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 Outdated policy frameworks, such as the Radio Control Law of 1931 and the Public Telecommunications Act of 1995, constrain market entry, competition, and investments.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.