THE STATE OF E-COMMERCE

IN THE PHILIPPINES:
ISSUES AND CHALLENGES
TABLE OF
CONTENTS

01 Introduction 02 E-commerce
uptake in the
Philippines

04 E-commerce
roadmap pre
and during
07 Barriers to e-
commerce
adoption
pandemic

10 Consumer
rights, trust,
and privacy
13 E-commerce
and Trade
Agreements

16 Policies and
legislation 18 Conclusion

19 Recommendations 20 References

25 About FMA
INTRODUCTION
The Philippines has one of the highest internet penetration in East Asia, at
67% of its total population of about 110 million. The country also boasts of
having a population that is very active on social media, with the average
Filipino spending 9 hours and 45 minutes online daily, and three hours
and 53 minutes on social media sites.¹ Despite these however, Filipinos
are not quick adopters to e-commerce. Reports have it that prior to the
COVID-19 pandemic, only 2% of Filipinos have purchased goods and
services online, compared to their Asian counterparts.²
The pandemic has forced people to stay indoors for their safety, and this
has resulted in an increase of those turning to the internet for their daily
activities such as schooling, work, socializing with friends and families,
attending events such as weddings, birthdays and funerals, playing
games, getting entertained, or shopping. According to Digital 2020 April
Statshot report, 64% of Filipino internet users are spending more time on
social media and there was a 23% increased activity in online shopping.³
iPrice Group, a Malaysia-based firm that conducted a study on the
shopping behavior of Southeast Asians, found that e-commerce in the
Philippines accelerated during the lockdown period. Among the
Southeast Asian countries, the Philippines experienced the highest
increase in terms of shopping app usage (53%) as well as online spending
(57%).⁴
The Philippines’ Department of Trade and Industry (DTI) sees the uptake
of e-commerce will most likely increase in the next months even beyond
Covid-19. E-commerce is seen as a path towards a country’s economic
growth because it provides business opportunities, not limited by
physical distance and store hours. What is the future of e-commerce in
the country and how are government policies affecting its growth?

¹Simon Kemp, “Digital 2021: The Philippines,” DataReportal, February 11, 2021, https://datareportal.com/reports/digital-2021-philippines
²Andrew Marasigan, “The state of e-commerce in the Philippines,” Business World, August 2, 2020, https://www.bworldonline.com/the-state-of-e-
commerce-in-the-philippines/
³Athira Nortajuddin, “Social media habits during the pandemic,” The ASEAN Post, July 13, 2020, https://theaseanpost.com/article/social-media-habits-
during-pandemic
⁴Anna Gabrielle Cerezo, “How online shopping behavior of Filipinos changed during pandemic,” ABS-CBN News, October 14, 2020, https://news.abs-
cbn.com/life/10/14/20/how-online-shopping-behavior-of-filipinos-changed-during-pandemic
1
This paper aims to describe the state of e-commerce in the country, and where it is
headed to. It will look into the factors that promote or hinder e-commerce uptake,
including the issues of consumer rights, trust and privacy. Further, the paper will try to
see how e-commerce will be impacted by the trade agreements entered into by the
country.

E-COMMERCE UPTAKE
IN THE PHILIPPINES

Electronic commerce or e-commerce is about buying and selling of goods and

services, or the transmission of funds or data over an electronic network. The OECD
(2002) defines it as, “the sale or purchase of goods and services, whether businesses,
households, individuals, governments, and other public or private organizations
conducted over computer-mediated networks.” Further, the goods and services are
“ordered over those networks, but the payment and ultimate delivery … may be
conducted on- or off-line.”
In the year 2000, Republic Act 8792 or the Electronic Commerce Act was passed
into law in the Philippines. Section 3 of the Act states that its objective is to “facilitate
domestic and international dealings, transactions, arrangements, agreements,
contracts and exchanges and storage of information through the utilization of
electronic, optical and similar medium, mode, instrumentality and technology to
recognize the authenticity and reliability of electronic data messages or electronic
documents related to such activities and to promote the universal use of electronic
transactions in the government and by the general public.”
While an e-commerce law was passed as early as 2000, its uptake has not been as
fast as the internet penetration in the country. In 2000, only two percent of the
country’s total population were connected to the internet. Ten years later, 25% of the
population were already connected, and by 2020, 67% of the population or roughly
73 million Filipinos are already online.

2
Meanwhile, e-commerce adoption has been quite slow.
Data shows that from 2013 to 2015, despite technological
development and increase in internet penetration, the
average proportion of firms utilizing e-commerce in the
country has remained low.⁵ The 2014 Annual Survey of
Philippine Business and Industry revealed that only 400
out of the 220,000 establishments in the country have e-
commerce sales.⁶ he country’s micro, small, and medium
enterprises (MSMEs) are those targeted to benefit the
most by adopting e-commerce.
In the Philippines, an MSME is defined as a business entity
or enterprise engaged in industry, agri-business, and/or
services that has an asset size of up to PhP100 million, and
an employment size with less than 200 employees. In
2010, there were a total of 777,687 business enterprises in
the Philippines, and 99.6% of them were considered as
MSMEs.⁷ By 2019, the number of business enterprises in
the country increased to 1,000,506 and 99.5% (995,745)
of them are MSMEs.⁸ Micro enterprises, or those with an
asset size of up to PhP3,000,000 and less than 10
employees, make up 89% of the MSMEs. With practically
all business establishments categorized as MSME, the
government sees the need to harness e-commerce to
support the country’s economic growth.

⁵FrancisMark A. Quimba and Sylwyn C. Calizo, Jr., “Determinants of e-commerce adoption of Philippine businesses,” PIDS Discussion Paper Series 2019-
24, December 2019.
⁶Ibid.
⁷“The MSME Sector at a Glance,” March 2012, http://legacy.senate.gov.ph/publications/AG%202012-03%20-%20MSME.pdf
⁸ Department of Trade and Industry. 2019 MSME Stats, https://www.dti.gov.ph/resources/msme-statistics/

3
E-COMMERCE ROADMAP PRE
AND DURING THE PANDEMIC

To help foster the growth of the economy, the DTI in 2016 developed the Philippine
E-Commerce Roadmap of 2016-2020, targeting to expand the share of e-commerce
to GDP from 10% in 2015 to 25% by 2020.⁹
The Roadmap identified five success criteria namely:

1
100,000 Micro, Small,
2
40-50% of internet
and Medium
Enterprises doing e-
commerce;
users doing e-
commerce;
5
3 4
Online and connected
government (G2G,
G2B, G2C, and G2E).
Fast and competitive Cybercrime
internet access; enforcement and
protection; and,

Under the 2016-2020 Roadmap, other agencies of government such as the

Department of Information and Communications Technology (DICT), the Bangko
Sentral ng Pilipinas (BSP), Department of Science and Technology, and the National
Privacy Commission (NPC), among others, were given roles to help fulfill its goals.
Initiatives by the government agencies, such as the DICT’s National Broadband Plan,
and the BSP’s National Retail Payment System, were seen to support the success of
the roadmap.

⁹DTI.
Philippine E-Commerce Roadmap 2016-2020 available in https://ecommerce.dti.gov.ph/wp-content/uploads/2020/07/FINAL-Philippine-E-
Commerce-Roadmap-2016-2020-01-29-2016.pdf
4
 However, e-commerce still did not prosper much during this
period, although there was considerable growth in terms of
internet penetration and social media use in the country.
Considering the large number of Filipinos connected to the
web, there is potential to increase e-commerce in the country
but such did not happen. According to a mid-term assessment
of the roadmap, lack of support from other government
agencies and the absence of official industry data were some of
the issues that hampered e-commerce growth in the country.¹⁰
Of course, there were also other barriers that prevented sellers
and consumers from adopting e-commerce (see section on
barriers to e-commerce adoption).
The year 2020 proved to be pivotal for e-commerce in many
countries, including the Philippines. Lockdown measures during
the pandemic have driven buyers, who are unable or do not
want to go outside, to online channels, and e-commerce has
been the only option for many physical stores to sell their
products.¹¹ The lockdowns and limited mobility of the
population necessitated that people shift online for many of
their needs, such as food delivery, shopping, payment of goods
and services, etc. Although many Filipinos lost their jobs during
the pandemic, many were quick to pick up and establish online
stores that sold anything and everything, from baked goods,
cooked food, face masks, and, milk tea. Even big businesses,
including supermarkets and restaurants, upgraded their systems
and went online. In fact, restaurants and fast-food chain claim
that their online deliveries make up the bulk of their business.
With dine-in features of restaurants disallowed as a result of the
pandemic, it is the delivery of food that has kept businesses
afloat.¹²

¹⁰Jenina C. Lim, “Lack of data, support hampers PHL e-commerce roadmap,” Business World online, January 24, 2019,
https://www.bworldonline.com/lack-of-data-support-hampers-phl-e-commerce-roadmap/
¹¹Villa, Rafael and Andres Monzon, 2021. Mobility restrictions and e-commerce: Holistic balance in Madrid centre during COVID-19 lockdown. Economies
9:57 https://doi.org/10.3390/economies9020057
¹²Doris Dumlao Abadila, “Delivery operations keeping food businesses afloat,” inquirer.net, April 13, 2020,
https://business.inquirer.net/294580/delivery-operations-keeping-food-firms-afloat
5
The shift to online buying and selling did not mean that all of a sudden, there was trust
and confidence on e-commerce, but simply, this was the easier way to purchase
goods and services. Thus, in a span of a few weeks, online delivery picked up and new
jobs were created.
The lower the physical mobility of people, the higher online transactions became.
During the country’s lockdown in April 2020 where mobility was down by 90%, there
was a sharp spike in online transactions. According to the CEO of Zalora Philippines,
91% of Filipino internet users searched for goods and services online, and 76% of them
consummated the transaction.¹³
In January 2021, the DTI launched the e-commerce road map 2020-2022, which
should have been launched the previous year. The new road map focuses on
educating online retailers on the values of speed, security, and structure, which DTI
believes should equate to sales.¹⁴
During the launch, DTI Secretary Ramon Lopez reported that there are now 93,318
online sellers registered with the DTI. Bulk of them registered during the lockdown.
According to Lopez, this is “a clear indication of Filipino resilience as many of our
countrymen adapted to the challenging times.”¹⁵
Under the Philippine e-Commerce Roadmap 2022, the contribution of digital
transactions to the economy is seen to rise to P1.2 trillion (about USD24 billion) by
2022, from P599 billion (about USD11.98 billion) last year. This means the e-commerce
industry is expected to take up 5.5 percent of GDP, from 3.4 percent in 2020.¹⁶
Through the 2022 Roadmap, the DTI hopes to make e-commerce easy and accessible
to online sellers and shoppers, through market access, digitalization, and logistics
integration.

¹³Andrew Marasigan, “The state of e-commerce in the Philippines,” Business World, August 2, 2020, https://www.bworldonline.com/the-state-of-e-
commerce-in-the-philippines/
¹⁴DTI. E-Commerce Philippines 2022 Roadmap. https://ecommerce.dti.gov.ph/madali/
¹⁵Keynote speech of Secretary Ramon M. Lopez, Virtual launch of Philippines E-commerce roadmap 2022, in https://www.dti.gov.ph/speeches/virtual-
launch-of-philippines-e-commerce-roadmap-2022/
¹⁶Ibid.
6
BARRIERS TO E-COMMERCE
ADOPTION

Despite the plans and goals of the roadmaps, there are barriers that still
have to be hurdled to achieve them.
Slow and unreliable internet connection. The COVID-19 pandemic has
shown us the importance of being connected. The limit in our mobility
has forced many to shift to online spaces in doing their wok, in
purchasing goods and services, in socializing with others, in getting
entertainment. Unfortunately, in a country like the Philippines, the quality
of connectivity depends on the infrastructure available in certain
locations, and the cost of internet package one purchased. The average
cost of broadband per month in the country is USD53.71. In terms of cost,
this ranks the Philippines 18 in 42 Asian countries, and 6th of the 10
ASEAN countries.¹⁷
According to the Ookla Speedtest Global Index, the Philippines fixed
broadband speed currently ranks 65th among the 180 countries tested.
In mobile, it placed 77th out of the 137 countries examined.¹⁸ Compared
to its ASEAN neighbors, Philippines ranked fifth in both fixed broadband
and mobile out of 10 countries.
It has also been observed that other Asian countries that have outranked
the Philippines pour investments in their internet infrastructure. Thailand
has 52,483 telco towers and Vietnam has 90,000, while the Philippines
has only 17,850. Vietnam has 756 users per tower and Thailand 991, while
the Philippines has 4,090 users per tower, reflecting high congestion
prone to degraded services.¹⁹ This is the reason why Internet connection
in the country is limited, slow, and unreliable in many areas, and such
impacts on the growth of e-commerce in the country.

¹⁷Cristina Eloisa Baclig, “PH’s $53.71 cost of broadband per month in 2020 lower than global average -study,” inquirer.net, January 14, 2021,
https://technology.inquirer.net/107258/phs-53-71-cost-of-broadband-per-month-in-2020-lower-than-global-average-study
¹⁸Ben Rosario, “Lower House notified: PH internet speed shoots up in global rankings,” Manila Bulletin, June 17, 2021,
https://mb.com.ph/2021/06/17/lower-house-notified-ph-internet-speed-shoots-up-in-global-rankings/
¹⁹“More Pinoys using the internet: Cost of mobile data ‘cheaper’ in Philippines vs Thailand,” globe.com.ph, February 2, 2021,
https://www.globe.com.ph/about-us/newsroom/consumer/more-pinoys-using-internet-mobile-data-cheaper-ph.html#gref
7
8
Low transaction account ownership. According to the 2019 financial inclusion survey
report of the BSP, there has been a 6% increase in the number of Filipinos with bank
accounts from 2017 to 2019. However, this still translates to 51 million Filipino adults
who do not have bank accounts.²⁰ The reasons for this are as follows: they do not have
money to open an account, they lack the documentary requirements to open an
account, and there is lack of awareness of the convenience of digital payments.
Low digital payment penetration. To date, cash-based transactions still account for a
large percentage of local transactions in the country. Even goods and services ordered
online are paid for in cash. According to the Global Findex Database, most Filipinos
prefer to use cash to pay their utility bills.²¹ Only 5% pay utility bills through their bank
accounts or mobile money accounts. Similarly, nearly 60% send or receive domestic
remittances through over-the-counter services, and seven out of ten receive their
wages in cash.
Low uptake on interoperable retail payments. While the country has made significant
progress in offering interoperable retail payments with Instapay and PESOnet, many
banks have yet to join them. Most rural and thrift banks remain outside of this payment
infrastructure. An interoperable platform connecting banks and non-banks in bill
aggregation should be developed. Such platforms could potentially enable all actors –
in particular the smaller players such as rural and thrift banks and cooperatives, but also
large banks, utility payers, payment centers, and merchants – to offer and push for
digital payment options in their businesses.
Logistical concerns. The Philippines is an archipelago with more than 7,000 islands,
thus it is a challenge to the deliver goods and services outside of Metro Manila.
Businesses need to rely on cross-border shipping partners for last mile delivery of
packages, and this may mean additional delivery or shipping fees. Aside from transport
issues, businesses have to invest in warehouses, inventory carrying and logistics
administration.
Implementation of existing laws. The Philippines has passed laws such as the E-
Commerce Act, the Cybercrime Prevention Act, and the Data Privacy Act. However,
enforcement agencies such as the Department of Justice, the Philippine National
Police and the local courts have yet to become adept at handling cases involving
electronic transactions. The necessary systems need to be put in place.

²⁰Lawrence Agcaoili, “51.2 million Pinoys remain unbanked - BSP,” Philippine Star, July 17, 2020,
https://www.philstar.com/business/2020/07/17/2028480/512-million-pinoys-remain-unbanked-bsp
²¹World Bank. Philippines Digital Economy Report 2020: A better normal under COVID-19: Digitalizing the Philippine Economy now.
9
Privacy and security issues. The Philippines has many laws in place to address
concerns of consumers and sellers alike. It has passed the Data Privacy Act (DPA) and
the Cybercrime Prevention Act (CPA) in 2012. The former is to protect the right to
privacy while ensuring the free flow of information to drive innovation and growth,
while the latter penalizes among others offenses like illegal computer or system access
identity theft, and credit card fraud. The Philippine National Police and the National
Bureau of Investigation have been tasked to enforce the CPA. Despite these laws,
there have been many reported cases of financial scams and data leaks that have
compromised data of individuals. Kaspersky Security Network reported that web
threats in the Philippines in 2020 is 37% more compared to the previous year.²²

CONSUMER RIGHTS, TRUST, AND

PRIVACY

Stories of people getting scammed for buying goods online are not new. There are
those who buy expensive gadgets only to find out when they open the package that
there’s only rock and crumpled newspapers inside, or that the item they received is not
the same as what they ordered, or as described in the advertisement. These are some
of the reasons why consumers would rather buy from a physical store rather than order
online.
The DTI recognizes that building trust is a challenge that has to be addressed. In fact,
with the uptake of e-commerce, the agency has reported an increase in consumer
complaints lodged at them.
The Philippines does not have dedicated consumer protection legislation for e-
commerce. However, the Electronic Commerce Act, signed in 2000, provides some
recognition of the need for consumer protection in the electronic environment.
Section 33(c) of the Act notes that violations of the Consumer Act of 1991 and other
pertinent laws committed using electronic data messages or electronic documents are
to be penalized according to the same penalties available under those laws.

²²“Kaspersky report finds PH in top 10 of 2020 global web threat detections,”backend news.net, February 23, 2021, https://backendnews.net/kaspersky-
report-finds-ph-in-top-10-of-2020-global-web-threat-detections/

10
 The Consumer Act is the Philippines’ main consumer law focusing on
protection against deceptive, unfair and unconscionable sales practices. It
also ensures that consumers have adequate access to redress. The Act says
that consumers should enjoy the following rights: right to basic needs, right
to safety, right to information, right to choose, right to representation, right
to redress, right to consumer education, and right to healthy environment.
In 2008, the Government issued Joint Department Administrative Order 01,
which prescribes the Rules and regulations for consumer protection in a
transaction covered by the Consumer Act of the Philippines through
electronic means under the E-Commerce Act (R.A. 8792). The regulations
aim at protecting consumers doing online transactions, specifically on the
purchase of products and services. It covers both local and foreign-based
retailers and sellers engaged in e-commerce.
Lack of consumer trust is a challenge when it comes to online transactions.
Perhaps due to the discomfort of divulging financial information online or
misgivings over the reliability of online merchants, Filipinos have been
skeptical about spending money on the internet. Surveys say that Filipino
consumers have a low trust in credit cards. Many are still reluctant to get
credit cards because of fear that it will lead to overspending and debt.²³
Those who have credit cards are also wary of transacting online, given the
numerous incidents of hacking and weak cybersecurity cases that have
been reported in media. The 2019 National ICT Household Survey also
showed that cash on delivery is the preferred mode of payment by online
shoppers and sellers.²⁴ During the early days of the pandemic, cash on
delivery was still the preferred mode of payment by consumers. As of 2021
however, reports have it that there is a growing shift in digital payments.²⁵
Gaining the trust of buyers is a challenge for any online merchant. To
counter this, there is a need to use a a combination of strategies that
include, among others, prompt delivery, offering alternative payment
options, and providing accurate product descriptions. The government and
private sector must install efficient redress mechanisms and respond to
consumer complaints. The public must be assured that when they transact
business online, they can do so without fear or any harm to them and that
their personal data are protected.

²³2018 MoneyMax Financial Life survey as cited in Pierre Salonga, “10 credit card myths you should stop believing,” Money MaxAugust 25, 2021,
https://www.moneymax.ph/credit-card/articles/pinoy-credit-card-myths
²⁴Cai Ordinario, “Buy online but pay in cash still preferred - poll,” Business Mirror, July 13, 2020, https://businessmirror.com.ph/2020/07/13/buy-online-
but-pay-in-cash-still-preferred-poll/
²⁵Richmond Mercurio, “E-payment takes preference over cash in online shopping,” philstar.com, February 1, 2021,
https://www.philstar.com/business/2021/02/01/2074366/e-payment-takes-preference-over-cash-online-shopping
11
Another issue of concern especially among buyers when it
comes to e-commerce is privacy. When transacting business
through e-commerce, a significant amount of information about
you is collected by the other party. These usually include one’s
physical address, e-mail address, other contact details, credit
card information, etc. While some of these are passively
collected, these may be used also to allow third party advertisers
to track your browsing habits. Who has access to these data and
what would happen if they fall into the hands of other parties are
questions that consumers ask.
Prior to the enactment of the Philippines’ Data Protection Act
(DPA), it is common for individuals to receive phone calls from
banks or credit card companies asking you to apply for one.
When asked how they got your information, they are unable to
answer the question. After the passage of the DPA, there were
still similar offers for one to apply for a loan or a credit card.
Again, when asked how they got your contact information, they
could not reply and when you further tell them that this is against
the DPA, they abruptly end the call. This just shows that the
personal information that we provide our banks and other
institutions go to the hands of third parties, who use them,
usually for marketing purposes.
The DPA was signed into law in 2012. However, the National
Privacy Commission (NPC), which is the agency mandated to
administer and implement the DPA, as well as to monitor and
ensure compliance with the law, was created only in 2016 or four
years after the law was passed.
Persons who are the subject of a privacy violation or personal
data breach may file a complaint with the NPC. The NPC then
evaluates the complaint and renders a decision. Section 22 of
NPC Circular 16-04 says that the decision of the NPC may
include enforcement orders, including, among others the
following: (1) award of indemnity, where the indemnity awarded
shall be determined based on the provisions of the Civil Code;
(2) cease and desist orders; (3) imposition of a temporary or
permanent ban on the processing of personal data; (4)
recommend to the Department of Justice the prosecution and
imposition of penalties.
12
Data privacy advocates in the public and private sectors agree that there is a need for
safer e-commerce and e-governance spaces in the country.²⁶ Ensuring the protection
of personal data of consumers and the proper enforcement of data protection and
privacy laws will help boost the online retail and the manufacturing industry. This will
also further build the confidence of the country’s international partners in our
information systems.
The NPC also recognizes trading opportunities across the Asia Pacific economies to
expand, and they see the participation in the APEC Cross-Border Privacy Rules
(CBPR) system as a means to help boost e-commerce in the country. The NPC is
expected to identify at least one accountability agent whose role shall be to assess and
certify the compliance of local companies with CBPR standards.²⁷ By being CBPR-
certified, companies can gain entry to larger markers at reduced compliance costs in
matters pertaining to cross-border data transfers.

E-COMMERCE AND
TRADE AGREEMENTS

Advancements in technology are bringing about changes in the business landscape in

the domestic and international arena, and such changes are facilitating the faster
movement of goods and services. These days, trade agreements have an e-commerce
chapter or provision in them. But for developing countries like the Philippines and
many of the Association of South East Asian Nations (ASEAN) member states, the
issues within e-commerce, i.e., privacy, free flow of data, intellectual property rights,
etc., are those that governments should carefully look into to see if they are
advantageous and beneficial to them.
The Philippines-Japan Economic Partnership Agreement of 2008 is the Philippines’
only bilateral free trade agreement, covering, among others, trade in goods, trade in
services, investments, movement of natural persons, intellectual property, customs
procedures, improvement of the business environment, and government procurement.
The rest of the country’s trade agreements are with a group of nations, and usually as a
member of the ASEAN.²⁸

²⁶NPC, “Data privacy leaders support President Duterte’s call fr safer e-commerce, e-governance,” July 28, 2020,
https://www.privacy.gov.ph/2020/07/data-privacy-leaders-support-president-dutertes-call-for-safer-e-commerce-e-governance/
²⁷Ibid.
²⁸See http://investasean.asean.org/ for updates on ASEAN trade. Also, https://www.dti.gov.ph/15-main-content/dummy-article/682-free-trade-
agreements and http://tariffcommission.gov.ph/finder/ for a list of Philippine trade agreements and corresponding tariff schedules and commitments.
Other trade-related information is also available at the Philippine National Trade Repository website http://pntr.gov.ph/.
13
The most recent trade agreement that the country entered into is the Regional
Comprehensive on Economic Partnership (RCEP), which is the trade agreement made
up of the 10 ASEAN country members plus Australia, New Zealand, Japan, South
Korea, and China. India, which joined the initial meetings and discussions on RCEP,
backed out of membership in 2020.
The RCEP has a Chapter on e-commerce, in which member states commit to the
following:
paperless trading and acceptance of documents submitted electronically as the
legal equivalent of its paper version
acknowledging the validity of e-signatures
enacting and maintaining legal frameworks for the protection of personal data and
consumer protection measures for e-commerce, particularly against fraudulent and
misleading practices
regulating unsolicited commercial electronic messages (i.e. direct marketing),
including enabling opt-outs, consent-based requirements and otherwise
minimizing such messages
maintaining the current practice of not imposing customs duties on electronic
transmissions between member states (although taxes / fees / charges imposed in
a manner consistent with the RCEP Agreement are permitted)
building capabilities of local cybersecurity authorities, and fostering cooperation
between member states in tackling such matters
prohibiting (i) data localization requirements mandating the use or location of
computing facilities onshore as a condition to conducting business within the
member state, and (ii) restrictions around cross-border data transfers by electronic
means required for the conduct of business; except where such
requirements/restrictions are necessary to achieve legitimate public policy
objectives or for the protection of essential security interests

²⁶NPC, “Data privacy leaders support President Duterte’s call fr safer e-commerce, e-governance,” July 28, 2020,
https://www.privacy.gov.ph/2020/07/data-privacy-leaders-support-president-dutertes-call-for-safer-e-commerce-e-governance/
²⁷Ibid.
²⁸See http://investasean.asean.org/ for updates on ASEAN trade. Also, https://www.dti.gov.ph/15-main-content/dummy-article/682-free-trade-
agreements and http://tariffcommission.gov.ph/finder/ for a list of Philippine trade agreements and corresponding tariff schedules and commitments.
Other trade-related information is also available at the Philippine National Trade Repository website http://pntr.gov.ph/.

14
 According to the Philippine government, RCEP will
provide a more conducive trade environment for cross-
border e-commerce, which can attract more Chinese
investments in the country, as well as strengthen its
economic ties with other RCEP participating countries.
It is also expected to pave the way for the
internationalization and participation of MSMEs in the
global value chains.²⁹ Generally, domestic laws are
already in place to address some concerns including
the Consumer Protection Act, E-commerce Act, and
the Data Privacy Act. Not all state parties to RCEP have
similar laws. Under RCEP, it merely requires parties to
the agreement to adopt measures and frameworks for
consumer protection, privacy, and other issues.
However, groups such as Trade Justice Pilipinas, sees
the agreement as further deepening inequality “as it
does not grant sufficient flexibility for less developed
ASEAN member states” and could also threaten the
jobs of workers in the Philippines.³⁰
Currently, the chapter is not enforceable by state-state
dispute settlement. In the future though, it may be
enforceable and its provisions may be used as
precedent in other trade negotiations.³¹
RCEP will enter into force 60 days after six ASEAN
states and at least three of its FTA partners have ratified
the trade deal. As of April 2021, China, Japan,
Singapore and Thailand have ratified RCEP.³² The DTI
expects that the said treaty will be ratified before the
end of 2021. The Philippines hopes to be one of the six
countries to deposit the instrument of ratification, but
the President has yet to submit the treaty to the Senate
for ratification.³³

²⁹DTI, “MSMEs to benefit from RCEP,” www.dti.gov.ph, July 6, 2021, https://www.dti.gov.ph/news/msmes-benefit-from-rcep-agreement/

³⁰Jenina P. Ibanez, “RCEP perks seen advantageous but PHL exporters still hampered,” Business World, November 16, 2020,
https://www.bworldonline.com/rcep-perks-seen-advantageous-but-phl-exporters-still-hampered/
³¹Jane Kelsey, “Important differences between the final RCEP electronic commerce chapter and the TPPA and lessons for e-commerce in the WTO,”
bilaterals.org, February 10, 2020, https://www.bilaterals.org/?important-differences-between-the
³²Zoey Zhang, “What is the ratification status of RCEP agreement and when will it come into effect,” China Briefing, April 30, 2021, https://www.china-
briefing.com/news/ratification-status-rcep-expected-timeline-china-thailand-already-ratified/
³³Kris Crismundo, “DTI to submit RCEP ratification to PRRD this month,” Philippine News Agency, May 17, 2021,
https://www.pna.gov.ph/articles/1140487
15
POLICIES AND LEGISLATION

The Bureau of Internal Revenue (BIR) issued a Memorandum on June 2020 ordering
businesses earning income “through the use of any electronic platforms and media and
other digital means” to register and settle their taxes, or else face penalties.³⁴
The taxation of online sellers in the country is not new. In 2013, RMC 55-2013 was
issued requiring registration and tax payments from “online business transactions,
including online retailing through virtual shopping malls, online marketplaces, web
stores and similar websites” or “online stores,” which include business-to-consumer,
consumer-to-consumer, and business-to-business transactions.³⁵
The Philippines currently has no special legislation that provides for the taxation of
online transactions. However, the imposition of tax under the National Internal
Revenue Code (Tax Code) makes no distinction between businesses with a physical
presence and those with only a virtual one. This means that online transactions should
be taxed in the same way as conventional ones. It has to be noted though that
individuals, including online sellers, earning less than PhP250,000 (USD5,000)
annually are exempt from payment of income tax.
The Philippines for the moment is collecting value added tax (VAT) on both local and
cross-border digital transactions, similar to what is being done by other ASEAN
member-states. Meanwhile, the Department of Finance and the BIR are crafting
regulations and designing a system to effectively collect VAT on digital transactions.
In Congress, the House of Representatives has proposed House Bill 6765 or the
“Digital Economy Taxation Act of 2020” which proposes to impose VAT on the online
transactions of goods and services and requires non-residents offering digital services
in the Philippines to have a resident agent.

³⁴BIR Memorandum Circular 60-2020

³⁵Ben O. De Vera, “DOF firm on listing, taxing online sellers,” inquirer.net, June 13, 2020, https://business.inquirer.net/299851/dof-firm-on-listing-taxing-
online-sellers#ixzz74KNC0IRu
16
At the Senate, Resolution 410 was filed, which seeks to tax
multi-national online streaming services and the digital
economy. There is also Senate Bill No. 1591 or the
proposed Internet Transactions Act which was filed to
make online buying, selling, and other transactions faster.
The Act will pave the way for the establishment of a
singular office, the E-Commerce Bureau under the DTI,
that will be given the responsibility of carrying out
provisions of the bill, ensure the implementation of
Republic Act No. 8792 or the Electronic Commerce Act of
2000, and be the focal point in the monitoring and
implementation of the Philippine e-commerce roadmap.
According to the bill’s author, the country e-commerce
industry can still improve but it needs to resolve key issues
such as lack of trust, internet infrastructure, logistics
infrastructure, payment mechanisms, lack of governing
entity at the regional level that can fight cybercrime and
settle cross-border disputes, difficulty in the process of
returning a product, taxation, and online consumer
complaints.³⁶
However, there were also a few points raised by merchants
and platform providers that should be addressed. For one,
they think that a “one size fits all” regulation may
discourage seller participation because of the Joint and
Solidarity Liability clause in the proposed law, which holds
e-commerce platforms jointly liable with merchants selling
products that do not comply with intellectual property,
consumer protection, and other laws. There should also be
safety nets and stiffer penalties against those who commit
bogus online transactions using fake identity and
fraudulent receipts of proof of purchase.³⁷

³⁶“Senate bill seeks smoother e-commerce deals via Internet Transactions Act,” Newsbytes. June 11, 2020, https://newsbytes.ph/2020/06/11/senate-
bill-seeks-smoother-e-commerce-deals-via-internet-transactions-act/
³⁷Manila Standard, “Understanding impacts of Internet Transactions Act on Filipino entrepreneurs,” Manila Standard, March 9, 2021,
https://manilastandard.net/mobile/article/348977
17
 CONCLUSION

With more and more people going online, the future of

e-commerce in the Philippines looks bright. It is possible
that the targets set by the DTI may be reached
considering that people are getting more accustomed
to conducting business online. With the risks of COVID-
19 pandemic still looming over our heads, with the lack
of vaccines, it is inevitable that online transactions will
be the preferred mode by many.
Despite prognosis that e-commerce will continue to
grow, there remain challenges that have to be hurdled
to ensure its continued upward trajectory. Increased
consumer trust, ensuring safe and reliable transactions,
investor confidence and enablers such as internet
access, logistics and payments, can help boost the
growth of e-commerce and the economy as a whole.
As technology continues to advance and e-commerce
becomes part of trade agreements, there is also a need
to study the impact of such agreements in developing
countries like the Philippines, including their impacts on
specific sectors such as women, labor groups, and
others.

18
RECOMMENDATIONS

Government should take an active role in creating and implementing an enabling

policy and regulatory framework through reforms that will help reduce the digital
divide, reduce logistics cost, promote use of digital payments, and create a conducive
business environment. This includes addressing the following: (1) low digital payment
penetration; (2) Logistics concern, considering that it is a challenge to the deliver
goods and services outside of Metro Manila; (3) internet connection, which is slow and
expensive compared to its Southeast Asian neighbors; and, (4) putting in place the
necessary systems for the implementation of existing laws, and ensuring that
enforcement agencies and local courts are familiar and adept at handling cases
involving electronic transactions.
Other than these, government should also
Provide efficient redress mechanisms to address consumer complaints and
concerns, including privacy issues, trade, taxation, and labor
Address uncertainty and security concerns by strengthening awareness in data
security and supporting firms’ capability to protect their e-commerce platform;
Provide support to MSMEs and other firms in adopting ICT in their business
operations;
Review trade agreements, such as RCEP, and see how such can affect and impact
labor and economy
In partnership with the private companies, there is a need to improve the internet
service in the country. This means providing faster, reliable and affordable internet
service to the general population, not only to those in the urban areas, but also those in
rural areas.
Establish partnership among government, the private sector, consumers and civil
society to (1) help equip the workforce with digital skills and provide training and
technology to the new generation of startups; and, (2) provide digital skills and literacy
training to consumers and the public as they use and navigate the platforms. This
would help build consumers’ confidence in using the online system.

19
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24
ABOUT FMA

The Foundation for Media Alternatives is a non-profit service institution whose

mission is to assist citizens and communities - especially civil society organizations
(CSOs) and other development stakeholders - in their strategic and appropriate use
of the various information and communications media for democratization and
popular empowerment.
Since its formation in 1987, FMA has sought to enhance the popularization and
social marketing of development-oriented issues and campaigns through media-
related interventions, social communication projects, and cultural work. In 1996,
FMA streamlined its programs and services in both traditional and new media, with
a major focus on information and communications technologies (ICTs), to enable
communities to assert their communication rights and defend their rights to
information and access to knowledge, towards progressive social transformation.
FMA seeks to develop programs and projects that strategically address the
questions of access to and equity of disadvantages sectors in the area of
information and communications - and in locating the so-called digital divide within
existing socio-political divides, including gender. These involve:
Promoting equitable partnerships for innovating connectivity and community
access alternatives to assert the agenda of disadvantaged communities;
Facilitating capacity-building sessions for CSOs in the area of ICT literacy, ICT
management, online collaboration or advocacy, and secure online
communications;
Helping CSOs manage development content through appropriate tools and
technologies towards building vibrant online communities and knowledge
networks;
Enhancing multi-stakeholder consensus-building on strategic information and
communication agenda, via action-oriented research, constituency-building and
public advocacy.

25
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