Philippines digital trade seen to hit P1.9 T by 2030

MANILA, Philippines — The value of digital trade’s impact to the Philippine economy is estimated to rise by almost 12-fold to hit P1.9 trillion by 2030,  according to a Hinrich Foundation report.

The report, titled “The Data Revolution: How the Philippines Can Capture the Digital Trade Opportunity at Home and Abroad,” showed digital trade’s impact to the economy was valued at P160 billion in 2017 and equivalent to 1.8 percent of the gross domestic product, and is expected to reach P1.9 trillion by 2030 if the country is able to fully leverage on opportunities offered by digital technologies and digital trade.

Digital trade covers the production, distribution, marketing, sale or delivery of digitally-enabled products and services, as well as cross-border data flows.

Counted as digitally-enabled products and services are physical and digitized products traded online; services using digital technologies such as information technology – business process outsourcing (IT-BPO) and export of data processing and online software consultancy services; as well as telecommunications services like email, video conferencing and digital file sharing by exporting firms.

The report also showed the country’s digital exports are seen to grow by 218 percent to reach P594 billion by 2030, if the country is able to take advantage of available opportunities.

Hinrich Foundation estimates Philippine digital exports to be worth P187 billion in 2017, making it the country’s sixth largest export sector, accounting for 5.4 percent of total exports.

The report showed the IT-BPO sector is the primary driver of the country’s digital exports.

Meanwhile, digital export revenues from e-commerce are still low, in part due to the inadequate information communication technology (ICT) infrastructure.

Hinrich Foundation research fellow Stephen Olson told reporters that while there is high social media and smartphone penetration in the Philippines, the country has yet to take advantage of the opportunities offered by digital trade.

“The nation hasn’t really scratched the surface in terms of opportunities of the internet economy and I suspect it is closely linked to how slow the internet is and how hard the accessibility is. So, very high degree of social media usage. That’s encouraging, but still not really taking advantage of the opportunity,” he said.

To capture the opportunity and grow both digital trade and digital exports, he said the Philippines would need to make more investments to put in place the necessary ICT infrastructure.

“That’s really the backbone of the digital economy…both the speed and accessibility of internet access here in the Philippines,” he said.

In addition, he said maintaining an open digital environment would enable the country to capture the digital trade opportunities.

While the Philippines has a strong environment for supporting digital trade and does not have significant restrictions on cross-border data flows, the report noted there are limiting conditions in place when it comes to openness to foreign investments through the foreign equity ownership cap set at 40 percent for public utilities, including telecommunication companies, as well as the Securities and Exchange Commission’s requirement that only Filipino nationals may own the commercial operation of an online platform to market or sell third-party products and services.

“Such regulations may impede the set-up of foreign-owned digital operations that could potentially add value and investments into the digital economy,” the report said.

Olson said minimizing cross-border friction points is another area that could help the Philippines seize opportunities in digital trade.

As customs thresholds are still too low and impose administrative costs, he said the Philippines should consider raising the de minimis threshold or the value of imported goods for which no duty or tax would be collected.

“A de minimis threshold of $200 could generate over $30 billion in economic benefits for all 21 APEC (Asia Pacific Economic Cooperation) members,” the report said.