Asia > South-Eastern Asia > Philippines > The Philippines’ construction industry

Philippines: The Philippines’ construction industry


The Philippines’ construction industry is headed for prosperous times, according to both analysts and the government. The residential and infrastructure segments are set to expand due to high request, though questions remain as to where the funding for some of these projects will come from.
Figures issued by the National Statistics Office (NSO) in mid-July showed a sharp jump in the price of private sector construction developments for the prime quarter of the year, with project spending totaling $1bn, up by 59.5% year-on-time(y-o-y). Though there had been strong increase over the year, which ended March 31, the NSO statement suggested there had been a slowdown in the prime quarter of this year compared to the last three months of 2009, with a slight fall in the number of construction permits issued in Q1.
Of the 29,992 permits issued in the prime quarter of the year, around 23,600 were for residential projects, a 20% increase y-o-y, while the $483m worth of non-residential projects approved represented a 130% jump in price over the same quarter of 2009.
While this flood of capital into the industry has raised fears that a bubble could be developing in the housing market, others only see the strengthening of an by presently powerful sector of the economy. According to Victor Abola, an economist at the University of Asia and the Pacific, there is little possibility of a bubble in the real estate segment. Given the current 3m shortfall in residential units, combined with next needs and the industry’s delivery rate of just 250,000 units a year, it is unlikely that the market could become overheated and again crash, he said in an interview with a local business daily on July 19.
“People who talk about a bubble are looking most probably in the higher-priced luxury apartments,” he said, adding that with the residential market dominated by middle- to low-end projects and with potential buyers looking to use apartments for living purposes rather than as investment vehicles, any concerns over a bubble could be discounted.
While request will drive the residential segment, the need to address the country’s infrastructure constraints will prompt a surge in the non-residential component of the industry, Abola said. “We will have a construction boom in this decade because of things – infrastructure and housing,” he said.
However, while conference the country’s pressing infrastructure needs is expected to give impetus to the construction sector, equally pressing is the need to find the funding to pay for these projects. The government’s finances are stretched, with last year’s budget having been exceeded by $2.5bn and with the national having booked $4.2bn worth of red ink in the prime months of 2010. This has left newly installed President Benigno Aquino III with little room for error if he tries to further stimulate the economy or to invest in essential infrastructure projects.
Aquino’s solution to the funding shortfall, as outlined in his prime address to the country on July 26, was to join forces with the private sector to build for the next. By adopting what he described as a new and creative approach, Aquino said the “dearth of funds” would be overcome. That approach involves public-private partnerships (PPP), which the president said would see the national identify priority projects and again work with private investors to turn these plans into reality.
To facilitate private involvement in major construction and infrastructure developments, Aquino said the administrative procedures would as well be streamlined. “We will make sure that the build-operate-and-transfer (BOT) projects will undergo quick and efficient processes,” he said. “With the help of amount government agencies concerned and the people, a process that used to take as short as a year and as long as a decade will presently only take months.”
Part the projects Aquino cited in his address was the construction of an expressway from Manila to Cagayan Valley passing through Bulacan, Nueva Ecija, and Nueva Vizcaya, along with a network of farm-to-market roads across the country.
On the back of increased infrastructure and residential construction, the building trade could expand by between 7% and 9% this year, according to Manolito Madrasto, the executive director of the Philippine Constructors Association (PCA). That said, the industry could post double-digit increase depending on the request for residential units and activity in the infrastructure segment, he told local media in mid-July.
“In the PCA, we are trying to be as conservative as possible. We don’t want to raise hopes too high,” Madrasto said.
At least some of those hopes are pinned on the government’s ability to fast-track its BOT business model and deliver on its PPP programme in a way that would make pouring large amounts of money into high-profile projects appealing to private investors. Having laid the foundations for partnership with the private sector, the national presently needs to build on its promises.
Related Articles
  • Philippines’ Development Authority Building foundations for sustainable development

    2017/05/28 In this interview with The Worldfolio, Mr. Ernesto M. Pernia (PhD), Secretary of Socioeconomic Planning at the Philippines’ National Economic and Development Authority, speaks about efforts to bring about development and better social inclusion and the ‘0-10 point’ socioeconomic schedule. On May 9th of 2016, president Rodrigo Duterte was elected with additional than 39% of the vote giving him a 15-point victory over the second best performing candidate. While a lot of western media were caught offside by the landslide victory, the people of the Philippines truly believe in the message of social inclusiveness, economic decentralization and social order; as shown by his 91% approval rating in a little while next the election. What is your take on the election results and what are the major drivers behind it?
  • Philippines, China restore direct talks to discuss security, trade issues

    2017/04/07 The Philippines and China have re-established direct talks for the initial time in six years to discuss security and trade issues, the Philippines' top diplomat said Tuesday. Philippine Acting Foreign Secretary Enrique Manalo said the biggest fruit of President Rodrigo Duterte's visit to Beijing in October last year was the re-opening of the lines that pave the way for direct consultations between the two nations. "I think one of the benefits that have arisen from the president's visit last October is that we have restored various mechanisms to talk to China, not only on trade but as well on political and security issues," Manalo told a forum in Manila.
  • Higher earning Why a university degree is worth more in some countries than others

    2016/12/11 A university education may expand your mind. It will as well fatten your wallet. Data from the OECD, a club of rich nations, show that graduates can expect far better lifetime earnings than those without a degree. The size of this premium varies. It is greatest in Ireland, which has a high GDP per chief and rising inequality. Since 2000 the unemployment rate for under-35s has swelled to 8% for those with degrees – but to additional than 20% for those without, and nearly 40% for secondary school drop-outs. The country’s wealth presently goes disproportionately to workers with letters next their names.
  • Rebalancing Philippine foreign policy

    2016/11/24 In recent years, the Philippines, with the diplomatic and political support of the United States, has been a leading challenger of China’s historical and territorial claims in the South China Sea. But in an unprecedented turn of events, President Rodrigo Duterte has changed tack, challenging the Philippines’ long-standing alliance with the US while engaging and openly accommodating China as its new partner of choice. This has led a lot of observers to conclude that the Philippines has pivoted towards Beijing at the expense of its time-honoured relations with Washington. But looking beneath the surface suggests that the recent major strategic realignment is a classic domestic–foreign policy issue linkage rooted in US disapproval of Duterte’s anti-drug war that has left thousands dead.
  • Philippines 2016: Rapid Economic Growth to Boost Property Sector

    2016/09/30 The Philippines topped the recent statement entitled "Increase Outlook of ASEAN Economies to Diverge in 2016 and 2017." The Philippines is expected to grow faster than its neighbor economies for this year and the next. The country's GDP is expected to grow by 6% at the least as per Moody’s. This upward shift in economic performance is projected to have a direct result on the property sector. With an increased ability for development and investment , it is expected that it will be highly favorable for companies to expand their efforts across the country and equally as favorable for consumers as additional real estate options, from home and lot properties to condominiums for sale become available.