Commentary: The prerequisites for digital competitiveness

Recognizing the vital role that digital tools and spaces have had on our lives, the institute found it fitting to partner with the Philippine-American Academy of Science & Engineering (PAASE) for its first town hall discussion of the year. In a digital event held earlier this week, the discussion brought together speakers from Google, Amazon, Netflix, Grab and GCash to discuss users' changing behavior, significant trends and challenges, and technology's role in shaping life in 2021. 

During the event, Dr. Carlos Primo (CP) David, trustee and program convenor of Stratbase ADR Institute and Professor of the University of the Philippines National Institute of Geological Sciences, also discussed this crucial role that new technologies have in the new normal and in creating a competitive business environment.

"Filipinos have quickly shifted to digital technologies such as e-payments and e-shopping platforms and spawned a new way of living to adjust to the non-contact restrictions, safety protocols, and lockdowns," said David.

Karen Yang Chiang of GCash said added that "Filipino livelihood has been vastly affected by COVID-19 with a 16.9 GDP decline in 2020, the worst in 36 years. Our unemployment rate is at 10%, which means that over five million Filipinos are left jobless.  26% of medium and small enterprises have fully closed, and 78% or 4.5 million businesses are experiencing full or partial closure. GCash is really keeping the economy moving with over 500,000 social sellers using our P2P service."

Indeed, there is untapped potential in digital technology as an economic growth driver for the country. To illustrate, in the IMD World Competitiveness Report released in June last year, the Philippines ranked 45th out of 63 economies for 2020.  To arrive at this ranking, the IMD evaluated the country's competitiveness based on broad indicators, such as economic performance, government efficiency, business efficiency and infrastructure.

Compare this to the country's ranking in the IMD's World Digital Competitiveness Report, and we see the Philippines ranks 57th out of 63 countries. In contrast to the broader report, this digital-focused index uses knowledge, regulatory framework, digital infrastructure and future-readiness as the basis for the ranking.

According to the report, the Philippines saw a decline in terms of knowledge. With its scores for indicators such as talent, training, and education, and scientific concentration all dropping in the latest report. Overall, the country ranked 62nd out of 63 in the knowledge category.

In terms of technology, however, the Philippines rose to 53rd. Despite low scores in the regulatory framework indicators, its rank was pulled up by its stellar performance in the Investment in Telecommunications indicator, where it ranked 10th overall.

While the government's National Broadband plan seems to have stalled, the country's telecommunication providers continue to invest in the necessary digital infrastructure to keep-up with demand.  For 2021, Globe Telecom and Smart communications' combined investments are expected to reach over.

Globe has already announced that it would be increasing investments by 250% in 2021 for new cell towers and their 5g network expansion that will boost internet speeds, while Smart Communications announced projected spending between P88 billion to P92 billion capital expenditure to expand services to the unserved and underserved areas in the country. 

The fact that the country's ranking in terms of digital competitiveness is 12 positions below its rank in the broader competitiveness report indicates how the country has been slower to take advantage of technology than its peers. At the same time, it also highlights digital as a key area for improvement.

A critical step towards ensuring that Filipinos reap the benefits of digital technologies and opportunities is by making sure there is access to it.

A Philippine Institute for Development Studies (PIDS) paper published in December of last year found that specific segments of the population have better access to the internet and can benefit more than others from technology and the digital economy. 

According to the PIDS discussion paper on the Digital Divide and the Platform Economy, this includes "those who live in the urban or more affluent areas, those who are neither too old nor too young to utilize the technology, those who are male, those who are more skilled/educated, and those who have high levels of trust."

The PID’s paper posits further that this unequal access to technology widens the gap between the haves and have-nots even further. In the Philippines, where a third of the population is still offline, the pandemic, the rapid digitization of transactions and services, and the widening digital divide can be a recipe for disaster.

Both the PIDS paper and the speakers at our event brought a regional perspective to addressing these challenges. They also cited the need to embrace innovation to be competitive and take advantage of these new technologies.

PIDS recommended that economies in the region work to define and measure various indicators for access and participation in digital platforms. They furthermore called to support projects that would expand access to ICT.

Similarly, Stratbase ADRi President Prof. Dindo Manhit, who spoke on how digitization can significantly shape economic recovery, said that the "huge investments of the private telcos can potentially be quadrupled if government steps in with synergized digital infrastructure projects." He added that funding these through developmental loans has long been a strategy of our ASEAN.

The Philippine's digital competitiveness is key to the country's economic recovery. However, suppose digital is to be a true driver of growth, then the country's leaders must first address the country's gaps in knowledge, regulatory framework, and access by working together with the private sector and its development partners.

Paco Pangalangan is the executive director of think tank Stratbase ADR Institute.