The Philippines is ready for digital trade integration with the Asia-Pacific but it has to properly implement policies to ensure it can successfully integrate its digital trade with the region, findings of a study indicate.
The Philippine Institute for Development Studies (PIDS) published a study assessing the country’s readiness for regional digital trade integration with the Asia-Pacific by using the Regional Digital Trade Integration Index (RDTII) framework.
Using the RDTII framework of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), the PIDS research has found that the Philippines exhibited a relatively open policy and regulatory environment for digital trade, with an overall 2020 assessment score at 0.342.
Moreover, the Philippines ranked as the ninth least restrictive economy from among all the 22 Asia-Pacific economies that were assessed in 2020 and has also performed slightly better against the Asia-Pacific regional average of 0.420 during the same year.
The country performed best in three pillars: tariffs and trade defense measures (pillar 1); cross-border data policies (pillat 6); and intermediary liability and content access (pillar 8).
“Perhaps the best factor strengthening the Philippines’ position to integrate itself with the Asia-Pacific is its exceptionally low tariffs (pillar 1) that synergizes well with having only slightly restrictive non-tariff measures (NTMs) being imposed (pillars 9 and 10) on digital goods,” PIDS senior research fellow Francis Mark Quimba, research specialist Sylwyn Calizo Jr., Project Evaluation Officer III (Philippine APEC Study Center Network) Jean Clarisse Carlos, and senior research fellow Jose Ramon Albert said in a discussion paper funded by UNESCAP.
The paper said the Philippines, however, faces issues on NTMs, including the trade of dual-use strategic goods such as electronics, computers, and telecoms of specified technical standards that have become highly regulated since October 2020.
Likewise, the country does not recognize enterprises’ self-certification for product safety, it said.
“These two issues prevent the Philippines from further reducing trade barriers for the trade of digital goods,” it added.
The paper said another factor strengthening the Philippines’ position is its continuous improvement on intellectual property rights (IPR) enforcement (pillar 4) that complements the country’s liberal access to online content (pillar 8).
“The protection of IPR is a key factor enabling growth in the digital economy. Thus, it is important that policies form a conducive environment that protects IPR,” it said, adding IPR enforcement is an important part of the digital economy as digital sectors are dramatically producing and distributing information driven products and services, including digital creative products.
The paper further said the country’s strong policies on data (pillars 6 and 7) is another key strength, noting such policies, especially the Data Privacy Act of 2012, are strong enough to create a conducive environment for regional digital trade integration.
“However, the Philippines’ strong policies on data could also increase trade costs. For instance, Philippine laws require minimum data retention requirements on certain contents and hiring data protection officers,” it added.
In contrast, the country performed worst in pillar 2 (public procurement); pillar 3 (foreign direct investment); and pillar 5 (telecommunications infrastructure and competition) using the RDTII framework.
“…Foreign equity limitations (pillar 3) possibly banning foreign equity on some electronic commerce and electronic retailing is a major challenge to the Philippines’ digital trade integration with the Asia-Pacific. The Philippines has consistently imposed strong restrictions on foreign direct investments in sectors relevant for digital trade,” it said.
The paper cited that in certain circumstances, foreign equity in electronic commerce can be prohibited from having any foreign equity.
“Electronic commerce represents an important part of digital trade, which means that bans on foreign investment can impede the digital economy’s growth, thereby making digital trade integration difficult,” it said.
The paper identified another major challenge to the Philippines which is its highly discouraging policies affecting foreign bidders’ participation in public procurement (pillar 2).
“Foreign bidders also participate at a disadvantage because of domestic preference and foreign equity restrictions. This suggests that public procurement for digital goods and services are skewed towards domestic bidders, which may have an adverse effect on competition,” it said.
The paper said the infrastructure gap on both Information and communications technology (ICT) and transportation is also a key concern affecting online sales and transactions (pillar 11).
“Essential services to remote areas rely on a dependable and affordable ICT service, which the Philippines does not have. Moreover, developing the transportation sector remains important, even if transactions occur digitally, because the actual product still needs to go through logistics services in order to be delivered, and logistics is affected by the quality of transportation infrastructure,” it added.