Philippines - Country Commercial Guide
Defense

This is a best prospect industry sector for this country. Includes a market overview and trade data.

Last published date: 2021-09-11

Overview

The Armed Forces of the Philippines is undertaking a 15-year modernization program that started in 2012 and will continue through 2027 under the Republic Act (RA) 10349 or the Revised Armed Forces Modernization Act. The total cost of the 15-year program is projected to be over $40 billion. There are opportunities for the sale of aircraft, ships, unmanned vehicles, intelligence and surveillance systems, communications, personal protective equipment, and weapon systems. The U.S. is a primary supplier of defense equipment to the Philippines, but faces stiff competition from Israel, South Korea, Italy, Spain, France, Sweden, and Germany. China and Russia are also gaining momentum in the market.

Current President Rodrigo Duterte has reaffirmed his commitment to continue the AFP’s modernization, but with a slight shift in its priority. Under the late President Benigno Aquino III, the focus was to strengthen the AFP’s capability to address external threats, particularly to protect its territorial waters, and advance its maritime domain awareness. President Duterte’s focus is counterterrorism and internal threats. RA 10349 is significant as it is the first committed effort to modernize the AFP. It was legislated to protect it from being impacted by shifts in the country’s subsequent political climate.

Due to the continued presence of terrorist activity in some parts of the Mindanao region, the Government’s defense spending, apart from the Modernization effort, is expected to focus on the AFP’s counterterrorism efforts. This includes procuring adequate equipment to ground forces and providing the necessary air and maritime reinforcements.

Leading Sub-Sectors

The AFP Modernization will be implemented in three phases:  Horizon I (2012-2017), Horizon II (2018-2022), and Horizon III (2023-2027). Estimated spending for Horizon II is expected to be $5 billion. There are no available spending estimates yet for Horizon III. The AFP is now preparing its list of equipment for Horizon III procurement. Initial reports have indicated that it will include procurement of more combat utility helicopters, heavy lift helicopters, and larger UAS (unmanned aerial systems).

Opportunities

The list of Horizon II projects is considered proprietary, but Post has learned of the following opportunities as likely to be included in Horizon II plans:

  • multi-role fighter (MRF) aircraft
  • munition systems for the MRF
  • command and control fixed wing aircraft
  • flight simulators
  • helicopters for combat utility, attack, search and rescue
  • aircraft (medium lift and amphibian aircraft)
  • air surveillance radar
  • trainer aircraft
  • land vehicles (armored personnel carriers, all-terrain vehicles, light tactical vehicles)
  • force protection equipment
  • unmanned aerial systems (UAS)
  • amphibious aircraft
  • intelligence, surveillance, and reconnaissance (ISR) systems
  • tactical data link systems and network integration
  • riverine operations equipment (light, assault, and support boats)
  • maritime vessels (corvette, offshore patrol vessels)

Apart from its modernization program, the Philippine Security Forces (includes the AFP and all Service Commands, and the Philippine Coast Guard) receive an average of $120-125 million annually in U.S. grant funds inclusive of both Department of State (DoS) Foreign Military Fund (FMF) and International Military Education and Training (IMET) and Defense Security Cooperation Agency (DSCA) Building Partnership Capacity (BPC) programs 333 and 1263. This is separate from defense-related construction projects, as well as Defense Threat Reduction Agency (DTRA) projects in the Philippines. Additionally, as a U.S. grant recipient country, the Philippines has acquired numerous ships (high-endurance cutters or WHEC vessels), aircraft (C130H/T models), and hundreds of wheeled and tracked vehicles via the U.S. Government’s Excess Defense Articles Program (EDA).

Foreign Military Sales (FMS) and all U.S. grant assistance are handled by the Joint U.S. Military Assistance Group (JUSMAG) Philippines. The direct commercial sale (DCS) method of procurement to the AFP requires a thorough understanding of the Philippine Government procurement system with a local agent or partner critical in identifying procurement opportunities.

Resources

Contact Information:

Thess Sula, Commercial Specialist, U.S. Commercial Service Philippines

Email: Thess.Sula@trade.gov