Economy : The Philippines’ Missing Piece
The Philippines start-up ecosystem had a runaway success as 2021 ended despite the pandemic, according to a report done by Venture Capital Report. The rise of available start-up capital has not been limited to 2021 though. Looking at 2019, the country had $152 million dollars, 2020 had $369 million dollars, and for 2021 had the greatest leap of over $1 billion dollars of capital flowing through the multitude of startup businesses the Philippines had! Year after year after year were record breakers and so we could conclude Philippines has a competitive key startup environment. Right? Well, that is not exactly right. If we looking at the bigger picture which consist of neighboring SEA countries, the entire South East Asian region raised over $25.7 billion dollars’ worth of funding making our country’s 1 billion dollars look like nothing in comparison. So, despite the foreign and local investments there seems to be a glaring issue that limits our country’s ability to produce modern startups, specifically those involving tech as they are nowhere to be seen. Where are our home-grown startups and is it not everywhere already? This may be the reason why we are not seeing enough foreign investment. But, how so?
A quick reflection would lead us to question our nation’s capacity to attain these startup products? Well not precisely, to begin with, notable tech firms that Filipinos are familiar with are not Philippine’s based, we are merely one of their most lucrative markets. Some prominent names in our nation’s e-commerce field are the likes of Lazada, Shopee, Zalora, Carousell, and other smaller competitors, actually come overseas. Out of the four companies stated, the first two, Lazada and Shopee both occupy a large market share of the e-commerce market or online retail platforms.
This is an issue because overseas companies see majority of their revenue go back to their parent country and not to the Philippines. They are essentially siphoning the money of Filipinos to the pockets of their respective countries.
Lazada: was founded in Singapore and is today owned by the China-based Alibaba Group
Shopee: is owned by Sea Limited, a publicly traded in the New York Stock Exchange, but is still founded and based in Singapore
Zalora and Carousell are of the same nature, none of these companies are founded neither are headquartered in the Philippines.
Of course, there are advantages to this as well. The site allows local sellers and local customers to connect, which helped launch the e-commerce boom in the Philippines and served our country when it was under a tight lockdown. The disadvantage is that these platforms are not controlled by local companies. If they were, the government would have likely received more tax income, employed more people, and perhaps even sparked a national entrepreneurial interest.
These mentioned, are also not the only platform providers, we have it in almost every sector, from our food delivery tech enterprise Singapore-based Grab to logistics businesses such as Thailand-based Flash Express and Indonesian-based J&T express, majority of us have been so accustomed to these names that we are ignorant to where they came from however there are some few exceptions. Several financial technology companies that have seen the biggest growth among the entire startup landscape are home-grown, one may argue that this is where we actually reign, our fintech landscape is majority home-grown and locally based, GCash, Paymaya and so much more.
The biggest financial technology businesses in the Philippines are the three listed, however they do not follow the typical startup trajectory, where a group of people join together with a goal or desire to disrupt the status quo. Instead, these three were raised in the houses of the largest corporations in the nation. Mynt, which houses GCash, is a partnership between Globe Telecom, the local Ayala Corporation, and the Chinese Ant Group. The same is true with Paymaya, which is a subsidiary of Voyager Innovations and once again a part of the PLDT group of telecommunications companies.
The power that big companies wield may also be an indication that, despite the fact that we may run our own firms that are quite disruptive, they are still very distant from altering the status quo of who is wealthy. Ultimately, the conglomerates will continue to hold their status as monopolies, duopolies, and other categories. Additionally, this is demonstrated by foreign companies that operate in the host nation. For instance, Zalora Philippines and GrabPay Philippines, which operate in the Philippines but appear to be joint ventures with SM Corporation and SM, respectively, are both international companies that operate in the host nation. This not surprising nor unexpected that they were the chosen partners arguably we could say that the partners chose them because they hold the capital, infrastructure, and experience needed to execute growth, it is simply common sense from a financial point of view. Now let’s return to our primary concept, is the Philippines lacking its own technology businesses? In our understanding, we may be lacking home-grown businesses. We may have seen these playouts the same way as our neighboring countries, but we can tell that they are more advanced in enhancing their own home-grown start-ups, some of these are Indonesia’s GoTo group, Malaysia’s Carsome, or Vietnam’s Sky Mavis, who are famous when it comes to developing unexchangeable online game, Axie Infinity, as well as Thailand’s Bitkub. More home-grown businesses can be stated from these nations, but how about the Philippines?
We are lacking on some technology start-ups compared to them. The real question here is, Is it a loss for the whole archipelago? Can our local start-ups grow and compete against these gigantic platforms? Well, as a matter of fact, there are actually no competitors as their platforms are already immense. We may forever be complacent when relying on foreign-based companies as more barriers are blocking us from seeing some local-based start-ups. But it’s not a loss, well, not yet, at least. Our opinion here is based on some factors, one of them is on how our government takes action. Innovation and start-up Act is one of our government initiatives, it was signed in 2019 and it aims to promote and strengthen the entrepreneurial ecosystem of the Philippines. If our government takes the right action for this dilemma; we may eventually grow. Another one is some private companies, we have some investors who allied us in opening our local start-ups, some of them are the famous Ayala-backed AC Venture fund, and the Kickstart Ventures which is a Globe-backed Venture fund. The last factor is the most exciting opportunity presented to us, it is the blockchain industry, this sector is notorious for being filled with risks however.
Philippine is a crypto-attached nation, we are exposed and one of the highest adopters of crypto coins, and among the largest players on crypto-based games, and it is one of a reason why it is such a disturbance for us. These adoptions may affect our future growth as one of a blockchain-enabled country. There are no such factors like these found in other countries, in fact, it is completely opposite from us. The number of growing blockchain start-ups has been spurring across our country, there is actually a local-based venture who invests in local and worldwide blockchain-enabled start-ups, it is known as the Yield Guild Games (YGG). It gradually means that the Philippines is having both venture capital firm and applications. Yes, the Philippines is lacking, we still can’t see the same local competitive presence on our economy, but we can still be more adaptive to those countries around us and create a change in our economy.
Desiderio, L. (2022, April 3). Philippines startups raise over $1 billion in 2021. Philstar.com. https://www.philstar.com/business/2022/04/04/2171974/philippines-startups-raise-over-1-billion-2021
Harvard Business Review. (2015, August 5). How the Philippines became Tech Startups’ new source for talent. https://hbr.org/2015/08/how-the-philippines-became-tech-startups-new-source-for-talent
Chen, J. (2022, April 22). How conglomerates work. Investopedia. https://www.investopedia.com/terms/c/conglomerate.asp
Angeles, R. (2022, May 5). The Philippine Innovation Act. National Economic and Development Authority – Sentro Ang Tao Sa Ating Plano. https://neda.gov.ph/the-philippine-innovation-act/