The COVID-19(coronavirus) pandemicunderscores the importance of digitalization for economicand social resilience. COVID-19 is restricting mobility andeconomic activity around the world, and the Philippines isno exception. As mobility restrictions and social distancingmeasures limit face-to-face interactions and activities, theavailability of affordable digital technologies has emergedas a key determinant of resilience. Indeed, digitaltechnologies allow businesses, the government and schools topursue operations online rather than completely shuttingdown. E-commerce and digital payments have permittedbusiness transactions to continue and goods to be delivered;online communication platforms have facilitated home-basedwork, virtual meetings, and remote classes; and governmentagencies in many countries have used online processes toquickly deliver social assistance to vulnerable households.Unfortunately, not all countries have been able to leveragedigital technologies to their full extent, because of pooraccess to high quality internet and long-held analogpractices. In the Philippines, COVID-19 has accelerated theadoption and use of digital technologies. However,digitalization is largely constrained by the country’s lowhigh-speed broadband penetration, which lags behindneighboring middle-income countries. The digital divide inthe Philippines is large with nearly 60 percent ofhouseholds not having access to internet, and unable to reapthe benefits of digitalization. As a result, face-to-faceinteractions and analog practices largely dominate in thePhilippines, making social distancing economically costly.For example, cash and cheques remain the dominant modes ofpayment while applying for permits and licenses typicallyrequires exchange of documents in person. Gatherings ofpeople waiting in lines are typical fixture for Filipinos tosecure goods and services. This report provides a thoroughanalysis of the obstacles to digitalization and identifieskey reforms and policy measures that could help thePhilippines harness the potential of the digital economy. Ituses the CHIP (Connect, Harness, Innovate, Protect)conceptual framework to analyze the requirements toaccelerate digital transformation. The framework focuses onfour key drivers of digitalization: (i) Connect, whichrefers to a set measures to build the digital foundation andenablers such as digital infrastructure for participation inthe digital economy; (ii) Harness, which points to neededinvestments in analog complements such as skills,regulations, and institutions to leverage the old economy;(iii) Innovate, which refers to expanding the new economyservices, digital payments, digital entrepreneurship ande-government; and (iv) Protect, which focuses on mitigatingthe risks in the digital economy. The need to act on thedigital economy is urgent. Reforms delivered now will helpthe government cushion the impact of the COVID-19 outbreak,support the recovery in the medium term, and make theeconomy more inclusive, competitive, and resilient tosimilar shocks in the long term.
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