Infrastructure market in the Philippines

Building on the previous administration’s successful infrastructure program, “Build, Build, Build,” the new administration under President Ferdinand Marcos Jr. has been actively advocating for public-private partnerships (P3s) as a favourable financing model for infrastructure projects.

In addition to national projects, local government units such as provinces and municipalities are encouraged to look at P3s as a means of pushing infrastructure development and other undertakings for socioeconomic benefit.

The Philippines is one of the fastest-growing economies in Asia and is the second fastest-growing economy in the ASEAN. Increasing urbanization, a growing middle class and a young, English-speaking population continue to drive the local economy, thanks to strong consumer demand supported by a burgeoning labour market and steady remittances from overseas Philippine workers.

There is notable positive economic performance in the services sector, including business process outsourcing, real estate, finance and insurance.

Key opportunities for Canadian infrastructure companies in the Philippines

• Airports
• Railways
• Digital infrastructure
• Intelligent transportation systems
• Irrigation systems / hydropower plants
• Introduction of nuclear energy

Notable challenges for Canadian infrastructure companies in the Philippines

• There is strong competition from other countries, especially those that are providing official development assistance or concessional funding for some upcoming P3 projects.
• There is a need to conduct feasibility studies on some, if not most, P3 projects, which may incur additional costs to potential investors. 
• The revised Implementing Rules and Regulations (IRR) to the Build-Operate-Transfer (BOT) Law is intended to fine-tune some policies that will push for the appropriate sharing of risks between the government and the private sector. This revised IRR is expected to come out in Q3 2022.

Business landscape in the Philippines

The BOT Law (Republic Act No. 6957 as amended by Republic Act No. 7718) is the legal basis for P3s in the Philippines. It allows for collaborative partnerships between the government and the private sector that can be made possible through a broad range of modalities, including Build-Operate-and-Transfer (BOT) and Build-Transfer-and-Operate (BTO).   

To show the Philippine government’s commitment to P3s in 2013, the P3 Centre was created to oversee the programming, implementation, monitoring and evaluation of the Philippines’ P3 projects. It is currently under the responsibility of the National Economic and Development Authority, the Philippine government’s primary think tank for strategic socioeconomic development plans.

A few notable P3 projects in the Philippines include the following:

• the Mactan-Cebu International Airport Project
• Light Rail Transit Line No. 3 (MRT 3)
• the Manila-North Expressway (NLEX) Project
• the Metro Manila Skyway (one of the longest elevated expressways in the world) 

Three international airports are being planned under the country’s P3 program, and are led by big local conglomerates or infrastructure companies:

• Bulacan International Airport (San Miguel Corporation (Can$18.4 billion))
• Davao International Airport (Udenna Infrastructure Corporation (Can$1 billion))
• Ninoy Aquino International Airport (Megawide Consortium (Can$2.7 billion))

Rail projects are also being planned, as this is the preferred mode of modern mass transportation in various areas of the Philippines, especially in Manila and in provincial metropolises.

These projects include:

• Manila’s East-West Rail project (Can$1.4 billion)
• MRT 7 project (Can$3.2 billion)
• Cebu Monorail project (Can$1.8 billion)
• Davao People Mover project (Can$750 million)

A complete list of Philippine projects at various stages of development is publicly available online.

Summary

The Philippines is an attractive market because its GDP growth for 2022 is projected to be 6.5%, higher than an earlier forecast of 6.0% by the Asian Development Bank. Infrastructure upgrades, including bridges, expressways, ports and railroads, continue to be the government’s top priorities.

Public spending on infrastructure this year and next year is expected to be up to 6.0% of the GDP to help improve the country’s business environment and competitiveness.

The Philippines is committed to and actively working on improving its infrastructure and is open to doing business with Canadian companies.

For more information on infrastructure in the Philippines market, please contact dodjie.Fabian@international.gc.ca.