Digitalization in the Philippines is hampered by outdated policies, and comprehensive reforms are needed to address infrastructure and other issues, the World Bank said.
"Compared to other Asean countries, the Philippines' internet connectivity lags in affordability, speed, and access, creating an uneven landscape for digital participation," the Washington-based multilateral organization said in a January policy note.
Limited internet access is curbing the digital potentials of people and businesses, it added.
"The country's poor broadband infrastructure is rooted in outdated policy frameworks that stifle investment in rural areas and foster a market with weak competition, both of which hinder broadband expansion," the World Bank continued.
"Binding constraints underlying the Philippines poor broadband infrastructure are interrelated, requiring a comprehensive package of reforms to yield desired entry, investments, and sector performance outcomes."
Among others, the World Bank noted that fixed broadband takeup among Philippine households was just 33 percent as of 2022, well below Malaysia's 50 percent, Thailand's 58 percent and Vietnam's 76 percent.
The Philippines, it added, accounts for over 50 percent of the Asean population with no fixed broadband connections.
This has led to a lack of skills, with just 2 percent of Filipinos said to be able to use basic formulas in Excel.
Only 6 percent, meanwhile, can copy and paste into a document, and just 7 percent know how to add an attachment to emails.
In terms of investments, the Philippines spent just 0.44 percent of gross domestic product on telecommunications infrastructure in 2022, down from 0.64 percent in 2018.
This is much lower than at least 1 percent invested by over 100 countries in the last 15 years, the World Bank said.
"Laws on connectivity have remained unchanged despite vast technological advancements, evolving business models, and widening access gap," it noted.
In the "most concentrated, most profitable, and least invested market in the region," the broadband market remains in the hands of a duopoly that is not incentivized nor obliged to expand rural coverage, it added.
The country's regulatory weaknesses, the World Bank said, include barriers to market entry and investments, including a tedious licensing process and the requirement to secure a legislative franchise; an unlevel playing field; ineffective infrastructure sharing policies; and outdated frequency management.
It said that the proposed Open Access in Data Transmission bill, which aims to set a regulatory framework that would expand the internet infrastructure by encouraging investments, would be a "promising, viable start," among other measures.
The bill, passed by the House of Representatives in December 2022 and still pending in the Senate, can be complemented by government investments in a national broadband network and improving access to the masses.
Reforms such as mobile spectrum restacking, which will facilitate higher data speeds; spectrum auctions; and pricing changes could follow.
"The cost of inaction — loss of growth opportunity, people remaining unequipped for future jobs, and widening of the digital divide — is too high for the Philippines," the World Bank said.
"For inclusive growth through digitalization that benefits all Filipinos, updating Philippine policy to promote competition, encourage investment, and upgrade broadband infrastructure is urgent and necessary," it added.