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Philippines begins major infrastructure investments

March 1, 2021
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Why this is important to Wisconsin businesses: Overseas firms can participate in the upgrades being planned for airports, roads, rail, bridges and more.

The government of the Philippines is banking on an infrastructure development push to drive a robust economic rebound in 2021. Fitch Solutions Country Risk & Industry Research has projected that the Philippines’ construction sector will post double-digit growth of 13% during 2021, supporting a consensus/average GDP growth forecast of 7.8% for the year.

The 2021 national budget includes a strong focus on infrastructure projects, allocating ₱318 billion ($6.5 billion USD) to the Department of Public Works and Highways for transportation network development, flood management, asset preservation and bridges. The Department of Transportation is receiving ₱61 billion ($1.3 billion USD) for expenditures on rail transport, land public transportation and maritime infrastructure.

This emphasis is in line with the government’s ambitious $180 billion “Build! Build! Build!” program, launched in 2017 to address infrastructure shortcomings that have been a consistent bottleneck in the country’s economic development plans. The Philippines ranked 96th out of 141 countries in the World Economic Forum’s Global Competitiveness report in 2019.

Build! Build! Build! seeks to accelerate public infrastructure expenditure from an average of less than 3% of GDP during the first half of past decade to around 7.3% by 2022. There are 104 flagship projects under the initiative, many of which are presently under construction or at an advanced stage of the feasibility study. See a full list of these projects.

Aside from tapping into the state coffers, Build! Build! Build! also benefits from Official Development Assistance (ODA) funding from countries such as Japan, China, South Korea and the U.S., as well as multilateral development banks (MDBs) such as the Asian Development Bank and the World Bank. The country’s active ODA project portfolio stood at $20 billion as of March 2020. Several Build! Build! Build! projects are also funded through public-private partnerships. The new Manila International Airport project in Bulacan, the largest of the Build! Build! Build! flagship projects at ₱736 billion ($15 billion USD), arose from an unsolicited public-private partnership proposal from Philippine conglomerate San Miguel Corp.

In addition to Build! Build! Build!, smart city solutions are being explored to address infrastructure challenges in areas such as flood monitoring and prevention, traffic management and security, with metro Manila, Cebu and Davao as key destinations. Cebu and Davao are part of the Association of Southeast Asian Nation (ASEAN) Smart Cities Network, a collaborative platform where cities from the ASEAN member states work toward the common goal of smart and sustainable urban development.

Wisconsin companies can find opportunities to take part in the developments described above, for example providing construction equipment, green building materials, smart cities solutions and mass housing technologies. Additionally, strong ties between the U.S. and the Philippines could facilitate access to consulting opportunities, ranging from pre-feasibility and feasibility studies to civil design and architecture.

Market entry approaches would vary by sector and project type. For example, suppliers of smart cities solutions would first need to meet with government officials to compare specific needs with solutions the company provides. Offering a trial pilot free of charge to the government is also recommended before the steps of budget allocation and procurement. Meanwhile, for MDB-funded projects, consultants providing technical assistance can deal directly with the MDBs, but the relevant government usually manages the procurement of capital goods.

Most importantly, given the Philippines’ cumbersome government procurement procedures and the constitutionally mandated 60% Filipino ownership in the construction, operation and maintenance of public infrastructure, partnering with local conglomerates, general contractors, subcontractors and distributors is the easiest and fastest route to market. For instance, there are many local construction firms that serve as subcontractors and can directly buy and import machinery from abroad.

Besides securing deals, implementation, delivery and payment are key factors to consider. Hence, a thorough risk assessment and due diligence with research on potential partners and projects are important. Because of the multiple pathways involved in entering or expanding into the Philippines’ infrastructure market, as well as the potential challenges and risks, Wisconsin companies are encouraged to consult with and utilize support from WEDC’s global trade and investment team, including in-market trade representatives in Southeast Asia.

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