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, it is a necessity.
Within Southeast Asia, startup ecosystems in countries like Singapore and Indonesia are thriving and their neighbours such as Thailand, Vietnam, and the Philippines are not far behind. Demand for digitisation and digitalisation is growing fast in these undeserved markets.
Today we will take a look at the Philippines, a country with a booming internet and mobile economy and a growing startup ecosystem. Here are five 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$367B, and a GDP growth of 6.6%, the Philippines is a developing market economy—ranking 3rd highest in nominal GDP among other Southeast Asia countries, just behind Indonesia and Thailand. Compared to 2019 where they ranked 5th, the Philippines saw one of the fastest growths in the region and projects an even higher growth in 2021. According to Oxford Economics and economist Sung Eun Jung, although 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 main contributors to 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.
- Unmatched internet and mobile consumption
The average internet user spends 10 hours a day online which makes the Philippines’ internet and mobile economy an important one, ranked 1st place globally for amount of time spent online daily. Nearly 4 hours is spent on social media platforms such as Facebook and YouTube, with trends such as social commerce picking up rapidly.
The Philippine internet economy is estimated at US$7B, with top verticals being e-commerce, online travel, online media, and ride hailing. Among the population of 109 million people, 67% of them are internet users. The internet economy is projected to grow by four times to USD$28B by 2025, primarily driven by the growing e-commerce sector, according to research by the Department of Trade and Industry.
- Strong 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 rank progress overall.
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. Although the Philippines still has a long way to go in terms of ease of doing business, they jumped 24 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, who just surpassed the required minimum average broadband speed, for example.
- Financial services—digital disruption in progress
Financial services was one of the first industries to be disrupted by technology and startups—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 o in the financial services sector, where 52 million Filipino adults are unbanked and underbanked, (making up 77% of the adult population), and 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 present multiple pain points that drive startups to address this.
- Agriculture—an industry ripe for innovation
Agriculture is one of the most important industries in the Philippines, accounting for almost 10% of GDP. The CoVid-19 pandemic created chaos in global supply chains, disrupting supply of essential goods and services and causing shortages of basic food supplies. Local authorities provided cash subsidies and vegetable seeds for households to grow “survival gardens” while residents resorted to eating alternative foods such as corn fungus.
Agriculture is a traditional, labour intensive industry, and with the average age of farmers in the Philippines rising, the use of technology for next-generation farming as well as to attract the younger generation to consider farming as a career has increased in importance. Innovation in Agritech is gaining pace, from the use of IoT devices and data analytics to improve crop yield to the use of e-commerce and digital platforms to offer farm-to-table and other solutions that improve efficiency in the industry. As the middle class continue to grow, demand for meat and other proteins provides opportunities for a new generation of startups focused on alternative foods.
Partake in the journey of Philippine digital transformation
Foreign startups that saw the Philippine market’s potential earlier on have successfully converted early adopters and have help shift consumer behavior of 70% of the population towards digital businesses. International startups looking to enter the Philippines now need to develop a deep understanding of their target markets and focus on matching their strengths to the gaps in respective industries.
The Global Innovation Alliance Manila Accelerator Program by Enterprise Singapore in partnership with Plug and Play is a market sensing and acceleration program for Singapore startups that are looking to expand their business in the Philippines. Through this program, startups can expect exposure to mentorship and workshops led by local industry leaders, as well networking, fundraising, and business development activities.
We welcome you to apply to join the inaugural batch of the GIA Manila Acceleration Program here.
The Philippine startup ecosystem has a long and exciting way to go. The trends of its economy, the internet behavior of its people, and the encouraging results of various stakeholders’ efforts suggest that there is great potential in the market — a growing market for your growing startup.
This article is produced and sponsored by Plug and Play APAC.
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