SME digitization crucial for Philippines post-covid recovery

The COVID-19 pandemic has highlighted the need for the Philippines to address its “digital divide” and transition to becoming a digitally-powered economy, according to the country’s National Economic and Development Authority (NEDA) chief, Karl Kendrick Chua.

Like more or less everywhere else in the world, the last few months have been trying times for the Philippines, while the economic outlook for the road ahead is worrying. 

Last month, local press reported that poverty would likely worsen because of the effects of COVID-19, while the scale of the damage is yet to be known. 

The government’s medium-term plan was to cut poverty rates by 14 percent by 2022. It made headway on those ambitions in 2018 when the proportion of poor Filipinos was lowered from 22 percent to 16.6 percent. 

That was “a very good start”, Chua said, but the pandemic will likely have set things back, and the government must now work to reduce the risks “for the poor and those in the informal sector.”

Part of those efforts will include cash aid and assistance to SME employees in efforts to temper the outbreak’s economic impact, but looking further down the line, the goal must lie in empowering poorer populations and businesses with digital growth opportunities. 

Like other countries and industries in need of a 180-degree pivot, Chua said there was opportunity given the changing circumstances to embrace new approaches. 

“Before the Covid-19 crisis, we were on track to becoming an upper-middle income country this year. If we can quickly transition to the new normal, we can aspire for so much more.

“These are extraordinarily trying times and the road ahead of us continues to be challenging and uncertain. Bear in mind that this crisis, like others before it, shall also pass, especially because we are working together as a nation,” Chua added.

SMEs and digitization in the Philippines

Much of the Philippines’ economic recovery could hinge on the ability of its SME ecosystem to continue their digitization efforts. 

Small and micro enterprises especially comprise a huge chunk of the country’s business landscape. As of January this year, there were 4,769 large enterprises, 106,175 small enterprises, 4,895 medium enterprises and a massive 887,272 units of micro business establishments.

SMEs alone have managed to create over 2.5 million jobs in the country, further signifying the vitality of these establishments to the country’s development.

In a conference held before the pandemic took hold, the country’s Institute of Corporate Directors President Alfredo Pascual said: “To be able to tap business opportunities in the evolving digital economy, digital transformation is key.”

Just one example of those efforts could be a small food retailer embracing digital payment methods, for instance, or a food delivery app, in order to stay relevant and competitive in an ever-evolving marketplace.

Embracing new technologies like this can, in turn, introduce gig-work into the local surroundings, such as delivery drivers, and make the area more viable for investment from other tech-driven firms.

Ongoing transformation is necessary not only to secure greater revenues, but also to increase operational efficiency, boost data-reliance, improve marketing, and enhance research and development – and to entice back public spending power.

The ability to continue to push on innovation will continue to be an important part of both economic recovery and development. 

Of course, this is all incredibly challenging for cash-strapped businesses, many of whom will be hanging on by a thread, and the government must continue to supply improvements to internet bandwidth and prices to allow SMEs to access digital marketplaces and online services. 

The government must heed the call by providing SMEs with the necessary aid and incentives. Meanwhile, SMEs in the Philippines must charter plans to innovate within their means and seek viable solutions that can help their businesses flourish.

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