Philippines Market Opportunities
In the pre-pandemic era, the Philippines was considered one of the fastest growing economies not only in the ASEAN region but also in the whole of Asia. With constant economic growth ranging from 6.0% to 6.9% as of 2017, the Philippines was projected to grow at an average of 5.3% from 2019 to 2028. However, with the outbreak of covid-19 and its adverse effects on the economy, the Philippines entered a recession with an economic decline of -9.4%, the steepest since World War II, while over 150 million Filipinos slipped into poverty.
The Philippine government imposed a series of strict “lockdowns” in 2020 that severely limited economic and business activities in almost all sectors. The national government has planned to borrow a total of 3.03 trillion Philippine pesos (PHP) in 2021, most of which will be from local sources. External financing included foreign loans from multilateral lenders as well as bilateral development partners, which contributed a gross amount of PHP 44billion.
The Philippine economy is highly sensitive to restrictions on the movement of people, goods and capital, given its heavy reliance on domestic consumption, investment and remittances. The economy’s heavy dependence on remittances from abroad has proven to be a major problem, given the shaky stability of jobs and wages that continue to face the global health crisis.
The central bank expects remittances to grow 4% this year after falling 0.8% to $29.903 billion in 2020 due to the pandemic. Remittances from abroad significantly support household consumption, which makes up 70% of the economy. Domestic consumption is suffering from low traffic due to movement restrictions and growing health anxiety among consumers who have significantly reduced consumption activities.
The World Bank also assessed that the country has a conservative fiscal response and slow implementation of economic stimulus that could contribute to economic recovery. In addition, there remains the problem of the African swine fever outbreak, which is causing the price of pork and other products such as poultry and fish to soar.
Post-COVID-19 opportunities for foreign exporters
As part of the anti-coronavirus strategy, the Philippine government plans to allocate 1.49 billion. PHP for various programs and projects. These areas include emergency assistance for vulnerable groups, resources to combat covid-19, fiscal, cash assistance and an overall economic recovery plan. In the first area, it is primarily the immediate allocation of monetary aid to various sectors and industries.
The second area involves strengthening the resilience of the healthcare system in the fight against covid-19. The amount of PHP 843 billion is to serve as reserve funds to finance possible future recovery plans. Finally, although the recovery plan has not yet been created, the government has expressed its intention to invest in social and infrastructure programs under the fourth pillar.
Civil aviation industry
The covid-19 pandemic has resulted in the loss of PHP 65 billion in revenue for local airlines and thousands of jobs. Economists and civil aviation associations also say it may take two to three years to reach pre-pandemic passenger volumes due to continued weak travel demand. The Philippine government has included the aviation industry, among other industries, in the bailout fund under the proposed “Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE)” Government Financial Institutions Act.
Following the national government’s pledge to improve the local aviation industry, the Department of Transportation said it has completed 121 airport projects, started 114 and will start another 75 in the future. Several projects are underway to develop airports for night operations after as well as upgrade regional airports in Vigan, Bask, Calayan, Viracu and Antique. In addition, the Department of Transportation, in collaboration with the private sector, has initiated the construction of new international airports in Bicol and Bulacan to help relieve passenger traffic in congested Manila. Another delayed airport project is the reclamation and construction of another international airport at Sangley Point in Cavite City.
The provincial government of Cavite, which acts as a partner in the PPP, terminated the deal it originally awarded to the MacroAsia Corp.-China Communications Construction Co. consortium. Ltd, as a result of fundamental deficiencies in submitting the requirements of the joint venture agreement. As a result, the Provincial Government of Cavite is once again looking for potential bidders. For new airport projects, the Ministry of Transport seeks to improve other regional airports through official development assistance or funding from the national government instead of a public-private partnership (PPP) procurement process.
Transport industry and infrastructure
As part of the fight against insufficient transport infrastructure capacity, the current government started the “Build Build Build” program, the task of which is the implementation of 72 projects worth PHP billion, which should enable the construction of new bridges, highways, railways, urban transport or airports. Financial coverage is irregularly divided into several instruments consisting primarily of official development assistance or public-private partnership projects.
According to allcountrylist, most of the projects are in the phase of construction or preparatory work, when individual projects are approved by the National Economic and Development Council of NEDA, which constantly updates project cycles and methods of financing. The Department of Transportation further announced its plans to increase the rail network from 77 km to 1,200 km by 2022. Ongoing projects include the extension of the Philippine National Railway from the cities of Legazpi in the Bicol region to the city of Clark in the Pampanga region.
The construction of the light rail MRT-4, MRT-7, the Subic-Clark rail link, the railway on the second largest island of Mindanao and the construction of the subway in the capital Manila will also continue. At the same time, the rehabilitation of the MRT-3 light rail is expected to be completed by July 2021, which will increase the number of train sets to be deployed during peak hours in order to achieve shorter waiting times for passengers. In addition to the road transport sector, the DOTr supports the improvement of air and sea connectivity.
The Philippine Department of Defense is currently implementing the so-called second horizon of the revised modernization program with an agreed budget of PHP 300 billion. However, as of 2018, only PHP108 billion was allocated to the department. The deepening budget deficit of the Philippines, together with a complex public procurement process, leads to a slowdown in the implementation of projects from the second horizon, and it can be assumed that it will not be fulfilled by 2022.
According to the national government, the presence of Chinese vessels and artificial islands in the West Philippine Sea was a predominant threat to the country’s sovereignty. In addition, the Department of National Defense has focused on addressing the issues of illegal drug trade, increasing terrorism in the country, and assisting the Philippine government’s efforts to combat the global pandemic. For 2021, the Ministry of National Defense has an allocated budget of PHP 27.0 billion for approved projects under the second horizon of the revised Armed Forces Modernization Program.
As part of the program, it is mainly about combat engineering equipment, unmanned vehicles, attack helicopters, radars, howitzers, tanks, wheeled armored personnel carriers and training aircraft. The Ministry of National Defense only has time until 2022, when the current modernization program cycle should be fulfilled. In addition to the Armed Forces Modernization Program, the Department is also negotiating with the Philippine Economic Zone Authority (PEZA) to set up defense industrial complexes in military areas to attract foreign investors to the defense sector.
Healthcare and pharmaceutical industry
Currently, there are only 1,456 hospitals in the Philippines, of which 32% are government hospitals and the rest are private facilities. These statistics are below the standards of the World Health Organization (WHO), when the required number of hospitals was to reach 5,250. Public health facilities usually partner with relevant private sector entities through a public-private partnership (PPP) program. The healthcare sector has already been offered by the Ministry of Trade and Industry of the Philippines to be included in the agenda of the Joint Committee for Economic Cooperation between the Czech Republic and the Philippines.
In the following period, an increase in insufficient capacities and an overall strengthening of the healthcare sector can be expected. Shortages of health workers, infrastructure and technology across the country are a persistent challenge in the Philippine health care system, which has become very evident after the Universal Health Care Act and since the onset of the covid-19 pandemic.
For 2021, the Department of Health was allocated an amount of PHP210.2 billion, of which only PHP1billion was allocated for construction, technology and equipment procurement projects, with the majority provided to PhilHealth for the day-to-day operations of existing public hospitals after the whole country. The expansion and development of medical devices is driving the market growth in the medical devices sector in the country.
In fact, the national government expects the medical device manufacturing sector to expand by $74million over the next few years as infrastructure projects are implemented. The country is also moving into a more technology-dependent healthcare sector as it embraces and implements solutions such as artificial intelligence and mobile apps, both for the general public and within individual organizations.