing the gains of the digital economy, in the e-Conomy SEA Report 2020 the country is seen growing its e-commerce market by 6 percent to $7.5 billion, from $7.1 billion last year. As such, the country is poised to reach its forecast of breaching $28 billion by 2025.
Many Filipinos are also seeing the advantages of increasing their online transactions. The e-Conomy SEA Report 2020 said the Philippines is one of three Southeast Asian countries that saw a rise in digital consumers from the rural areas. Majority of new e-commerce users in Indonesia, Malaysia and the Philippines came from non-metro locations.
“It’s [online businesses and transactions] actually going to increase the value of doing things offline. I think it’s going to be a by-product [of growing the digital economy],” Japan Fair Trade Commission Commissioner Reiko Aoki said.
Moving forward, growing the digital economy and e-commerce in general was one of the best contributions of the pandemic to the world and to the Philippines.
It helped small and medium enterprises cope with the decline in consumption spending and limited mobility restrictions that kept them away from their clients and consumers. It also helped jobless Filipinos make ends meet when they lost their jobs.
The pandemic also forced Filipinos to think outside the box, imagine a “new normal” that was unimaginable when 2020 arrived. And the Internet made it possible to create this.
Nobody knows what lies ahead and more studies are needed to maximize the digital economy. But as far as experts and the millions who found their hope online are concerned, the digital economy is here to stay and millions of people will be all the better for it.
1 comment
It’s remarkable watching our own e-commerce trends here in the United States and seeing how they align or differ from those trends in other countries. So much has become digitized in the past year, including the way we work. One of the things I’ve experienced as a business owner is the rise of 1099-NEC forms and how important Advanced Micro Solutions’ tax software is for my business. It makes filing taxes so much more efficient and is just another way that the digital age continues to benefit us.