Monday, April 15, 2024

Study: Filipino MSMEs need to digitalize to benefit from intra-Asia trade

A new study from logistics giant UPS has found that while intra-Asia trade holds significant potential, there is still a huge room to digitalize the Philippines’ logistics network, with many companies – including micro, small and medium-sized enterprises (MSMEs) – still relying on costly and time-consuming paper-based processes.

While the Covid-19 pandemic has accelerated adoption of digital technologies within the Philippines, adoption of digital payments and digital supply chain tools has fallen behind, the report said.

“MSMEs play a vital role in both the manufacturing and employment economies of the Philippines – it’s in all our interests to do what we can to build a thriving small business community and the rapid growth of e-commerce is a huge opportunity to do that,” said Russell Reed, managing director UPS Philippines.

Trade between the Philippines and 11 other Asian markets could triple by 2030, according to study titled “Clearing the Runway for Intra-Asia Trade”, which sheds light on trade growth drivers, potential headwinds, and multi-stakeholder action required to unlock the 2030 opportunity.

Trade in just 12 key markets, referred to in the study as the Asia 12 , accounts for 88% of intra-Asia trade today, and these markets are poised to consolidate this position further.

UPS found that trade within these 12 markets could more than double in value from $6.4 trillion in 2020 to $13.5 trillion in 2030.

For the Philippines in particular, the country has an opportunity to build on rapid growth in the previous decade – particularly in the manufacturing sector – which could see trade with the Asia 12 more than triple from $113 billion in 2020 to $393 billion in 2030.

There are also significant opportunities for Filipino businesses in areas such as digitalization, building supply chain resilience and multilateral cooperation in international trade.

Four product segments – retail, industrial manufacturing and automotive (IM&A), high-tech, and healthcare – accounted for 75% of the Philippines’ intra-Asia trade in 2020 and are expected to fuel the growth.

The IM&A segment stands to be the largest by value in 2030, more than tripling from 2020 levels as the country aims to serve as a global and regional hub for the automotive and electronics sectors.

Meanwhile, trade in the high-tech segment, which constituted 41% of the country’s intra-Asia trade in 2020, could more than double in value, riding the wave of digitalization which will create significant demand in this segment across Asia.

The study said Philippine-based businesses can plan for both headwinds and opportunities by diversifying supply chains into resilient trade routes and targeting high-value and high-growth trade routes, such as IM&A, healthcare, and retail trade with economies like Japan, as well in the high-tech segment with Hong Kong and Vietnam.

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