Is the Philippines Asia’s next technology tiger?
The Philippines has been a popular destination for foreign entities looking to enter emerging markets for the better part of the last two decades. Today, investors are increasingly inclined to allocate their resources to the country’s tech and innovation sector, and for a good reason. In a state riddled with problems the moment you step out the door, opportunities to provide solutions are always present and plentiful.
Filipinos have long adhered to a narrow concept of success commonly seen in third world countries: obtain a good education (on paper), secure a stable occupation, work hard, and rise through the ranks. In a fast-paced world where technology is evolving at an exponential rate, such cases of tunnel vision simply cannot remain the paradigm.
Witnessing every foible and triumph of globally renowned entrepreneurs has certainly left its mark on the Filipino people in recent years. The abundance of Internet resources and communities formed through social media, forums, and streaming platforms have diversified career aspirations among locals, overshadowing the old world concept of hustling and grinding with diminishing returns. New perspectives are also challenging traditional industry practices, forcing even the largest conglomerates to work alongside startups to remain competitive in their respective fields.
Touted as one of the most vibrant startup communities in SEA, the Philippines is currently undergoing a massive shift from being a service-oriented industry that addresses the needs of other markets to individuals creating startups to cater to their own demographic.
The country averaged an annual 1.24% GDP growth rate from 1998 to 2018, but analysts see it increasing to anywhere between 5.5% to 6.5% in 2019, effectively making the country one of the fastest-growing economies in the world (Trading Economics). A rising generation of entrepreneurial-minded youth and saturation of foreign investment in neighboring countries like Singapore and Indonesia have also convinced investors to deploy capital into the country.
Local startups have proven their ability in applying the latest innovations. Fintech, in particular, has the highest rate of adoption because it solves one of the population’s most pressing needs: access to fast and hassle-free financing.
Acudeen Technologies, a marketplace for movable assets, secured over US$11.2 million worth of invoice purchases–an impressive feat for three years of operation. Cashalo, a mobile app that provides on-demand access to loans, received a $190 million investment in 2018 from JG Summit Holdings Inc. and Hong Kong-based Oriente in a joint venture. Indonesian superapp GOJEK got their slice of the pie by acquiring a majority stake in Coins.ph, one of the most prominent local fintech startups, for $72 million in 2019.
Local tech talent is another factor that makes the country so attractive to investors and established startups looking to expand regionally. Angelo Valdez, CEO of Singapore-based human resource (HR) startup Diplomazee, echoes this sentiment. He expanded his company into the Philippines after seeing a massive gap between fresh college graduates and companies looking for new talent.
“Due to its massive business process outsourcing industry, the Philippines has developed an incredibly strong tech servicing industry,” says Valdez.
He also saw the country as an ideal market for testing new products due to a number of socioeconomic factors.
“With a fast-growing middle class that can afford technology, a largely fluent English-speaking population, a society that is addicted to social media, and low labor and operating costs, the Philippines apparently has all the ingredients of an emerging tech tiger,” says Valdez.
The government also introduced advantages for startups over their competitors who have yet to enter the market. Among these are tax cuts and other financial incentives for overseas and offshore businesses. Companies that qualify can enjoy income tax holidays, or even a 5% tax rate if they are located in a special economic zone.
That being said, entrepreneurs like Valdez recognize that it’s “a give-and-take process” between allowing startups to benefit from local talent and resources, and encouraging them to set the foundation for “a stable economy and sustainable growth and development” in the country.
Accelerators are in no short supply, boosting governmental efforts and acting as a pillar for both aspiring and experienced entrepreneurs. Notable among these is Launchgarage, which was co-founded by serial entrepreneurs Jay Fajardo and Jojo Flores.
QBO Innovation Hub is another example; it’s a partnership between the Department of Trade and Industry and JP Morgan catering to early-stage startups. StartUp Village, in the same vein, aims to assist entrepreneurs in turning their ideas into reality through their incubation program. The Department of Science and Technology also introduced a Tech-Business Incubator Initiative to provide capital and the necessary resources to cultivate entrepreneurialism within select universities across the country.
There’s no denying that winds of change are sweeping the Philippines, as the older generation’s service-oriented industries are slowly making way for a leading ecosystem for technology. Without a shadow of a doubt, with the ecosystem being as vibrant as it is today, the Pearl of the Orient is poised to be the country to watch in the coming years.
About the Author
Russ is the Global Accelerator Exchange Program Manager at Launchgarage Innovation Hub, the Philippines’s premiere incubator and accelerator for startups. In 2015, he founded LX, an Internet of Things (IoT) startup that led Russ to be named Connected World Magazine’s Top 10 IoT Pioneers Under 40 in 2018. He is also a consulting member of Singapore-based Acudeen Technologies.