When China’s Digital Silk Road meets Philippines’ digital transformation
When Ferdinand Marcos Jr became president, he laid out a policy of immediate digitalization of vital government services to boost the ease of doing business and combat corruption. This was an important policy as the Congressional Policy and Budget Research Department observed that digital transformation can be an important boost to the Philippines’ economic recovery in the post-pandemic period. Globally, digital transformation is nothing new as the ongoing process of digitalization has been shaping how countries do business and trade.
The estimated value of the Philippines’ digital economy in 2020 is around $7.5 billion with a projected annual growth rate of 30%. There are also expectations that the sector will expand substantially between $28 billion and $40 billion in 2025. Robust public-private cooperation is essential to this growth. E-commerce leads the Philippine digital economy in terms of sector, followed by online media, transport and food and online travel.
An undiscussed aspect of digitalization in the Philippines is in its geopolitical context. New technologies contributed to a more borderless world, true, but there are challenges that have emerged. Some of these are how to manage cross-border data flows, enforce intellectual property rights and protect consumer welfare. As a country in the middle of an economic transition, the country needs to work with its partners to further develop its digital economy. In this space, China promises both opportunity and challenge.
It’s not a secret that the Chinese Communist Party has strong links to private companies. The People’s Republic of China has also passed laws that allow it to access personal data from its private sector. There are voices expressing strong concern over China’s involvement in technology. The PRC’s Digital Silk Road can help the Philippines’ digital landscape develop but it can also lead to complications, such as having to manage international digital cooperation that requires cautious evaluation of its implications on national security, technology standards and regulatory frameworks.
Through the Digital Silk Road, the PRC has invested in the Philippines in important areas such as digital infrastructure (both hard and soft infrastructures), major smart city projects, financial technology and the Philippine supply chain. Examples of these include engagement in telecommunications, both terrestrial and subsea projects. Both Smart Communications and Globel Telecom are powered by Huawei. The duopoly of Smart Communications and Globe Telecom, powered by Huawei, have played a central role in this domain; DITO Telecommunity, the much-vaunted third player is intimately connected with PRC funding.
The PRC’s evolving economic interests in the Philippines can be seen mostly in the latter’s digital investments, encompassing a wide spectrum of sectors from infrastructure and telecommunications to energy, surveillance technology and entertainment platforms. Moving further into the digital economy unquestionably offers the potential to enhance efficiency, innovation and productivity, and generate new jobs for Filipinos.
Next steps
Moving forward, the Philippines should engage with a more diverse range of investors from different countries to facilitate and encourage direct foreign investments in the country. More telecoms should be encouraged to compete, and this can be aided with the enactment of supporting legislation and regulations like Executive Order 32, which streamlines processes for the construction of telecommunications and internet infrastructure. Finally, the Philippines should partner and coordinate with relevant actors within the private sector to establish strategies and frameworks that would motivate them to participate in investing and setting up digital infrastructure in the Philippines.
National security and economic development are not mutually exclusive; the digital infrastructure of the Philippines needs a lot of investment if it is to contribute more substantially to economic growth. Nevertheless, the Philippines cannot be careless and haphazard in its approach. Fostering digital transformation can happen while adopting frameworks that enhance digital and national security to prevent economic coercion in the future and defending the privacy and security of Filipino individuals, the private sector, and the government.
Julio S. Amador III is senior fellow at the Ateneo Policy Center and Philippine Lead Investigator for the NORM Project. Deryk Matthew N. Baladjay is research associate for the NORM Project. This work was supported by the Research Council of Norway as part of the project ‘Shaping the Digital World Order: Norms and Agency along the Digital Silk Road in Southeast Asia (NORM)’, under grant number 325129. For more information on the NORM project, please visit: https://www.prio.org/projects/1920
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