Opening Australia-Philippines economic opportunities through digital economy cooperation

By Ella Parker, Research Intern

In August, Australia and the Philippines recommenced their Trade and Foreign Minister-level meetings after a seven-year hiatus and produced a “Philippines-Australia Plan of Action 2021-2022”. The “Plan of Action” details numerous areas for cooperation including defence, environmental protection, and disaster management. Its various dialogues, working group meetings and consultations intend to take stock of the bilateral relationship over the next two years, assess the current allocation of resources, and determine where to concentrate effort.

Activities under the Plan of Action are early steps towards upgrading the bilateral relationship to a Strategic Partnership, the type of relationship Australia currently enjoys with Singapore, Indonesia and Malaysia. A ‘Strategic Partnership’ can be characterised by robust ties across the security, trade, and people-to-people aspects of a bilateral relationship. However, where Australia-Philippines relations are concerned, their economic engagement lags significantly behind their strong defence and social links.  
The Australia-Philippines relationship is based on a shared wartime history and mutual values. Modern engagement between the two countries began with Australian involvement in the liberation of the Philippines from Imperial Japanese forces during World War II. Today, Australia is the Philippines’ largest defence cooperation partner, second only to the US.

The Philippines remains one of Australia’s most enduring bilateral relationships, yet our economic engagement is underdeveloped.

Capitalising on the Philippines’ growing digital economy

Elevating trade is an area of increased concentration in bilateral relations.

In addition to the 2021 Plan of Action, Australia will invest in the Philippines’ economic and social development under its Partnerships for Recovery program. Priority investment areas include supporting economic recovery post COVID-19, health, education, security, and increasing political stability.

The Australian Government has also contributed funds to establish the Philippines Public Private Partnership Centre: an institution dedicated to attracting private sector investment in infrastructure projects. These initiatives are extremely important for the Philippines at this time, as the country is experiencing rapid economic and social growth.

By 2030, the Philippines is forecast to experience the largest increase in working age population globally, at 26 percent – higher than India, Malaysia, Indonesia, China and Thailand. Over the next ten years, it is predicted the Philippines will have the second-highest urban population increase of all ASEAN nations. The Philippines’ rapidly urbanising, growing working age population with English proficiency is likely to increase the country’s market competitiveness in the Indo-Pacific.

Another distinguishing feature of the Philippines is its higher mobile and broadband internet subscriber density than the regional average. In addition, between 2019 – 2024, e-commerce in the Philippines is expected to grow by 37 percent, signalling an opportunity to capitalise on this growth through targeted support. The Philippines already has a lead in the business process outsourcing (BPO) industry and serves large OECD companies, including ANZ and Telstra.

The forecast growth of the Philippines’ economy, coupled with its high level of digital connectivity and expected e-commerce expansion, highlight information communications technology (ICT) as an area for potential enhanced Australia-Philippines’ collaboration.

Increasing and targeting Australian investment towards the Philippines’ ICT infrastructure and security and developing digital economy cooperation could expand opportunities for bilateral trade.

Public-private partnerships to drive digital infrastructure and security

With high levels of internet usage among individuals, the Philippines is already becoming an ideal market for e-commerce and ICT infrastructure industries, both as consumers and employees. With further investment in digital skills and education, the Philippines could become a hub for innovation. At the same time however, the Philippines’ digitally active population and mass data collection from the BPO industry, combined with an underdeveloped cyber security industry and limited digital infrastructure, make it vulnerable to cyber-attacks.

Once properly secured and maintained, the economic potential from the Philippines’ online industry will be on a large scale. By engaging at an early stage and addressing digital awareness, skills shortages and infrastructure, Australia could build relations with Filipino public and private enterprise, attract trade and investment, and support steady growth.

Ranking in the global top 10 for cyber security and resilience, Australia is well placed to carry out this type of investment. Furthermore, Australia has already proved its capacity to engage on the topic with Singapore and Indonesia, where Cyber Security Cooperation Memorandums of Understanding have been signed.

As well as public sector support from Australia, private investment would be valuable to the Philippines’ digital development.

Utilising the Philippines Public Private Partnership Centre would be an effective way to engage the private sector whilst maximising the benefit of existing Australian Government investment. From an Australian private sector perspective, the Philippines’ market offers opportunity for rapid growth as well as access to a large workforce and market. From the Philippines perspective, this method offers the opportunity to learn from Australian businesses, such as best practice for feasibility studies, and protect Filipino industries from vulnerabilities.

Among the top digital and cyber challenges faced by the Philippines are low ICT budgets, a limited talent pool of cyber security professionals, and inconsistent ICT infrastructure quality, including low internet speeds. These issues could be addressed through collaboration with the Australian private sector. However, a general lack of awareness of the opportunities presents a barrier to building these commercial linkages.

Going forward, an agenda of events such as the 2018 Australian Innovation Summit in the Philippines is necessary to inform Australian industry about these opportunities and facilitate the establishment of commercial links.

The 2018 Summit provided an opportunity for Australia to share home-grown innovation that could support the Philippines’ national priorities, proving an effective mechanism to leverage the complementary strengths and interests of both countries. As well as government-to-government cooperation, this opportunity should be marketed to the Australian and Filipino business communities as an untapped commercial opportunity.

The Australia-Philippines relationship is long-standing and stable but is ready to be elevated to a new level of cooperation. By bringing together Australian ICT capability and the digitally engaged Filipino population, they can work together towards improving the Philippines’ digital economy and enhance their trade opportunities while also contributing to cyber resilience.

Australia’s experience with research and development, risk management and digital services provides an opportunity to partner with the Philippines and strengthen the country’s ICT capability. Having prioritised regional security and economic growth, it is in Australia’s interests to share knowledge about the digital economy and improve cyber resilience in the region by engaging countries such as the Philippines, that have a strong capacity to develop a prosperous ICT sector.

By improving economic ties with the Philippines now, Australia stands to access this emerging market from an advantageous position.

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