TECH4GOOD
The recent enactment of two pivotal pieces of legislation is poised to be a game-changer for the Philippines. Both are designed to enable the country to fully benefit from the ASEAN Digital Economy Framework Agreement (DEFA) once Congress ratifies it.
The Internet Transaction Act of 2023 aims to boost and safeguard e-commerce transactions in the country and ensure the development and promotion of e-commerce. On the other hand, the Tatak Pinoy Act of 2024 aims to enhance the Philippine industrialization strategy by improving the productivity and competitiveness of local industries in the global market.
With DEFA currently being negotiated by member states, the ASEAN integration journey is expected to reach new heights, intended to build an open, rules-based, and dynamic digital economy. The regional bloc aims to accelerate its transformation into a leading global digital economy by leveraging digital transformation to pave the way for greater integration from the current focus on physical integration. This move is expected to drive inclusive growth and development.
The drive for the region’s digital integration started in early 2020, when ASEAN member states established the region’s Digital Masterplan 2025. This plan aimed to make ASEAN a leading digital community and economic bloc and speed up its recovery from the Covid-19 pandemic. In 2022, the ASEAN leaders signed the Bandar Seri Begawan Roadmap, directing members to begin negotiations for the ASEAN DEFA with the expectation that it will be completed by 2025.
A study done by the Boston Consulting Group (BCG) and endorsed by the ASEAN Economic Ministers (AEM) meeting offered a comprehensive roadmap to accelerate the region’s digital economy. The roadmap lays down a forward-looking and aspirational DEFA (North Star DEFA) that can accelerate the region’s digital economy growth to $2 trillion by 2030 from its current trajectory of $1 trillion (Baseline DEFA).
The DEFA presents a pivotal moment for the Philippines, a nation with digital potential.
Examining the DEFA through a Philippine lens reveals exciting opportunities and challenges for the country’s digital landscape. The Philippine digital economy is expected to sustain its strong growth trajectory, reaching $35 billion by 2025, making it one of the fastest-growing digital economies in the region. This strong growth momentum is mainly driven by increased dependence on digital technologies brought about by the pandemic restrictions.
From a Philippine standpoint, achieving the baseline DEFA would involve prioritizing the establishment of a common ground for digital trade. This would include setting up harmonized standards for electronic products and services, mutual recognition of electronic certifications, and streamlining customs procedures for e-commerce. Accomplishing a North Star DEFA would involve deeper regional integration in areas such as interoperability of digital payment systems, digital infrastructure, adoption of emerging technologies, and robust data privacy standards that will allow a more unrestricted flow of data across borders.
By ratifying the DEFA, the country can gain access to new markets, attract foreign investment, and facilitate the development of domestic digital industries, resulting in more jobs and economic opportunities for Filipinos.
The DEFA emphasizes support for MSMEs in their digital transition. With a significant portion of the population engaged in Micro, Small, and Medium Enterprises (MSME), enhancing their capabilities to effectively participate in a digitally integrated regional economy can lead to more competitive businesses offering locally produced products and services to the region. This benefits the MSMEs and the consumers and fosters innovation and entrepreneurship within the country.
DEFA aligns well with the Philippine government’s push for digitalization. A priority goal of the current administration of President Ferdinand R. Marcos, Jr. is the digitalization of the country’s MSME sector. To achieve this goal, the Department of Trade and Industry developed its MSME Digitalization Agenda and Work Plan to allow MSMEs to thrive in the digitally-driven economic environment and enjoy a seamless cross-border trade experience with electronic documents and interoperable processes.
Entering into the DEFA negotiations will not be an easy ride, though. The Philippine negotiators will have to contend with domestic realities. Their main challenges relate to gaps in its national digital highway and its capacity to develop policies and regulations consistent with business model innovations. The DEFA covers contentious and complex topics, and regulations must focus on creating an enabling environment for digital trade, promoting innovation, protecting consumer rights, and addressing regulatory challenges brought about by innovations.
Given the Philippines’ current digital landscape, such as its 73.1 percent internet penetration rate, high usage of social media and e-commerce platforms, and a growing number of tech-savvy entrepreneurs, the country is well positioned to harness the benefits provided by DEFA. The ratification of DEFA is crucial for the Philippines. It perfectly aligns with its aspirations for economic growth and the national agenda for digital transformation aimed at enhancing the Philippines, standing in the digital global market.
(The author is an executive member of the National Innovation Council, Lead Convener of the Alliance for Technology Innovators for the Nation (ATIN), vice president of the Analytics and AI Association of the Philippines, and vice president of UP System Information Technology Foundation.) ([email protected])