Philippines - Country Commercial Guide
Digital Economy
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Overview

State of the Digital Economy

According to the Philippine Statistics Authority (PSA), the digital economy in 2023 amounted to about $35.4 billion, contributing 8.4 percent to the country’s Gross Domestic Product. This resulted to a 7.7 percent growth from the $33.6 billion Gross Value Added of digital economy in 2022. The Digital Economy contributed 8.4% of the GDP in 2023.  This marked an 11 percent increase from about $33 billion recorded in 2021, covering digital transactions spanning digital-enabling infrastructure, e-commerce, and digital media/content.  Digital-enabling infrastructure emerged as the largest contributor, accounting for around $28 billion or 77.2 percent of the total.  This amount reflected a 7.5 percent rise compared to its 2021 figure of $26 billion, with telecommunication services and professional and business services being the primary contributors.  

According to the e-Conomy SEA 2023 report, jointly produced by Google, Temasek, and Bain & Company, the digital economy in the Philippines is projected to reach $150 billion in gross merchandise value by 2030. This growth will be mainly driven by the e-commerce sector, which includes online media, travel, transport, and food delivery services.  

National Focus

The Philippine Development Plan (PDP) 2023-2028 specifies digital transformation as one of its underlying themes. The Philippines envisions achieving a robust digital economy to make the Philippines “globally competitive”.  The goal is to bridge the “digital divide” across the archipelago, where nearly 40 percent of the country lacks reliable internet access. To this end, President Marcos recently approved the Philippine Digital Infrastructure Project worth $288 million which is intended to boost broadband connectivity nationwide, especially in remote areas.  

The President also previously directed all government agencies to digitalize all essential public services.  Efforts in this direction include the establishment of more common tower infrastructures to increase connectivity, digitalization of business registration processes in local governments, integration of online government services in a single platform through the eGov PHSuper App, implementation of the national broadband plan to improve internet and mobile     services, and execution of the Cloud First Policy that promotes cloud computing technology for government administration and public services delivery.  Philippine micro, small, and medium enterprises (MSMEs) are likewise highly encouraged and supported by the government to embrace digitalization and innovation.  


Market Challenges

While there have been legal and regulatory reforms in place and programs and policies supporting digitalization in the Philippines, U.S. companies should be informed of the legal, regulatory, and market barriers that impede new market entrants:  

Telecommunications and Connectivity

In 2022, the amendment to the Public Services Act removed nationality barriers in the telecommunications sector, allowing for a full foreign ownership.  However, new entrants must face the requirement of a legislative franchise for the establishment of a telecommunications or data transmission entity.  Aside from being a costly endeavor to secure a legislative franchise, this creates uncertainty for companies wanting to invest in the Philippines.  The Philippines is the only country in the world that has this requirement.  

The telecommunications market in the Philippines is primarily dominated by two companies: Globe and PLDT Smart.  These companies have substantial network infrastructure investments, including international submarine cables, cable landing stations, and network backbones.  Any smaller independent internet service provider (ISP) or telco must obtain domestic IP transit (internet access) from PLDT Smart and Globe, or purchase IP transit internationally.  New companies entering the market need to negotiate access with these two major telcos in the Philippines or independently build and operate their own networks or request access to government assets.

There has been a clamor by the local private sector and a consumer group to amend the National Building Code of 1977 to eliminate lease fees for telecommunications infrastructure in buildings.  This move is expected to lower operational costs for telco companies, leading to a more competitive market and reduced internet costs in the country.  

Spectrum Management

Spectrum management in the Philippines is a critical aspect of the country’s communications infrastructure, overseen primarily by the National Telecommunications Commission (NTC). This process involves the regulation and allocation of radio frequencies to prevent signal interference and ensure efficient use of the electromagnetic spectrum. The NTC is responsible for issuing licenses to various users, including telecommunications companies, broadcasters, and other entities, to manage the spectrum effectively and equitably.

U.S. companies face several challenges in spectrum management in the Philippines. One major issue is the absence of a comprehensive regulatory framework for spectrum management in the country.  This situation allows incumbent Mobile Network Operators (MNOs) to control most of the spectrum, creating difficulties for new players and technologies to enter the market.    

The laws governing spectrum use are outdated and do not keep up with technological advances. They limit spectrum use to traditional networks, hindering the adoption of new wireless technologies like 5G and future advancements like 6G.  The current method of assigning spectrum licenses favors established companies and larger MNOs, overlooking the revenue potential of a more competitive assignment process through open tenders or auctions.  Moreover, the rules governing spectrum pricing, such as NTC MC 10-10-97 and 11-12-2001, are outdated and do not reflect the rising market value of spectrum.

Navigating the regulatory environment, governed by the National Telecommunications Commission (NTC), can be complex and time-consuming. Companies must adhere to local licensing requirements and frequency allocations, which may differ from U.S. standards. Ensuring compliance with local regulations while dealing with potential bureaucratic delays and competitive pressures poses difficulties. Market entry and operational costs can be high, and companies must adapt to dynamic regulatory changes and manage potential interference issues.  Effective engagement with local stakeholders and understanding the complex regulatory landscape are crucial for success in this market.

Cybersecurity

Cybersecurity in the Philippines is a growing concern as the nation increasingly relies on digital technologies. The government has implemented several measures to bolster cybersecurity, including the creation of the National Cybersecurity Plan and the establishment of the Department of Information and Communications Technology (DICT) to oversee and enhance the country’s cybersecurity posture. Despite these efforts, challenges remain.

The Philippines faces issues such as outdated infrastructure, limited resources, and a lack of widespread cybersecurity awareness. These factors contribute to vulnerabilities and make the country susceptible to cyber threats like ransomware attacks, phishing, and data breaches. The legal and regulatory framework is still evolving, with ongoing efforts to update and strengthen cybersecurity laws to better address these threats.

U.S. companies operating in the Philippines encounter specific challenges in this environment. They must navigate a complex regulatory landscape, which includes compliance with local data protection laws and cybersecurity requirements.  The variability in cybersecurity practices and the maturity of local IT infrastructure can impact the effectiveness of American companies’ security measures. There may be gaps in local cybersecurity expertise and resources, complicating efforts to implement and manage robust security solutions.

Artificial Intelligence and Emerging Technologies

The state of Artificial Intelligence (AI) in the Philippines is marked by significant potential and emerging development. The government has recognized AI’s importance for economic growth and innovation, establishing initiatives such as the National AI Roadmap and the establishment of the National AI Research Center to foster AI adoption and research. These efforts aim to enhance the country’s AI capabilities, support startups, and integrate AI into various sectors, including healthcare, agriculture, and finance.

However, the Philippines faces several challenges in advancing its AI landscape. Key issues include limited infrastructure and resources, which can hinder the deployment and scaling of AI technologies. Furthermore, there is a shortage of skilled professionals with expertise in AI, creating a talent gap that impacts the ability to develop and implement sophisticated AI solutions. The regulatory framework for AI is still under development, and there is a need for clearer guidelines and policies to ensure ethical AI use and data protection.

U.S. companies entering the Philippine market may face specific challenges related to these conditions.  They must navigate an evolving regulatory environment and adapt to local data protection laws, which may differ from U.S. standards.  Companies may also encounter difficulties due to the very nascent state of AI infrastructure and the scarcity of skilled local talent, which can impact project execution and innovation.  


Digital Trade Opportunities

With the country’s commitment to digital transformation, U.S. companies can find several opportunities in the Philippine market. Sub-sectors of interest are as follows:

Artificial Intelligence

Artificial intelligence (AI) is an emerging sub-sector in the Philippines, which is anticipated to reach $772.1 million in 2024, with an annual growth rate of almost 29 percent to reach about $3.5 billion in 2030. In a 2020 report by EDBI and Kearney, AI is projected to boost Philippine GDP by 12% ($92 billion) by 2030.   Global management consulting firm McKinsey also noted the potential for AI to create opportunities by automating approximately 50% of the tasks conducted within ASEAN’s four largest economies, including the Philippines. In 2021, the Philippine government launched the National Artificial Intelligence Roadmap with the vision of transforming the Philippines into an AI hub within the ASEAN region.  In 2024, as envisioned in the AI Roadmap, the Center for Artificial Intelligence Research (CAIR) was established.  The CAIR is envisioned to play a key role in leveraging AI technology to improve economic growth and bolster inclusive development.    

There are ongoing efforts by the Philippine government to use AI in weather forecasting and smart cities. U.S. technology companies can find opportunities in these areas as well as in government frontline services, real estate, banking and finance, safety and security, cybersecurity, retail and e-commerce, education, space exploration, agribusiness, urban planning, manufacturing, healthcare, logistics, and transportation.

Cybersecurity

The Philippine cybersecurity market is expected to grow by 13% to $387.10 million by 2028. Key vertical markets for cybersecurity include the Philippine government, the business process outsourcing (BPO) industry, the financial sector, healthcare, education, and telecommunications. Robust cybersecurity measures are increasingly critical as the country positions itself as a global data center hub. The pandemic has accelerated the use of digital payment and fintech platforms. Software sales in the Philippines are forecast to reach $1.26 billion by 2028.

As the Philippine government moves towards digital transformation, it has enacted laws and policies to recognize the importance of cybersecurity. Laws on data privacy and cybercrime prevention have been enforced since 2012, and three cybersecurity-related bills are being prioritized in Congress. In February 2024, President Marcos approved adopting the National Cybersecurity Plan 2024-2028, which outlines strategies and programs for protecting the State and its people in cyberspace, upskilling the cybersecurity workforce, and bolstering the cybersecurity policy framework.  

The Philippine cybersecurity market is dominated by a few significant players, mostly from the United States. U.S. Information technology companies are highly regarded worldwide for their innovation, quality products, and after-sale service, making them highly competitive in the Philippine’s cybersecurity IT subsector market.

New entrants are highly encouraged to find a local partner, agent, or distributor, especially when bidding on a government tender. Key partnering opportunities include areas of information and network security, IT auditing and consulting, digital forensics, threat intelligence, software development, and more.

Smart Cities

According to the World Bank, a “smart city” in the Philippine context refers to an innovative urban area that leverages technology and innovation to improve functionality, sustainability, and livability. The goal is to create cities that are more responsive to the needs of not only their residents but also the environment. Prime examples of smart cities in the Philippines are Manila, Cebu, Davao, and Clark. Local Government Units (LGUs) that have initiated steps to become smart communities are Malabon City, Mandaue City, San Fernando City, Pampanga, Tagum City, Cauayan City, and Tuguegarao City.  

There are several opportunities for U.S. firms in various sectors, especially in ICT and digital connectivity, energy, smart infrastructure, and smart transportation. Some of these key opportunities are presented by major initiatives by the Philippine government such as the Build Better More program, which builds on the previous administration’s Build! Build! Build! Initiative. This program focuses on enhancing the country’s infrastructure. Out of 185 infrastructure projects under the $165 billion program, 134 projects, or 83% are aimed at improving physical connectivity. These include expressways and farm-to-market roads.  

For 2024, $26 billion of the $100 billion national budget is allocated to infrastructure, representing 5.7% of GDP. The Marcos administration is committed to maintaining infrastructure spending at 5 to 6% of GDP and is increasing the use of Public-Private Partnerships (PPPs) to support these projects.  

A key part of the government’s strategy to address Metro Manila’s urban pressures has been to push growth and development outwards. With space limited in traditional business districts, new development is now being targeted in other regions. Hence the rise of mixed-use projects and township developments – providing areas and amenities for home, work, and play for residents.  These efforts are mostly driven by the private sector, largely due to increased Business Process Outsourcing (BPO) investments.  

Open RAN  

Open Radio Access Network (Open RAN) is an emerging telecommunications framework that aims to disaggregate traditional RAN architecture, promoting interoperability between various vendors and reducing dependency on proprietary systems. This approach allows for a more flexible, cost-effective, and scalable network infrastructure. Open RAN is particularly relevant in markets like the Philippines, where improving mobile network coverage and capacity is critical for accelerating digital transformation.

OpenRAN developments in the Philippines are gaining momentum as part of the country’s broader efforts to enhance its telecommunications infrastructure. OpenRAN has a particular appeal in emerging markets like the Philippines, where traditional network solutions have often been dominated by a few large players, resulting in high costs and limited flexibility.

In 2023, PLDT’s wireless unit, Smart Communications, Inc., launched the Philippines’ first fully operational Open RAN Proof of Concept. This milestone is developed in partnership with NTT DOCOMO, Inc.

The U.S. government is actively supporting OpenRAN developments in the Philippines as part of its broader Indo-Pacific strategy to enhance digital connectivity and security. Through the U.S. Agency for International Development (USAID), the U.S. Trade and Development Agency (USTDA) and other initiatives, the U.S. has provided technical assistance and funding to encourage the adoption of OpenRAN technology. This support aims to promote network diversification, reduce reliance on traditional telecom vendors, and improve connectivity, especially in rural areas. These efforts align with broader goals to foster innovation, economic development, and cybersecurity across the region while strengthening U.S.-Philippine bilateral relations.

Incorporated as a non-profit corporation in 2023, the Asia Open RAN Academy (AORA) is an activity co-created by USAID as part of the U.S. Government’s Indo-Pacific Economic Framework (IPEF).  It is an alliance of academic, government, and industry stakeholders from the Philippines and the broader Indo-Pacific region to advance an open, interoperable, and secure digital ecosystem through greater cooperation and competition.  AORA’s goal is to accelerate the adoption of Open RAN technologies by developing and promoting a comprehensive curriculum and facilitating technical exchanges.  This initiative will provide MNOs and ISPs with a skilled workforce for deploying open network architectures.

In May 2023, the U.S. Government announced USAID’s support for an Open RAN Lab in Manila to boost the Philippines’ 5G rollout, strengthen its innovation economy, and expand digital opportunities for workers.  The lab, part of USAID’s five-year Better Access and Connectivity (BEACON) project, will be hosted at the University of the Philippines Diliman and aims to enhance economic growth through improved internet infrastructure.


Digital Economy Trade Events:

  • U.S. Department of Commerce Executive-Led Innovative Technologies for Urban Infrastructure Development Trade Mission to the Philippines and Indonesia, November 12 to 20, 2024
     
  • The trade mission aims to foster collaboration and knowledge exchange between U.S. private sector delegates and Philippines and Indonesia government and private sector stakeholders in smart city development, digital ecosystems, and sustainable urban infrastructure.
     

Local conferences and trade events:

  • ASEAN Innovation Business Platform (AIBP) Conference & Exhibition, sSeptember 17 to 18, 2024, City of Dreams, Pasay City. The conference and exhibition will showcase digital initiatives by local government agencies and enterprises and innovative B2B Technology Solutions.
     
  • Innovation Summit, November 6 to 9, 2024, SMX Convention Center, Davao City. Organized by the Davao City Chamber of Commerce and Industry, Inc. and ICT Davao Inc., the event aims to highlight the latest advancements in technology and offer networking opportunities for tech enthusiasts, business leaders, and diplomats.
     
  • CyberSecPhil Conference, February 12 to 13, 2025, Manila. The conference serves as a pivotal platform for in-depth discussions, addressing challenges, and sharing the best practices in the rapidly evolving landscape of the security industry.
     
  • Philippine Tech Show 2025, March 25 to 28, SMX Convention Center Manila. The event, organized by the Philippine Cable and Telecommunications Association Inc. (PCTA), is set to be a landmark event in the technological landscape of the Philippines.  Themed “Elevate & Evolve: Enhancing Networks and Connectivity,” this five-day event will bring together leading professionals and stakeholders from a diverse range of industries including cable TV, ISPs, VAS, telecommunications, IT services, FinTech, and Data Centers.
     
  • PhilSec, 2025, Manila. Organized by Tradepass, the event is a gathering of top global cybersecurity experts, offering organizations a chance to present their advanced solutions and engage with a select group of delegates.