Philippines' construction sector to grow 10.9% in 2019

The establishment of much-needed transport infrastructure like the Metro Manila Subway project are already underway.

The Philippines’ construction sector is projected to grow 10.9% in 2019 on the back of a healthy project pipeline and growing foreign direct investments, according to a report by Fitch Solutions.

The report highlighted how the sector would be boosted by progress made on Phase 1 of the $75b Metro Manila Subway project, a 25 km-long fully underground subway system that will run from Quezon City’s Mindanao Avenue to Manila International Airport. The system will link key districts within Metro Manila to alleviate traffic congestion once it is completed in 2025.

Considered as the largest project of president Rodrigo Duterte’s ‘Build Build Build’ infrastructure programme, the project is partially financed by a $985m loan disbursed by Japan International Cooperation Agency (JICA), the report highlighted.

“We believe relative political stability within the country will be a plus for the sector as policies enacted by the current government will benefit from continuity over the next few years,” Fitch Solutions added. “Also, the country is home to large pipeline of transport projects which span across different sub-sectors.”

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The report pointed out how the country has 64 transportation projects in the pre-construction phase which accounts for more than 75% of the total value of construction projects in the pipeline.

These projects include the $14b new Manila International Airport which will add an estimated capacity of 100 million passengers annually and complement the operations of the Ninoy Aquino International Airport (NAIA). A memorandum of understanding (MOU) was signed between the Incheon International Airport Corporation (IIAC) and San Miguel Corporation for the development and operation of the new airport.

Other projects include the Makati City Subway project valued at $3.7b for Metro Manila’s financial district, whilst the estimated $1b Metro Cebu Expressway project which started minor engineering works in 2018 aims to connect Nag City to Danao City in the Visayas region.

Fitch Solutions’ also noted of the administration’s efforts to ease ownership restrictions for foreign contractors in selected construction projects from 25% to 40% as the government aims to enhance the country’s competitiveness.

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“We note that the amount of foreign direct investments to the construction industry has increased, reflecting the administration’s fruitful efforts in attracting foreign capital to the sector to support the ‘Build Build Build’ program,” Fitch Solutions said, citing that such efforts will have long-term benefits for the country in terms of plugging the financing gap in its transport sector.

Whilst Japan has traditionally been one of the Philippines’ largest source of foreign direct investment, Fitch Solutions said it expects more Chinese capital to flow into the country to support the growth of its overall infrastructure sector.