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Understanding E-commerce in the Philippines

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Environment of the Roadmap

National and Global Environment

Latest World Economic Outlook growth projections

Expectations of a worldwide growth contraction are raised amidst the Covid19 pandemic, as economic activity, mobility, and labor markets remain depressed. This is most likely to be severe in Europe, Latin America, and the US.

Pervasive uncertainty exists due to factors such as:

  • Length of lockdowns depending on the ability of each country to control virus spread
  • Availability of employment for displaced workers
  • Dampened consumer spending due to social distancing measures
  • The ability of businesses to reconfigure operations and adapt to new normal
  • Risk-aversion of banks, investors, and consumers due to the bleak economic environment
  • Cross-border spillovers

ICT-ready nations have countered economic shocks from the pandemic by using technology to sustain business operations and transactions. However, even with advances in technology, developed economies with aging populations are limited by their slower consumption patterns and the heavy burden of public transfers to older citizens.

Historical Gross Domestic Product of the Philippines

The Philippines is one of the fastest-growing emerging markets, with its gross domestic output (GDP) growth ranging between 6-7% in the last 10 years. This is buoyed by:

  • A young and vibrant population
  • High domestic demand, with household consumption contributing the most to GDP
  • Improving savings rate and investment spending,
  • Rising infrastructure spending across regions,
  • Employment gains,
  • Lowering inflation, low-interest environment, and stable exchange rate
  • Significant net additional income from Filipinos working abroad

While our financial strength is evident in our falling debt to GDP ratio, and rising foreign direct investments (FDI), supported by improvement in ease of doing business, factors that dampen economic growth remain. These include low agricultural productivity, obstacles to doing business, shortage of technical skills, high frequency of natural calamities, high rates of electricity, and residual corruption.

Global e-Commerce

The United Nations Conference on Trade and Development (UNCTAD) estimates that e-commerce sales contributed $29 trillion or 36% of global GDP in 2017. This can be attributed to the availability of more affordable and reliable ICT and internet connectivity, giving consumers and businesses access to markets and information.

Apart from technology, social adoption hinged on education and security, facilitative legal and institutional environment, and efficiency of payment and delivery systems contribute to the expansion of e-business.

Southeast Asian Internet Economy, GMV (US$_B)

In Southeast Asia, the internet economy, comprising internet retail, online travel, ride-hailing, and online media, continues to grow at an unmatched pace. Indonesia and Vietnam lead the pack, leveraging their sizable market base and fast adoption of digital payment to attract entrepreneurial startups and investors. Singapore, on the other hand, continues to compete as a regional gateway, banking on its world-class business environment and architecture to attract internet unicorns.

As growth in cross-border B2C trade expands, hindrances to regional trade are brought to light. Common concerns include internet access, cybersecurity, customs rules and taxation, and the returns process. All these points towards the need for regional investment in connectivity, not just in terms of technology and infrastructure, but also in the necessity of forming regionally recognized cross-border standards and regulations.

p>UNCTAD B2C Index: PHL vs. ASEAN

e-Commerce in the Covid19 Pandemic

Necessity has made e-commerce the default solution to challenges brought by the Covid19 pandemic. The latter forced innovation and technological adoption, as seen in the surge in demand for online shopping and services, as well as the adoption of new digital models of doing business.

The drive towards digital heavily depends on platforms that provide access to online services. These have risen to the challenge by giving discounts, free services, and solutions to problems such as network congestion caused by increased usage. Among the most widely used in current circumstances include communication platforms, e-commerce websites for food and consumer goods, and online health information portals.

On the side of the financial services, providers have encouraged digital transactions by removing fees on mobile payments. However, studies show that consumers still favor traditional modes of payment.

One glaring fact is that while adoption of online services was faster in developed countries with digital platforms and integrated supply chains, emerging economies have experienced various challenges in the adoption of e-commerce. Some of the good and bad sides of e-commerce growth in the face of the global pandemic include:

With a pandemic that has illuminated the significance of digital innovation, as well as its existing inefficiencies, governments’ role in addressing access and capacity constraints is especially critical. Regulators can reinforce the economy by urging greater cooperation to facilitate the flow of goods and services, narrowing the digital divide, and creating a level playing field for MSMEs and lower-income households.