The Philippines has a booming internet and mobile economy and a thriving startup ecosystem. In fact, there is no dearth of online resources making a case for the Philippines as your startup base; even we have touched on why the Philippines is an ideal destination for business growth and scalability in the past. 

However, in the past two years, the market has changed dramatically. When it comes to major business decisions such as choosing the right next destination for expansion, staying up to date and digging deep is always important. 

As such, in the second episode of the Market Access Series in partnership with Globalization Partners, we explore why and how you should expand your business to the Philippines. Featuring Joan Yao, Vice President of Investments at Kickstart Ventures; Fita Aldaba, Undersecretary for Competitiveness and Innovation at the Department of Trade and Industry (DTI); and Charles Ferguson, General Manager – Asia Pacific of Globalization Partners; the panel was moderated by Dennis Poh, Founder and CEO of Legatcy.

The Philippines is on the right track

Fita from DTI opened the session by reminding everyone that in the pre-pandemic context, the Philippines was considered Asia’s economic star. “Amidst the pandemic, the country, like most parts of the world, experienced economic setbacks in 2020 but very quickly in the next year itself, we were back on track with a 5.6 per cent average growth, and the forecast for this year is that we will be able to reach 6 to 7 per cent, which is equal to or more than the pre-pandemic levels,” she shared.

Fita added that the country’s inflation has slowed down to 3 per cent, unemployment has dipped to 6.6 per cent as of December 2021, the production index has surged, and the export of goods and services has also increased by 8.3 per cent as of last year. “Foreign Direct Investments (FDI) has also increased by a whopping 52.5 per cent in 2021” Fati added.

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The Philippines is also striding ahead in the field of digital transformation with the pandemic accelerating technology adoption and innovation. Reports suggest that there were over 76.01 million internet users in the Philippines in January 2022. The Philippines’s internet penetration rate stood at 68.0 per cent of the total population at the start of 2022. Internet users in the Philippines increased by 2.1 million (+2.8 per cent) between 2021 and 2022.

Furthermore, Fati quoted a Microsoft survey that found that 8 out of ten companies in the country are ramping up industrialisation efforts while 88 per cent of the surveyed companies said that they consider innovation a must.

Ideal from a VC standpoint, business opportunities galore

Joan from Kickstart Ventures shared that when considering a certain investment opportunity from a VC standpoint, the three Ts are crucial: team, TAM (total addressable market), and timing. 

She explained, “if you think about the Philippines in this framework, the TAM is large and growing. In 2020, the digital economy of the country was valued at USD 9 billion by the end of 2021, it was valued at USD 17 billion showing almost a 100 per cent year-on-year growth.”

“For a long time, the digital consumers were just not there but this is a silver lining to the pandemic and this is what tech startups can leverage,” she added. Highlighting the third T, team, Joan pointed out that the Philippines’ large English-speaking population is an advantage in terms of global startups looking for local talent to build their local hubs.

Emerging trends: Challenges and opportunities

With almost every section of business and life being disrupted by digitalisation today, it can be difficult to focus on a specific area or niche. While almost all sectors, including fintech, healthtech, edtech, ride-hailing, and now WEB3, are burgeoning in the country, Joan said that businesses must identify gaps and inefficiencies — sectors that can genuinely benefit from technology and new business models. 

“Ranging from fields like mobility, agriculture, education, healthcare, housing, and tourism — these fields require both online and offline investments,” she added.

Fita shared that despite fintech booming in the country, even today, there are around 51.2 million unbanked Filipinos. This is around 70 per cent of the total population. “As such, the Philippines Central Bank is implementing its digital payments transformation roadmap to convert over half of the country’s total transactions to digital by 2023. The goal is also to enhance interconnectivity, interoperability, and financial integration between domestic and cross-border digital payments, and to promote financial inclusion,” she shared.

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Speaking on some of the challenges businesses should consider before moving or expanding to the Philippines, Ferguson said, “no matter where you bring your business, there are certain challenges that are a given: From trying to understand the new regulations and policies to settling in the new infrastructure and figuring out the product-market fit. So businesses need to be ready for that.” However, the Philippines is known for its liberalised and business-friendly open economy. So, it should be relatively easier to establish your company here. 

Fita reassured that irrespective of political changes that might happen in the future, which is a normal progression, the country’s strive for innovation and digital disruption and the creation of new products and services will continue. Joan added that there has been an irreversible sea change and a dramatic shift from offline to online and there is a huge opportunity for tech startups in the Philippines. Lastly, Ferguson encourages businesses looking to expand across the region to leverage the Filipino talent pool which consists of highly skilled professionals. Study the ropes around hiring remote talent from the Philippines by scheduling a demo here.

To learn more, view the webinar here.

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This article is produced by the e27 team, sponsored by Globalization Partners

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