Southeast Asia is rapidly emerging as a global digital hub, with countries across the region making significant strides in digital transformation. Among these digitalizing markets, the Philippines stands out; ending 2023 as the fastest-growing economy across Southeast Asia at a rate of 5% — just shy of the government’s target of 6% to 7%.[1] Should projections hold, the Philippines is expected to once again show significant growth in 2024, demonstrating its resilience despite various global economic pressures. At the core of this development lie three pivotal elements that are shaping the digital domain of the Philippines.
The nation is swiftly embracing digitalization, evidenced by soaring rates of internet penetration and the rapidly expanding e-commerce and digital payments sectors. Even advancements in artificial intelligence (AI) are no longer exclusively confined to the realms of IT as the Philippines aims to harness its capabilities to enhance efficiency and productivity within the agricultural industry. Government-led initiatives such as the E-Government Masterplan 2022[2] and Digi-Ed 2028[3] signal a further commitment to digital prowess, positioning the Philippines to make a significant imprint on Southeast Asia’s digital acceleration.
Recognizing the Philippines’ strategic role in the region’s digital landscape, Equinix is bolstering this momentum. Our market entry through the acquisition of three data centers from Total Information Management (“TIM”) is based on the strength of nation’s digital trajectory. This strategic move is set to satisfy the escalating demand for digital infrastructure and interconnectivity, not just within the Philippines but across the broader Southeast Asian region.
Key Insight #1: A digital divide remains amid high internet penetration
The digital and internet landscape in the Philippines is a study in contrasts. On one hand, internet penetration is on an impressive upswing. An estimated 69 million Filipinos had access to the internet in 2023, up from roughly 48 million in 2018. Filipino internet users spend a significant amount of time online, averaging about nine hours daily.[4]
However, despite being one of the heaviest internet users globally, the Philippines faces challenges with digital infrastructure. Internet services are among the slowest and most expensive in the region, with an evident digital divide between urban and rural areas.[5] In tandem with these efforts, the government of the Philippines is also spearheading significant modernization initiatives to bring more social and civic services online, significantly scaling digitalization efforts. The government’s Digital Transformation Strategy aims to enhance digital infrastructure, connectivity and ease of doing business. Key projects include software development for revenue management, tax collection and a one-stop online platform for business processing.
As demand for digital services continues to grow, Equinix’s digital infrastructure can scale to meet increased loads while maintaining consistent performance through Platform Equinix®, a neutral interconnection platform. By extending Platform Equinix to the Philippines, users will have access to a diverse ecosystem of internet and cloud service providers while digital service providers can effectively reach customers in remote and underserved locations to meet their digital needs. The increased interconnection will help forge a more inclusive digital future where every Filipino regardless of location can partake in the benefits and opportunities brought about by digital transformation.
Key Insight #2: E-commerce and digital payments form a symbiotic relationship
The e-commerce market in the Philippines is experiencing an extraordinary boom, with sales reaching $17 billion in 2021 and estimated to grow by 24 billion in 2025.[6] This growth is driven by 73 million online active users and is expected to continue with a compound annual growth rate (CAGR) of 16.8% from 2024 to 2028.[7] Concurrently, the nation has seen a dramatic increase in the adoption of digital payments. During the pandemic, digital payments surged by over 5,000%, with the Bangko Sentral ng Pilipinas (BSP) moving a total of over PHP 1.4 trillion in 2020.[8]
It is clear that both of these dual driving forces will be the keys to unlocking the country’s digital economy. As it grows, so does its need for integration into the various platforms operating within Southeast Asia’s vibrant markets.
Through Equinix’s portfolio of digital services like the on-demand, software-defined interconnection of Equinix Fabric® and Equinix Network Edge virtualized network solutions, data can be exchanged between various enterprises, facilitating transactions between diverse e-commerce and payment platforms. Its secure environment complies with local and international financial industry standards so that these transactions are both protected and immutable against cyber threats. Reduced latency and streamlined data transfer between financial institutions, payment gateways and e-commerce websites ensure that growth in both industries will continue unabated as Philippines remains on track to becoming a leading digital economy in Southeast Asia.
Key Insight #3: Empowering the use of AI
The Philippines government’s ambitions for AI are substantial, aiming to better position the Philippines within ecosystems of AI innovation and development. The National AI Strategy underscores the importance of digitalization and infrastructure, which includes building a robust network environment and improving data access.[9] The Department of Trade and Industry (DTI) has also launched the country’s AI Roadmap, which outlines the need for reliable and affordable internet access, as well as the establishment of a national data center with a dependable data infrastructure and management system.[10]
But to capture the full value of AI, businesses must integrate robust data infrastructure and advanced analytics capabilities. This means that businesses continue to capitalize on digital infrastructure to keep up and solve challenges relating to ecosystem dependencies, including connectivity, proximity to data, data security, and privacy. To do so, businesses must understand the difference in different deployment models of AI.
Deploying private AI infrastructure at Equinix enables digital leaders to leverage public models while ensuring that an enterprise’s most valuable business data does not enter the public domain. Private AI offers risk protection while delivering the benefits of trained AI models, enabling businesses to realize the full potential of AI.
Extending support for Southeast Asia’s digital transformation
Equinix is committed to supporting the digital ambitions of Southeast Asia, with the Philippines playing a crucial role in this growth. Our market entry into the Philippines aligns with our investment plans in the Asia-Pacific region, where we have already announced expansions into new markets such as Jakarta, Indonesia (JK1) and Chennai, India (CN1), along with Johor (JH1) and Kuala Lumpur (KL1) in Malaysia, which are already in operation.
These expansions align with Equinix’s strategic vision to extend its leadership in Southeast Asia and the broader Asia-Pacific region, propelling the acceleration of the digital economy and supporting the digital transformation of enterprises entering new markets. We aim to support the digital transformation of the Philippines, allowing enterprises to harness the potential of emerging technologies and thrive in an increasingly interconnected world.
[1] https://www.mckinsey.com/ph/our-insights/the-philippines-economy-in-2024-stronger-for-longer
[2] https://dict.gov.ph/dict-provides-road-map-towards-digital-transformation-launches-egmp-2022/
[3] https://mb.com.ph/2024/1/25/dep-ed-eyes-full-digitization-interconnectivity-of-offices-and-schools-through-digi-ed-2028
[4] https://www.statista.com/topics/5660/internet-economy-in-the-philippines/
[5] https://www.bworldonline.com/editors-picks/2020/10/06/320910/phl-risks-getting-left-behind-as-internet-remains-slow-expensive/
[6] https://www.trade.gov/country-commercial-guides/philippines-ecommerce
[7] https://ecommercedb.com/markets/ph/all
[8] https://business.inquirer.net/316989/digital-payments-surged-by-over-5000-percent-amid-pandemic-says-bsp-chief
[9] https://mb.com.ph/2023/11/3/dti-highlights-ph-strategies-to-address-skills-gap-in-using-ai