Global trade moves to the digital economy

IF anything positive came out of the pandemic, it could be the accelerated transition to the digital economy. As mentioned earlier in this space, the health crisis has highlighted the weaknesses of our telecommunications infrastructure and underscored the urgency of developing quality Internet connectivity. But with quarantines still limiting travel, economic activities have moved to the digital sphere out of necessity and despite inadequate infrastructure.

The change is not only evident in domestic trade, but also in international trade. Singapore, for example, has digital economy agreements (DDAs) with Australia, New Zealand and Chile. This city-state is also negotiating a similar treaty with the European Union and the United Kingdom.

The photo shows non-essential establishments inside a mall in Fairview, Quezon City, which are still closed. PNA PHOTO / TMT PHOTO FILE

The Philippines should follow this example. According to a Singaporean government website, “Digitization and technological disruption, accelerated by the impact of the Covid-19 pandemic, has dramatically transformed consumer behaviors and business models and created new opportunities. For example, e-commerce has allowed manufacturers to reach consumers directly. He added: “Secure and transparent cross-border data flows are essential for the growth of the digital economy and to ensure that the interests of consumers are safeguarded.

With DEAs, Singapore hopes to harmonize its digital rules and standards with its treaty partners and facilitate interoperability between systems in signatory countries. The agreements also aim to support cross-border data flows and protect personal data and consumer rights.

For businesses, the agreements aim to reduce operating costs and increase efficiency. Among other things, the treaties will also allow electronic invoicing and facilitate small and medium-sized enterprises (SMEs) in transactions with foreign companies on digital platforms.

Of course, the Philippines is far too complex and different to resemble its neighbor city-state. But that doesn’t mean that policymakers and business leaders here can’t learn from their counterparts there. The point is, they should.

The future

The Philippines lags behind Singapore and a few of its other Southeast Asian neighbors in digitization, but in all fairness there have been improvements. According to a World Bank report, the number of Internet users in the Philippines has more than tripled, from 23 million in 2010 to 73 million in 2020. According to the report, Filipinos spend about 10 hours a day on the Internet, half of which with a cell phone. to log in.

“In economic terms, the share of the added value of the digital economy in the GDP (gross domestic product), in constant prices, increased from 7% in 2012 to more than 10% in 2018,” said the World Bank . “During the same period, the added value of the digital economy has shown double-digit annual growth, exceeding on average 13%.

As expected, the World Bank also cited factors delaying digitization in the Philippines. These include the high cost and uneven quality of the Internet, limited adoption of digital payments, expensive logistics, and a business environment with low levels of competition.

Some might argue that the Philippines has a lot of issues to resolve before pursuing a DEA or some other form of digital treaty. We do not agree.

Obtaining these treaties will push the Philippines to strive for higher levels of digitization, which, of course, requires public and private investment and political reforms. The acquisition of higher capacities will be necessary to do business with potential treaty partners.

In fact, the United States Chamber of Commerce had suggested that the Philippines negotiate a DEA with the United States. Incidentally, the United States already has a digital trade deal with Japan, covering products such as e-books, videos, music, software, and games.

In fairness, Congress is working on measures to make it easier to import some of these products, especially e-books, by exempting them from local taxes. But nothing substantial has been done to facilitate the exports of digital products from the Philippines.

Filipinos can compete globally not only in the export of eBooks, but also software, games, and animation. And given the growing number of local feature films on streaming platforms like Netflix, Filipino films could also benefit from digital trade deals.

As many have said, the future is digital. The Philippines should act quickly to avoid being further left behind.

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About Monty S. Maynard

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