This is a best prospect industry sector for this country. Includes a market overview and trade data.
The Philippines lags many of its neighbors in infrastructure development, being notorious for challenging traffic conditions and long commutes. Port congestion is regularly raised as a constraint to economic growth. Prior to the pandemic, under capacity in international airports across the country presented a significant impediment to development and tourism. The needs are significant and there are opportunities in the transport infrastructure sector.
In 2017, the Duterte Administration launched the ambitious $180 billion “Build, Build, Build” (BBB) program to address the nation’s mounting infrastructure challenges. The initiative initially designated 75 projects valued at $48 billion as flagship projects. These included big-ticket rail, airport, road, and bridge projects across the nation. The Government favored designating most projects to tied aid loans because they are offered at concessional rates with long repayment periods. Japan and China emerged as leaders in this area, quickly claiming the big-ticket rail projects. The Asian Development Bank, World Bank and Korea were the Philippines’ other sources of concessional loans for their flagship projects.
The list of flagship projects has been revised twice in the past five years. Government has removed projects no longer deemed realistic and added other projects including public-private partnership (PPP) projects.
The latest list of flagship projects now includes 112 projects valued at approximately $94 billion. There are 76 transport and mobility projects in the list worth $85 billion, almost half of which are road, highway, expressway, or bridge projects. Other projects in this category are rail, airport, bus rapid transit, subway, and port projects. The list of flagship projects can be found at https://neda.gov.ph/infrastructure-flagship-projects.
As of May 2021, four flagship projects had been reported completed, and 12 projects are ongoing and are expected to be completed in 2021. Expected completion for the rest of the projects are is 2022 or later.
Out of the 76 transport and mobility projects on the list, 35 are being or will be funded purely by development aid, with only 12 to be financed completely by government funds. There are 24 PPP projects, 20 of which are unsolicited proposals.
Many of the projects in the list are not yet in the construction stage. Because of the pandemic, projects that are under construction are severely behind schedule. Awarding of contracts is also delayed. Unsolicited PPP proposals that are mostly airport projects are still being reviewed and revised by the project proponents in view of the effects of the COVID pandemic.
Given the complicated procurement procedures of the Philippine Government, firms have preferred pursuing big-ticket projects financed by the Japanese government, as such projects ensure completion and payment. Procurement for projects funded through official development assistance is conducted according to the rules of the donor nation, and after the main contractor is selected, this contractor can partner with firms regardless of national origin. U.S. firms have served as sub consultants/contractors/suppliers of Japanese-funded projects in the past, successfully completing projects valued in the millions.
PPP projects have been of interest to the Philippine Government, but the separation of the Build and Operate portions of infrastructure projects has presented concerns for U.S. firms not wishing to be responsible for operating or managing projects that they did not build. Furthermore, unsolicited PPP projects have also proven to be challenging as original project proponents can spend millions developing a project proposal with no guarantee that they will be awarded the project in the end since there is a mandatory Swiss Challenge. U.S. firms built relationships with the expected winners of such big-ticket unsolicited airport projects. However, as these firms are only the expected “winners,” U.S. firms have been hesitant to finalize business relationships until there is full confirmation. Due to the pandemic, the Government continues to emphasize a preference to shift projects to PPP models. However, the private sector is generally cautious to pursue such projects.
Firms are encouraged to first identify projects of interest, research their status and then determine how to engage and assess risks. 2022 is a national election year and a new administration means changes in priorities and projects. It is thus best to seek projects that are expected to move forward despite the future change in administration.
Rail: Among the projects that initially garnered high U.S. interest in the flagship list include the $3 billion North-South Commuter Railway Project (Philippine National Railway [PNR] North 1), the $12 billion North-South Commuter Railway Extension (PNR) North 2 Project, and the $7 billion Metro Manila Subway Project Phase 1. The rail and subway projects are being funded by Japan, while the Asian Development Bank (ADB) is funding the civil works of a portion of the North-South Commuter Railway project. U.S. firms cannot be the main contractor on record for JICA-funded projects, but the project size still allows for reasonable subcontracting, supply, and consulting opportunities.
Airport: The major airport project in the Philippines is the $15 billion New Manila International Airport in Bulacan, a greenfield project that has a design capacity of up to 200 million passengers annually and plans for four parallel runways. This is an unsolicited PPP project.
A range of products and services are needed for the completion of the infrastructure projects, including building products, construction equipment, electrical and mechanical equipment, and IT-related systems. Information on the contract packages for the rail projects and the winning bidders is available on the Department of Transportations’ website: https://dotr.gov.ph.
Among the ways by which U.S. firms can participate in projects are:
- Participating directly in a Philippine Government project tender.
- Serving as a subconsultant/subcontractor/supplier for Official Development Assistance-funded projects. (Note: Top Official Development Assistance donors providing loans for projects include Japan, Korea, Asian Development Bank and World Bank; see Page 63 “Official Development Assistance (ODA)” for additional information.)
- Developing and submitting an unsolicited proposal to the local or national government.
- Working as a subcontractor/consultant/supplier for a project proponent of a solicited or unsolicited PPP project.
- Partnering with a local firm to do any of the above.
- National Economic and Development Authority
- Department of Public Works and Highways
- Department of Transportation
- Public-Private Partnership Center
Bebe Montesines, Commercial Specialist, U.S. Commercial Service Philippines
For projects funded by the Asian Development Bank (ADB):
Mark O’Grady, Senior Commercial Officer, U.S. Commercial Service Liaison to ADB