Philippines - Commercial Guide
Defense

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

Last published date: 2020-07-20

Overview

The Armed Forces of the Philippines is undertaking a 15-Year modernization program that started in 2012 and will continue through 2027. 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.

Republic Act (RA) 10349 or the Revised Armed Forces Modernization Act was enacted during the time of former President Benigno Aquino III. Current President Rodrigo Duterte has reaffirmed his commitment to continue the AFP’s modernization, but with a slight shift in its priority. Under President Aquino, 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 a significant as it is the first committed effort to modernize the AFP. It was legislated to protect it from shifts in the country’s political climate.

A major armed conflict erupted between the AFP and members of the Islamic State in Marawi City in Lanao del Sur Province on May 2017. The conflict lasted over five months and led President Duterte to declare martial law in the entire Mindanao region. The AFP successfully reclaimed Marawi but this incident shed light on the extent of foreign terrorist involvement in the Philippines, and the AFP’s ability to respond to internal threats. Despite winning the war in Marawi, Mindanao is still under Martial Law due to the continued presence of terrorist activity. Because of this, defense spending, apart from the Modernization effort, is expected to focus on the AFP’s counterterrorism efforts. This includes providing 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 called 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 estimates yet for Horizon III. The AFP is 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 systems.

Opportunities

The list of Horizon II projects is considered confidential, but Post has gathered the following opportunities as likely 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
•    amphibian 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 vessel).

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 US$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 and aside from defense related construction projects, as well as Defense Threat Reduction Agency (DTRA) projects in the Philippines. A few examples of new equipment inclusive of training delivered to the Armed Forces via U.S. Grant programs in 2017-2018 are PUMA UAS System; Scan Eagle UAS System, two Cessna 208 Surveillance Aircraft; Aerostat Surveillance System; and PVS-31 Night Vision Goggles.

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 is handled by the Joint U.S. Military Assistance Group (JUSMAG) Philippines.

Resources

Department of National Defense: http://www.dnd.gov.ph/home.html 
Armed Forces of the Philippines: http://www.afp.mil.ph/
Philippine Government Electronic Procurement System (PHILGEPS): https://www.philgeps.gov.ph/

U.S. Embassy Manila Contacts:

U.S. Commercial Service Philippines: 
Thess Sula, Commercial Specialist. 
Email: Thess.Sula@trade.gov

Joint U.S. Military Assistance Group (JUSMAG):
Thomas E. Davis, Chief, Security Assistance Division
JUSMAG-Philippines