This is a best prospect industry sector for this country. Includes a market overview and trade data
Significant growth in private and public investment, upward consumer spending, and demand for better service drive the information and communications technology industry in the Philippines (ICT).
The Marcos Administration has announced its intention to continue the previous Duterte Administration’s digital transformation program. Under the digital transformation program, the immediate priorities include a cloud data center, software development for business process improvement, the conversion of local government units into smart cities, cybersecurity solutions for data privacy protection, and improving the internet and mobile services landscape through a national broadband plan.
The Duterte Administration believed that improving ICT would also improve the Filipinos’ quality of life while addressing the many challenges of doing business in the Philippines. On March 21, 2022, former President Duterte signed the amendment to the Public Service Act (11659), allowing up to 100% foreign ownership of public services in the Philippines, including Telecommunications. To create a better business environment and support its digital transformation projects, former President Duterte signed the Ease of Doing Business and Efficient Government Service Delivery Act (RA 11032) in May 2018. In 2016, the Philippine Government established its own Department of Information and Communications Technology (RA 10844) to show its strong support to the ICT industry.
The Philippines’ growing middle class and the young population are also important drivers of IT demand. There is an upward trajectory in their spending levels on technology benefitting premium brands.
Philippine infrastructure investments are another area of opportunity for U.S. exporters. Road, railway, airport, bridge, and port systems will require design software, building information modeling (BIM) for better project management and file-sharing applications. These systems will drive demand for hardware, software, and services.
There are four leading subsectors with commercial opportunities for U.S. companies:
The tech-savvy Filipino population with few data protection mechanisms makes the Philippines extremely vulnerable to cyber-attacks and incidents. The COVID-19 pandemic has changed the Philippines’ digital landscape. A February 2020 survey declared that 43% of Philippine private companies had increased allocation towards cybersecurity solutions investment. Eighty six percent (86%) use anti-malware and antivirus tools, 59% uses next-generation firewalls, and 47% are starting to invest in cloud-native security. Due to the continued adoption of cloud storage and solutions, software-defined area network security is gaining market popularity.
Market Opportunities: Philippine Government, the business process outsourcing (BPO) industry, education sector, financial sector, health sector, and the telecommunications industry are key vertical markets for IT. There is also growth in e-payment and fintech platforms. BMI forecasts the Philippines software and software sales will reach $95 million by 2025.
The National Cybersecurity Plan 2022 of the Philippine Department of Information, Communications, and Technology (DICT) is now on the rollout of cybersecurity infrastructure, including the capability-building program for all the national agencies and local government units. The Philippine Government continues to amplify the Data Privacy Act (RA 10173), set data protection standards, and recommend that all entities register with its online portal and hire a Data Privacy Officer. The rollout with the allocated budget indicates opportunities for U.S. software and hardware solutions providers.
Software and Services
Philippine software and software service sales will reach $95 million by 2025. From 2020-2021, software sales benefited from increased demand for devices from Filipinos working and studying remotely. Local firms have also pushed for digital transformation, increasing spending on enterprise architecture projects. The purchases were also driven by Microsoft Windows 11 releases to access significant security and feature updates. The 2021 IMD Digital Competitiveness Ranking report listed the Philippines as a lowly 58th out of 64 countries.
More than 400 software firms operate in the Philippines, with U.S. and European firms dominating the enterprise application segment. The Philippines’ robust business processing outsourcing (BPO) industry is a strong market customer for enterprise applications. In 2020, the Philippines’ ICT associations noted that the Philippine BPO industry generated $26 billion in revenue, and this figure is projected to reach $29 billion in 2022. Domestic consumers include sizeable private sector entities such as financial institutions, healthcare facilities, and conglomerates with various business units seeking digitization solutions in HR, accounting, business intelligence, and data warehousing.
In 2020, the Philippine Statistics Authority noted that of 957,620 businesses, 99.51% are micro, small, and medium enterprises (MSME) and MSMEs are emerging customers in this segment. However, they often lack the digital tools necessary to expand their businesses efficiently. Other sectors with software needs include the retail, manufacturing, and fintech sectors. Many local businesses are emerging, providing low-cost consulting, maintenance, and systems integration services.
Data Hosting and Processing: In 2020, the Asia Cloud Computing Association ranked the Philippines 11th in cloud readiness out of 14 Asian countries. The data hosting and processing segment is expected to grow as more firms seek to utilize cloud solutions for efficiency and resilience in the new normal. Legacy telecom firms are building their own data centers to service more customers.
Large local BPO firms are the consumers of cloud solutions, utilizing regional hubs in Singapore. Most global cloud providers partner with a local firm to offer services.
Market Opportunities: The Philippine Government’s Digital Transformation Strategy seeks to improve the Government’s digital infrastructure, connectivity, and ease of doing business through innovative tools and solutions. Software development for revenue management systems, tax collection, and a one-stop online platform for business processing are projects in the pipeline. Government cloud data centers, employee email, and national archives management are also part of the Government cloud-first policy.
The COVID-19 pandemic has spurred Philippine cities to improve citizen services. Their constituents were vulnerable during the lockdown, and they relied heavily on the support of their city governments. Cities moved to digitize services and set standards for data storage, protection, and utilization, by rolling out health IT and applications for contract tracing, financial assistance distribution, and city-wide vaccination programs.
Typhoon Odette in 2021 and the Taal Volcano eruption in 2020 emphasized the importance of ICT solutions for disaster response and resilience management programs. Following the May 2022 national elections, newly elected city officials will announce new ICT priorities and projects.
Market Opportunities: Several ICT approaches emerged to mitigate the impact of the COVID-19 pandemic. Efforts vary from command center development, disaster risk mitigation, resilience management, digital health and education, and data center upgrades to cybersecurity and analytics solutions. There are 17 cities in Metro Manila embarking on digital transformation projects. Beyond Metro Manila, Cebu and Davao are also undertaking digital transformation projects as part of the Association of Southeast Asian Nations (ASEAN) Smart Cities Network.
In the April 2022 Ookla Speedtest Global Index, the Philippines ranked 95th of 142 countries in mobile internet speed with 19.45 Mbps (global average of 30.75 Mbps) and 59th of 181 countries with 55.21 Mbps (global average of 63.46 Mbps) in fixed broadband speed. By 2025, the number of mobile subscribers in the Philippines will reach 159 million, and broadband subscribers will number 10.8 million.
Digital transformation is being led by local telecommunications firms and emerging broadband companies, and these efforts are contributing to strong telecommunications industry growth. Major telecommunications players will spend a combined total of $15 billion on the rollout of their services over the next three years. Legacy telecommunications players lead the 5G rollout with a combined total of 4,000 5G sites across the country. Emerging broadband providers are focused on 5G, mobile services infrastructure, and satellite connectivity projects.
The pandemic increased the demand for connectivity as more and more Filipinos were working and studying remotely and accessing online content and platforms. According to market research firm BMI, higher data revenues are expected with mobile video streaming and e-commerce growth.
In March 2022, former President Duterte signed the amendments to the Public Service Act (RA 11659). This significant ICT amendment allows up to 100% foreign ownership of public services in the Philippines, including telecommunications. This measure should foster competition and provide better quality services at a lower cost.
In May 2020, DICT published its first guidelines of the Common Tower Policy for independent cell tower construction in support of the Free Public Internet Access Act (RA 10929). Private companies interested in participating should register at DICT’s Common Tower Registration Portal. This will improve the rollout of mobile networks considering that the Philippines only has 22,000 combined cell towers operated by the three major telecommunications companies.
In May 2021, DICT and the Bases and Conversion Development Authority (BCDA) tendered the first phase of its National Broadband Plan valued at $2 million, which is the rollout of a bypass cable and fiber-optic network. The other phases of the national broadband plan include the national free Wi-Fi program, satellite overlay, and the common tower policy.
Market Opportunities: With full foreign ownership allowed in the telecommunications sector, foreign investors have greater control and significant incentives to participate in the market. The 159 million mobile subscribers would eagerly switch carriers to obtain better coverage and more economical pricing options.
All telecommunications players are expected to upgrade their network capabilities, install fiber-optic and sub-sea systems and cables, purchase modern networking equipment/storage/servers, and utilize cloud and cybersecurity services. The 5G rollout requires digital transformation solutions, including 5G-ready consumer devices. There are opportunities for U.S. financing companies to support medium to long-term telecommunications expansion projects.
In addition to the four leading subsectors, the Philippines is considered a strong market for consumer electronic products.
Statista reported that consumer electronics revenue in the Philippines will reach $9.8 billion this year with an annual growth rate of 0.25% through 2026. Strong demand is driven by Filipinos working and studying remotely as well as the emerging middle class. It is estimated that 1.5 million households will reach an annual income of $25,000 by 2024. This group will purchase consumer electronics for the first time and is eager to own mobile devices, game consoles, televisions, desktop and laptop computers, and other electronic devices.
Market Opportunities: Consumer electronics market spending for 2021-2026 will reach $9.8 billion. The most popular subsectors include mobile phones, computer hardware, laptops, tablets, and audiovisual devices. The mobile device market is the single largest sector with over 55% of all consumer electronics-related spending.
About 44 million Filipinos own a smartphone and media reports that Filipinos spend an average of 10 hours daily online, with 144 minutes on social media platforms. Major contributors are long commute times, working from home, virtual schooling, and other computer-based work. Emerging markets include premium products such as smartwatches and fitness trackers that target young professionals who use their disposable income for luxury purchases. A side note to consider is that the actual purchasing power for the nation is distorted by the $33 billion in annual overseas foreign worker (OFW) remittances that enter the country.
- Department of Information and Communications Technology
- Department of the Interior and Local Government
- National Privacy Commission
- National Telecommunications Commission
- League of Cities of the Philippines
- Philippine Software Industry Association (PSIA)
- IT & Business Process Automation Association Philippines (IBPAP)
John Giray, Commercial Specialist, U.S. Commercial Service Philippines