The digitalization of local businesses could add as much as $28 billion to the Philippine economy by 2024, a study commissioned by global technology firm Cisco revealed.
According to Cisco managing director for the Philippines Karrie Ilagan, the additional input could be realized in the next four years if half of the small and medium businesses (SMBs) shift to being "digital challengers" from "digital indifferent."
"The SMB sector has been among the hardest hit by the COVID-19 pandemic. However, the country's SMBs have shown great resilience, and have leveraged technology to continue to operate and serve their customers during the period," she said in a virtual briefing on Thursday.
"As the Philippines continues to overcome the current situation, and consumer and business activity starts to pick up, digital transformation of SMBs will play a pivotal role in their recovery and contribute to the country's overall economic growth," she added.
Results of the study showed that 73% of local businesses are currently digital indifferent or companies that are reactive to market changes, and digital efforts do not exist.
Meanwhile, 26% are digital observers or companies whose digital efforts have started but remain tactile and in bite-sized initiatives, and the remaining 1% is made up of digital challengers or companies that have a strategy for the use of digital technologies.
The same study found that among the main challenges to digitalization efforts are the lack of budget or commitment from management (15%), the shortage of skills (14%), and cultural resistance to change (12%).
"SMBs are the backbone of ASEAN economies, accounting for over 85% of total business establishments and making up the main contributions to private sector employment in the region," said Raz Mohamad, director for Small Business and Commercial for ASEAN at Cisco.
"While they are currently facing the biggest challenges to their operations, they also have an unprecedented opportunity to accelerate their digital transformation. Technology can not only help solve some of their key challenges and revitalise their operations, but also help them sustain their growth in the long term," he added.
Latest data from the Department of Trade and Industry (DTI) show that MSMEs account for 99.52% of the total 1.003 million business establishments in the country in 2018.
Micro enterprises are defined as those with total assets worth less than P50,000; cottage enterprises with assets worth P50,001 to P500,000; small with P500,001 to P5 million; and medium from over P5 million to P20 million.
In May, Trade Secretary Ramon Lopez said over 525,000 or 52.66% of MSMEs in the country had to stop operations due to the lockdowns imposed to curb the spread of the COVID-19.—AOL, GMA News