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Philippine ICT infrastructure and unlocking economic growth

In June 2021, cloud computing firm Alibaba Cloud announced that it will be building a data center in the Philippines. Alibaba Cloud, with headquarters in China, is the digital technology and intelligence backbone of Alibaba Group. 

In the last quarter of 2021, Philippine integrated telecommunications firm PLDT Inc. (PLDT) also announced that it would a build telco-neutral hyperscaler data center facility in the country.

Union Bank of the Philippines is building an innovation hub in Laguna (south of the capital Manila) that will house various centers of innovation within UnionBank, including its institutes on Data Science and Artificial Intelligence, Blockchain, its digital bank EON, as well as the recently launched Asian Institute of Digital Transformation (AIDT).

In the study (“The Growing Digital Economy in the Philippines: Opportunities, Challenges, and Google’s Contribution) commissioned by Google, research firm Alpha Beta found that digital technologies could unlock P5 trillion (equivalent to about 27% of the country’s GDP in 2020) in annual economic value in the Philippines by 2030. 

But there are still some issues that need to be addressed should the country aim to unlock this economic opportunity.

In terms of telecommunications infrastructure, the Philippines has almost 18,000 cell towers, way fewer than its neighboring Southeast Asian countries such as Thailand (52,483) and Vietnam (90,000). 

Worldwide digital ranking

International Institute for Management Development (IMD) ranked the Philippines 58th out of 64 countries in the World Digital Competitiveness Report, further falling from 57th in 2020 and 55th in 2019. In the Asia Pacific, the country was ranked second to the last of the 14 economies.

Statista, a market and consumer data provider, projects that the Philippines will have 77.4% internet penetration by 2026. Today, it stands at 74.2% (2021), meaning 25% of Filipinos still don’t have access to the internet, which these days is essential not only for businesses but also for online learning.

The pandemic, which forced companies to adopt digital solutions, magnified the need for better digital infrastructure that will allow frictionless connections. 

While there was an influx of business solutions launched or relaunched during the course of the two-year pandemic, legacy companies strengthened their services while new companies challenged the norm by introducing revolutionary products.

The Philippine government, through the Department of Information and Communications Technology, introduced the National Broadband Plan in 2017. It aims, among other things, “to accelerate the deployment of fiber optic cables and wireless technologies all over the country, particularly in far-flung or remote areas, to improve the overall internet speed of the country.”

However, network providers decry the bureaucratic and unclear guidelines in building cell towers, which makes it difficult to them to connect the archipelago. Also last year, PLDT and Smart Communications, called for affordable and reasonable regulatory fees to facilitate network rollouts in unserved and underserved areas of the country.

Digital acceleration

The pandemic accelerated digitalization by leaps and bounds. The global health crisis saw how technology helped companies ensure business continuity — and thrive. Micro, small and medium enterprises (MSME) also adopted digital technologies (website, digital payments) to keep the business going (and growing).

Legacy banks accelerated their pivot to digital banking realizing that lockdowns, which prevented people from going out, prompted clients to adopt cashless and online transactions.

Two years into varying levels of lockdowns and mobility restrictions, many people have adopted doing almost everything digital. There is no turning back and as far as technology adoption is concerned, the only way to go is moving forward.

The private sector is also stepping up in building a more digitally resilient Philippines. 

Cisco Philippines launched Ugnayan 2030, a multistakeholder framework that involves government leaders, industry, and the academe. The initiative aims to employ a holistic approach to help the Philippines build greater digital resilience by unlocking the value of digitization in the country. It is the local adaptation of Cisco’s Country Digital Acceleration (CDA) program. Cisco’s CDA team collaborates with national and state governments worldwide to accelerate their national digitization agendas.

With a not-so-impressive digital infrastructure — when compared to other Southeast Asian countries — the Philippines’ economic growth could also be affected.

With the Philippine elections coming, there are only a few presidential candidates who have laid down their plans for the country’s information and communications technology. 

Presidential candidate Vice President Leni Robredo has been urging the current administration to invest more in digitalization amid the pandemic to provide people with greater access to the internet. In November last year, she said that her infrastructure plans include “building smarter” which will support digitization that “will benefit not only IT (information technology) and BPO (business process outsourcing) but other industries as well.”

Presidential aspirant and Manila Mayor Isko Moreno announced his intention to strengthen the Philippines’ fiber-optic network to boost connectivity, should he be elected.

Back End News asked technology solutions providers about what they think, as industry experts, the Philippines need to improve its ICT infrastructure.

What does the new president need to provide as support to the IT infrastructure/sector to create sustained economic growth?

Samir Sayed, Managing Director, ASEAN and Korea, Poly

“In a challenging global economic climate, it is more important than ever that political leaders recognize the importance of technology and innovation in accelerating the national economy. As business leaders seek to incorporate future-forward practices like hybrid working to set their employees and companies up for success, having a champion nodal body to help drive momentum for technology-related initiatives that promotes workplace equity will go a long way in driving long-term growth and cross-border collaboration in a world without borders.”

Ravi Saraogi, co-founder and president APAC, Uniphore

As the Philippines prepares for a new administration in 2022, incoming leaders will need to consider the potential of investing in digitalization and building citizens’ digital capabilities as an economic recovery and growth engine.

With the country becoming one of the region’s fastest-growing digital economies, automation for businesses, especially SMEs, can help them get back on their feet and keep pace with shifting consumer behaviors.

Combined with upskilling and reskilling of the workforce to embrace new technologies such as artificial intelligence (AI), sectors as diverse as business process outsourcing and customer experience, e-commerce, fintech, and healthcare, among others, can accelerate their modernization to deliver better results with more efficiency to their stakeholders.

This human-AI synergy can help build not just stronger businesses and industries, but a stronger nation too.

Sumit Bansal, Managing Director of ASEAN and Korea, Sophos

“As we live increasingly digital lives, incoming government leaders need to increase their focus and investments in protecting citizens online. Now, more than ever, we have more young children and senior citizens spending their days learning, playing, shopping, or making financial transactions digitally. While it is good seeing them empowered, they are also more vulnerable to social engineering, phishing, and other kinds of cyberattacks. While we all need to be educated to be more alert and mindful of our online behavior, there must be exceptional support for those who have been marginalized in the past due to lack of access. Leaders need to elevate their citizens’ perspectives on personal data as it becomes a real currency in the digital age. Both individuals and organizations need to treat and handle it with the same thoughtfulness as any other currency. Mainstreaming cybersecurity education and systematically incorporating it in various digital literacy classes, even in primary education, must be explored by leaders in the private and public sectors. 

In addition, as the internet economy takes off and increases its contribution to real-world GDPs, leaders must include in their agenda multistakeholder discussions about digital sovereignty and what it means for them and their country. What kinds of infrastructure, policies, regulations, and reforms do they want to invest in to secure their citizens’ future while still enabling them to participate in meaningful progress and advance innovation that keeps pace with the accelerating pace of change? There is no clear and prescriptive answer here, as this is ultimately a discussion on the country’s values and realities given its current situation.” 

The Google report highlighted that the consumer, retail, and hospitality sectors are seen to be technology’s largest economic beneficiary in the Philippines accounting for about P1.22 trillion or almost a quarter of the country’s total digital opportunity. If the country’s digital infrastructure (not only connectivity but also data centers and other ICT) are improved on — and managed well, it could very well be at par with neighboring countries.