The Philippine digital economy is poised for significant expansion, forecast to reach a gross merchandise value (GMV) of $36 billion by 2025, with a sustained 16 percent growth rate.
However, this robust expansion is overshadowed by a critical imbalance in artificial intelligence (AI) readiness, according to Google Philippines Country Manager Prep Palacios.
In an exclusive interview on “Market Edge,” Palacios underscored a fundamental paradox: While the Philippines demonstrates substantial consumer enthusiasm for AI, its foundational infrastructure and local innovation ecosystem remain significantly underdeveloped compared to regional counterparts.
“Filipino internet users rank among the global Top 20 when it comes to interest in AI,” Palacios stated, highlighting a “massive competitive edge for adoption.” This strong demand, coupled with a cost-effective labor structure suitable for AI augmentation, presents a compelling economic argument for local investment.
Yet, ecosystem metrics reveal a stark disparity.
“The Philippines only has around 10 AI startups,” Palacios reported, a stark contrast to Singapore’s 495, Malaysia’s 60 and Vietnam’s 40.
“So our ecosystem density is critically low,” she added. This deficiency is compounded by having one of the lowest existing or planned data center capacities in Southeast Asia.
The consequence is a diversion of capital.
“The bulk of dedicated AI investment is flowing into regional hubs like Singapore,” Palacios noted, emphasizing that while the Philippines has a national AI strategy, “our local supply of AI companies and dedicated investments have not yet materialized to meet that potential.”
Beyond AI, the digital economy’s growth is driven by foundational e-commerce, with video commerce constituting 25 percent of GMV.
“The average order value of video commerce that we’re seeing is around $4 to $6. And it’s growing because Filipinos still go for affordability,” Palacios explained, highlighting the demand for cost-effective solutions.
Ride-hailing and food delivery are also surging, becoming “everyday essentials” that “solve problems for them … to escape traffic … it saves them time.”
However, as consumer behavior evolves — with search engines now handling more complex, multimodal queries using images and voice — the workforce must also adapt.
Palacios stressed that in the current landscape, “AI is a key competitive advantage for everyone in the modern workforce.”
To address the skills gap and ensure Filipinos stay competitive, Google is aggressively scaling up training efforts in Southeast Asia, with a goal to train 5.5 million people in critical AI skills.
In the Philippines, the tech giant is partnering with the Department of Trade and Industry, the Department of Information and Communications Technology, and the IT and Business Process Association of the Philippines to offer Google Career Certificates, including courses like AI Prompting Essentials, to employees and civil servants.
Despite the current challenges, Palacios remains cautiously optimistic, asserting, “I don’t think we are standing to lose in the next few years.”
The pathway to mitigating this risk lies in immediate action.
“The task for us is really to build that supply chain and really support the infrastructure that we need to build,” she urged.
She cited a forecast of an “additional data center capacity in the Philippines of around 150 percent” as a vital indicator that needs accelerated focus. (ABS-CBN News)