Part 1
For over more than fifty years, I have been briefing business executives and other professional people, both in the private and public sectors, at least twice a year in what we termed Mid-Year and Year-End Economic Briefings for “Friends of CRC” in the early years and later on “Business Economic Club” (BEC) as CRC evolved into the University of Asia and the Pacific. The one organized by the BEC last August 27, 2020 was the first ever MId-Year briefing in which I participated that was completely online. If the GCQ doesn’t change much from now to December 2020, it is most probable that the Year-End Briefing will also be delivered online. Another distinguishing feature of our last briefing was that, unlike previous ones, it did not start as usual with a forecast for the whole economy or to use the technical term, a “macroeconomic forecast.” It immediately started with a look into a specific sector of the economy, the digital industry. The very manner in which the briefing was being delivered to some 200 participants through Zoom was an eloquent testimony that anything related to digitalization and e-commerce does not even need a V-shape recovery. It does not have to recover because this sector that represents the so-called Industrial Revolution 4.0 has been growing great guns precisely because of the pandemic. As an anecdotal example, the owners of Zoom have become multi-billionaires overnight! Those who organized this “webinar” also wanted to dispel the very gloomy mood that resulted from a previous announcement that the GDP of the Philippines tanked by 16.5 percent in the second quarter of 2020. We wanted to deliver the message that there are sectors like the digital industry (together with food and agribusiness, health and wellness and education and manpower resources) that do not even need a V-shape recovery because they have still been growing in the midst of the pandemic.
The first speaker in the briefing who covered Digitalization and E-Commerce is one of the most prominent practitioners of digitalization, having been one of the first digital natives at the highest levels of management in such industries as telecommunications and the airline sector. Danilo (Bong) Mojica II combines marketing expertise with advanced knowledge of digital technology. He is a management consult helping both big and small businesses to adapt to digitalization and e-commerce. He is also an educator, being in the business faculty of UA&P. An entrepreneur himself, Bong is the investor and founder of Tailwind Digital Solutions. That is why at the very beginning of the briefing, he was able to immediately uplift the mood with his bullish forecasts for the Philippine digital sector. Consistent with his being an educator, he first made sure he defined his terms such as digitalization and e-commerce. The first he defined as the use of digital technologies to change a business model and provide new revenue and value-producing opportunities; it is the process of moving to a digital business. The second term he defined as a business model that lets firms and individuals buy and sell things over the internet.
To counteract the pessimism about certain sectors of the economy that will be permanently hurt by the pandemic (such as some sectors of the travel, tourism, entertainment, retailing, and restaurant businesses), he painted a bullish picture of the impact of digitalization on the economy, which has been given a big boost by the pandemic. The digitalization of the economy goes much beyond the generation of employment, especially of highly educated and skilled manpower. it also improves the quality of life, expanding access to education, sanitation and healthcare and boosting citizens’ access to public services. This latter benefit is increasingly visible in such smart cities as Pasig in Metro Manila and Balanga, the capital city of the province of Bataan whose poverty incidence is one of the lowest in the Philippines at 4 percent of the population (vs. 16.5 percent before the pandemic). Digitalization also allows governments to operate with greater transparency and efficiency, enabling society to be more transparent, increasing public participation and the government’s ability to disseminate information effectively. Digital initiatives could also lead to greener environments since 26 billion tonnes of net avoided CO2 emissions are estimated to be achieved from 2016 to 2025 through the widespread use of digitalization and e-commerce.
Worldwide, e-commerce was valued at $572 billion in 2010, swelling to $246 trillion in 2019. In the US alone, e-commerce amounted to $169.1 billion in 2010, growing to $595.5 billion in 2019. Digitalization has tremendous potentials in the Philippines, despite its still being a low-middle income country. Already 67 percent of the population are internet users even before the pandemic. With instant changes happening the way people work at home, go to school online, order daily necessities though the internet, etc., that percentage is expected to grow by leaps and bounce in the next two years. Filipinos are well known worldwide as the top users of internet services at 9 hours and 45 minutes daily compared to the global average of 6 hours and 43 minutes daily. Of course, there is still the question of whether or not all these hours of use make for productivity at work. But they spell a big demand for digital devices and services. As an anecdotal information, because of changes in the way public education is being delivered during the ongoing pandemic, even the poorest households in the rural areas are bartering their livestock for second-hand cellphones to enable their children to participate in blended learning.
As regards digital transactions in the Philippines, there are 48.9 million of us who are making digitally abled payment transactions with a total annual value of digitally enabled consumer payments amounting to $7.35 billion (an increase of 20 percent from 2019 to 2020). The average total annual value of digital payment transactions per digital payments is $150. Those who searched online for a product or service to buy was 91 percent of internet users and those who actually purchased a product online amounted to 76 percent of internet users. Since it is expected that the threat of the COVID-19 may linger for at least the next two years, one can imagine the continued large increases in these figures in 2021 and 2022. As a guide to consumer behavior, E-commerce spending by category is as follows: video games, 32%; travel and accommodations, 31%; electronics and physical media, 11%; fashion and beauty, 10%; food and personal care, 7%; toys, do It yourself (DIY), 7% and digital music, 2%.
Entrepreneurship in the digital space has literally exploded during the pandemic. Just before the first big lockdown on March 15, 2020, business names registered under retail sale via internet numbered, 1,753. As the economy went from one lockdown to another as a result of COVID-19, this number swelled to 67,589 representing an increase of an astronomical 3,756 percent. In the whole of 2019, there were only 1,600 businesses under retail sale via internet.
Those looking for opportunities in the digital industry in the so-called New Normal that will come after the pandemic is put under control are given a list by Mr. Mojica of the trends that have to be watched very closely. These are: online shopping and robotic deliveries; digital and contactless payments; remote work; distance learning, telehealth; online entertainment; supply chain 4.0; 3D printing; robotics and drones; and 5G and Information and Communications Technology (ICT). If we want to see our future now, I would recommend that we take a very close look at what is already happening in China today. China is and will be the most digitalized economy in the world in the coming years. We cannot wait for tomorrow to come. Mr. Mojica suggests that the government, private companies and academic institutions should cooperate to launch varied upskilling programs to fill the gap in digital skills amid tight labor market. I suggest that we start these upskilling programs by targeting first the 1.2 million workers in our BPO-IT sector, especially among those who are employed in the voice-oriented segment of the industry, the most vulnerable to being rendered obsolete by robotization and Artificial Intelligence (AI). (To be continued).
For comments, my email address is [email protected]