The world is collectively experiencing an accelerated shift to the digital age due to COVID-19. Consequently, innovation is now more than just a trend but a necessity.
Within Southeast Asia, startup ecosystems from countries like Singapore, Indonesia, Thailand, and Malaysia are thriving more than ever. And with the demand for digitisation also comes the need to expand in unserved markets as well.
Easing into this milestone is never easy, which is why markets with great potential for innovation and entrepreneurship like the Philippines could be worth recognising and exploring. From their booming internet and mobile economy to their growing startup ecosystem, we’ve come up with 4 reasons why you should expand your startup to the Philippines.
- Excitement in the Philippine economy
With a population of almost 110 million people, a GDP of US$367.36B, and a GDP growth of 6.6%, the Philippines is a developing market economy—ranking 3rd as the highest nominal GDP among Southeast Asia countries, just behind Indonesia and Thailand. Compared to 2019 where they ranked 5th, the Philippines saw one of the fastest growths in SEA and projects an even higher growth this 2021. According to Oxford Economics and economist Sung eun Jung, though the Philippine GDP was contracted by 9.6% in 2020 due to the pandemic, it is predicted to grow by 7.7% in 2021.
The contributors of the Philippines’ GDP are the service, industrial, and agricultural sectors. Making up 60%, the service sector is mainly driven by the business process outsourcing (BPO), tourism, and export services industries.
- An unmatched internet and mobile consumption in need of augmenting
The Philippines’ internet and mobile economy is one to find strength in as they rank 1st place globally for most time spent online, amounting to an average of 10 hours a day online. Within that timeframe, nearly 4 hours is spent on social media, like Facebook and YouTube. With the Philippine internet economy estimated to be at US$7B, the top verticals that make that up are e-commerce, online travel, online media, and ride hailing.
Of its population of 109 million people, 67% of them are internet users. The internet economy is foreseen to grow by 4 times, amounting to USD$28B by 20205, which was primarily driven by the growing e-commerce sector, as shared by the Department of Trade and Industry.
- Ecosystem support
With the economy improving, and an internet and mobile-savvy market, the Philippines is also showing initiatives to advance innovation. For one, the country ranked 50th in the Global Innovation Index in 2020—making it to the top 50 for the first time, which gives them one of the most significant overall rank progressions.
Government efforts to further the innovation industry are exemplified by the Philippine Innovation Act and the Innovative Startup Act, both of which have objectives to further the science, technology, and innovation environment in the Philippines. Particularly, the Innovative Startup Act includes:
- Providing visas to foreign owners, investors, and employees establishing, investing, or working in a qualified innovative startup business or support business;
- Providing incentives and subsidies to startups in the Philippines;
- Establishing Philippine Startup Ecozones; and
- Providing assistance to startups in processing of business registration requirements and protection of intellectual property.
Complementing this is the government’s Philippine Development Plan which ensures delivering equitable tax reforms, improving market competition, and improving ease of doing business in the country. Though the Philippines still has a long way to go in terms of ease of doing business, they jumped 29 spots in the EODB 2020 report.
Offering additional support are the enablers and major stakeholders within the Philippine startup ecosystem. These organisations are more than willing to open doors for startups that would opt to set up shop in the country, accelerating their access to working space, talent, clients, or capital. In terms of infrastructure, improvements are found with the likes of a new telco player, DITO, which surpassed the required minimum average broadband speed, for example.
- Industries welcoming digital disruption
Fintech in the Philippines — Coming out of the country’s emerging startup scene are notable companies like Coins.ph, First Circle, and Paymongo, all of which are in the fintech space. Gcash of Mynt (917Ventures of Globe Telecom) has over 33 million users, while Coins.ph, which was purchased last year by Gojek, has about 10 million users.
Naturally, these success stories emerged out of the huge opportunity in the financial services sector, where 52 million Filipino adults are unbanked and underbanked, (making up 77% of the adult population), as well as the 2,745 rural bank offices within the country. An example of a startup that addresses this market is Brankas, with Founder Todd Schweitzer having successfully set up shop in the country.
With the largest Philippine export being its people, the 10 million OFWs (Overseas Filipino Workers) and its market is one that has yet to see significant technological advances. The $30B remittances that enter the country annually, pose pain points that drive startups to address this. Other industries worth looking at for digital disruption are the BPO industry, employing over 1.5 million people and generating $29B of revenue yearly, as well as the service sector, making up 60% of the country’s GDP. Processes of large volume recruitment are still highly manual and fragmented, to say the least.
Partake in the journey of Philippine digital transformation
Foreign startups that saw the Philippine market’s potential have successfully converted the early adopters of the market, and eventually fundamentalised the shift of Filipino consumer behavior towards digital businesses. For new foreign startups who wish to enter the Philippines, it’s recommended that you have a deep understanding of the context of the market, embracing the strengths of the industry to fully make use of the opportunities that come from the plethora of gaps still untapped.
The good news is there are currently available programmes to ease the process of entering the Philippines such as The Global Innovation Alliance (GIA) Manila Accelerator Program by Enterprise Singapore in partnership with Plug and Play. It is a market sensing and acceleration programme for Singapore startups that are looking to expand their business in the Philippines. Through this programme, startups can expect exposure to mentorship and workshops led by local industry leaders, as well as networking, fundraising, and business development activities.
Join the GIA Manila Acceleration Program Batch 1 here.
Overall, the Philippine startup ecosystem has a long but exciting way to go. The trends of its economy, the internet behaviour of its people, and the results of the efforts of its various stakeholders suggest that there is great potential in the market — a growing market for your growing startup.
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This article is produced by the e27 Team, sponsored by Plug and Play APAC.
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