Unlocking the Philippines’ Digital Transformation by Increasing Internet Connectivity

Challenge

Digital transformation has been among the Philippines’ top priorities since 2022, but progress has been slow. Broadband internet remains weak. Outdated policy frameworks, such as the Radio Control Law of 1931 and the Public Telecommunications Act of 1995, constrain market entry, competition, and investments. Consumers and firms fail to take advantage of digital opportunities, financial inclusion is inadequate, and digital skills are not being acquired quickly enough. Just 28 percent of households had access to fixed broadband in 2023, a much smaller share than in Viet Nam (79 percent), Thailand (55 percent), or Malaysia (54 percent). The Philippines accounts for more than half of the population unconnected to mobile broadband in the countries that make up the Association of Southeast Asian Nations (ASEAN). In addition, the digital divide is expanding: While internet penetration in the top wealth quintile increased from 43 percent in 2019 to 60 percent in 2022, penetration in the bottom quintile rose from 2 percent in 2019 to just 5 percent in 2022. 

"Access to fast internet has been a game-changer for our business. It allows us to reach more customers online, manage inventory efficiently, and process payments quickly. All our negotiations and communications are internet-based. Whether it be for clients, suppliers, or marketing—everything is through the internet."

^{-Pattoys Miranda and Pam Angeles, owners of Bikeary Lifestyle Bike Shop}

Approach

Given the potential impact of the digital economy on poverty reduction and shared prosperity, digital transformation was a cross-cutting theme in the World Bank’s Country Partnership Framework with the Philippines (2019–24). The World Bank and the government of the Philippines are collaborating to increase internet access and decrease the cost of connectivity while rolling out digital government services and promoting e-commerce, the digitalization of payments, and enhanced digital skills across the population. The Philippines Digital Economy Report, published in 2020, informed government policy, including the Philippine Development Plan 2023–2028. 

Progress has been supported by a series of World Bank development policy loans (DPLs [financing to implement policy and institutional changes]) and other projects. The Competitiveness and Resilience DPL Series, launched in 2019, and the Sustainable Recovery DPL Series, launched in 2023, supported reforms. They included the following:

• an amendment to the Public Service Act that eliminated restrictions on foreign ownership in public services and increased market entrance to sectors such as telecommunications;
• introduction of the PhilSys national ID, to improve public and private digital service delivery and financial inclusion;
• adoption of the Common Tower Policy, which allows the establishment of independent tower companies, leading to the cost-efficient deployment of infrastructure through shared mobile towers;
• simplification of the network rollout, to ease bureaucratic obstacles to telecommunications investments. 

These operations helped reduce key barriers to digital transformation. But challenges remain. For example, investment in telecommunications fell from $2.1 billion in 2019 to less than $1.8 billion in 2023. 

In 2023, the World Bank initiated an advisory and analytics program dedicated to digital transformation in the Philippines. It focuses on digital connectivity, digital data infrastructure, digital skills, and high-impact digitally enabled service delivery. This program informed the preparation of two complementary projects: a DPL and an investment project to address broadband internet gaps. The policy note “Better Internet for All Filipinos” informed dialogue on legislative reforms to increase competition and investment. The Digital Transformation DPL supported the Konektadong Pinoy Act (expected to be signed into law in August 2025), which seeks to lower barriers to entry and investment, level the playing field, promote competition, and reduce the cost of internet service. The Digital Infrastructure Project supports climate-resilient, secure, and inclusive broadband connectivity by investing in government fiber optic backbone and middle-mile network. It connects schools, health facilities, and other institutions in Mindanao by incentivizing private sector operators to invest in last-mile connectivity to households.

Results

Through sustained engagement across multiple projects since 2019, the World Bank has helped the Philippines expand access to digital services and address the digital divide. 

The Competitiveness and Resilience DPL series (2019–22) improved internet penetration and enhanced infrastructure. This series helped lay the groundwork to address challenges in access, connectivity, and the digital divide. During the period of the DPL, significant improvements were made in several areas:

• Mobile internet penetration increased, with the share of the population with a unique subscription to mobile internet (internet on a mobile device such as a smartphone or a tablet) increasing from 45.5 percent in 2019 to 56.3 percent in 2022 (before falling to 54.1 percent in 2024).
• The number of installed telecommunications towers increased, from 17,850 in 2020 to 35,043 in 2023, increasing rural network coverage and improving service quality in urban areas.
• The number of fixed broadband subscriptions per 100 people increased from 5.4 in 2019 to 7.9 in 2022. 
• The share of digital payments surged from 1 percent of retail payments in 2013 to 52.8 percent in 2023.

More recent projects build on the Competitiveness and Resilience DPL to continue expanding access and closing the digital gap. The Digital Transformation DPL series is driving regulatory reforms to modernize outdated legal frameworks, facilitate market entry, attract investment, and promote competition. The Digital Infrastructure Project, which supports public investments to expand connectivity in unserved and underserved areas, complements these efforts. Results expected over the next two to four years include the following:

• Access to broadband internet will increase by 20 million (new, inferred and enhanced) by 2028.
• The share of households connected to fixed broadband services will rise from 25.6 percent in 2022 to 35.0 percent in 2026.
• The cost of fixed broadband basket as a percentage of Gross National Income per capita will fall from 11.3 percent in 2022 to 8.5 percent in 2026. 

The Digital Transformation DPL series supports reforms aimed at improving digital government services, the digital economy, digital finance, and digital skills. Expected and achieved results include the following:

• The number of people using digitally enabled government services through the unified e-government portal or a mobile application will increase by 30 million between 2022 and 2026.
• The share of digital payments in retail transactions will rise from 42 percent in 2022 to 56 percent in 2026.
• The number of e-commerce enterprises will rise from 2.4 million in 2022 to 3.5 million in 2026.
• The number of higher education institutions recognizing digital skills courses via the Philippines Credit Transfer System will increase to 50 in the 2024/25 academic year. 

Collaboration accross the World Bank Group

The World Bank and the International Finance Corporation (IFC) have collaborated to reduce digital infrastructure gaps in the Philippines through adoption of the Common Tower Policy, supported by the Promoting Competitiveness and Enhancing Resilience to Natural Disasters DPL series (FY20–22). Collaboration through IFC’s upstream advisory led to adoption of policy reforms to allow the establishment of and foreign investment in independent tower companies and the streamlining of the permitting process for tower building, which reduced permitting time from 18 months to 16 days, allowing the granting of 1,500 permits in a single year. These reforms enabled private investment and IFC’s participation in building rural towers in underserved areas such as Mindanao. They also helped sustain the reform momentum that led to the Digital Transformation DPL series.

^{Note: For discussion of differentiated approaches to the four segments, see Bettter Internet for All Filipinos.}

World Bank Group Contribution

The International Bank for Reconstruction and Development (IBRD) provided $1.64 billion in funding, including $600 million for the First Digital Transformation DPL, $750 million for the Second Digital Transformation DPL, and $287 million for the Digital Infrastructure Project. Together, multiple trust funds—including the DATA Fund, the Digital Development Partnership (DDP), Identification for Development (ID4D), the Cybersecurity Multi-Donor Trust Fund (MDTF), and Australia–World Bank Growth and Prosperity in the Philippines (AGaP)—provided $2.4 million in funding for the advisory and analytics program. IFC provided $25.5 million in loans and $8.3 million in indirect equity investment in independent tower companies.

Partnerships

The Philippines’ Department of Economy, Planning, and Development (DEPDev) has been the leading partner in preparing and implementing the Digital Transformation DPL Series. It submitted the Konektadong Pinoy Act to the Senate and co-convened stakeholder forums with other partners, including USAID, the American Chamber of Commerce of the Philippines (AmCham), the Philippine Institute of Development Studies (PIDS), and the UP Law Center. The Asian Infrastructure Investment Bank (AIIB) provided $400 million in co-financing for the First Digital Transformation DPL. The Department of Information and Communications Technology (DICT) has been the sole implementing agency for the Digital Infrastructure Project.

Looking Ahead

The World Bank Group Philippines Country Partnership Framework for 2026–31 focuses on improving internet connectivity as part of its “more private sector jobs” pillar. It aims to increase the number of people using digitally enabled services through a cross-cutting theme on an “efficient public sector” to achieve outcomes such as boosting the productivity of firms and farms, promoting inclusive finance, strengthening health systems, improving education, and building resilient communities. Supported by the World Bank, the Philippine government is considering follow-on reforms and investments to accelerate expansion of internet connectivity in rural areas and advancing digital transformation across key sectors through integration of the digital ID to services and expansion of digital payment, interoperable data systems, and provision of digital skills.