Building and construction to the Philippines

Trends and opportunities

The market

The Philippines building and construction industry is expected to post a robust year-on-year growth of 9 per cent in 2017 and 8.5 per cent in 2018 on the back of President Rodrigo Duterte’s “Build, Build, Build” agenda (Source: BMI). Under this “golden age” of infrastructure, PHP 8 to 9 trillion (A$ 208 to A$ 236 billion) have been allocated for infrastructure projects for the period of 2016 to 2022, with a primary focus on transport, railways, roads, airports, ports, energy and utilities, oil and gas pipelines and water infrastructure.

The Bases Conversion and Development Authority (BCDA)’s flag ship project, New Clark City, is one of the centerpieces of the Duterte administration infrastructure development agenda. This new urban frontier aimed at decongesting Metro Manila will offer around 31,400 hectares of special economic and industrial zones, integrated urban development and transportation and new, smart and green cities.

Aggressive growth in the Business Process Outsourcing (BPO) to the Philippines is driving the need for new office space and the creation of Next Wave Cities (NWCs). This growth is expected to be sustained over the next five years (Source: IT and Business Association of the Philippines).

The demand for residential housing is also being fueled by the BPO growth but also by Overseas Filipino Workers (OFWs) and retirees purchasing investment properties. It is estimated that more than 3 million homes are currently needed across the mass-housing, middle income and high-end markets. This demand is likely to rise to more than 6 million units by 2030 (Source: Subdivision and Housing Developers Association Inc.).

Property developers are building Megacities and Townships outside of Metro Manila. Green building technologies that reduce energy consumption and costs are gaining popularity. Moreover, the growing potential of the tourism and gaming industries of the Philippines is also presenting opportunities for Australian companies specialising in the design, engineering consulting, fit-out and supply of technologies and solutions to hotels and casinos.

Opportunities

Australia is recognised as a world leader in project development. Its expertise is acknowledged not only in engineering work but also in financial, legal and economic advisory services.

Australian firms can partner with local companies to provide specialised services such as:

• pre-feasibility and feasibility study preparation
• legal, financial, and economic studies
• preparation of tender documents.

The Philippines is heavily dependent on imported building and construction materials, with high demand across the sector. Basic materials such as cement, aggregates, reinforcing steel bars, galvanised iron sheeting and lumber are imported in large quantities, primarily because of shortfalls in local production and its comparatively high cost.

As local developers become more aware of green building practices, demand is growing for sustainable construction products and energy saving materials. Building companies are showing more interest in smart buildings, future-proof homes and energy saving innovations, as well as the products that support them like as pre-cast concrete and polyurethane foam insulation panels.

Opportunities exist for Australian companies able to supply:

• high-quality, value for money sustainable or ‘green’ building materials
• new mass-housing technologies
• prefabricated housing
• partnerships with local manufacturers of insulation products, steel products, pre-fabricated panels, aluminium products
• construction equipment
• contracting and consulting services, especially in areas related to sustainable construction.

The Philippines has strict nationality requirements enshrined in the constitution which affect the delivery of projects. For example, the construction, operation and maintenance of public infrastructure is restricted to companies that have at least 60 per cent Filipino ownership. For project delivery, the most viable channel for Australian participation is in partnership with a major Philippine conglomerate.

Competitive environment

The Philippines currently sources the majority of its imported building materials from near Asian markets, with China being the largest supplier. The country’s close historical ties to the US means developers often rely on American designers and architects, although local companies have carved a prominent niche in the market.

Australia is seen as a potential source of green building products, services and technologies, but faces strong competition from the US and United Kingdom.

Tariffs, Regulations and Customs

The implementation of the ASEAN Australia New Zealand Free Trade Agreement (AANZFTA) means that most building and construction projects now enjoy zero tariffs.

See the AANZFTA Tariff Finder for more information on applicable tariffs.

The Philippine Government imposes a Value Added Tax (VAT) of 12 per cent on all products and services sourced locally.

Marketing your products and services

Market entry

Australia’s proximity to the Philippines and its reputation as a supplier of quality materials are important factors in penetrating the market. This is complemented by the Philippine Government’s support of joint ventures between local and foreign firms, especially in areas where local production is inadequate.

Several Australian manufacturers are already represented across the sector and Australian exports to the Philippines include:

• wood-substitute products
• interior fit-outs for hotels, offices and residential buildings
• bathroom fixtures and fittings
• aluminium profiles
• security and safety products
• insulation panels
• warehouse systems
• pre-fabricated housing

Australian engineering consultants and contractors are also becoming more prevalent across all sectors of the market, with a focus on infrastructure projects. Australian architects are partnering with local firms, primarily on sustainable design projects such as residential and mixed-use buildings.

Distribution channels

Local agents and distributors are important conduits for the entry of imported building materials into the country. These local agents and distributors supply goods directly to project managers or to hardware wholesalers and outlets. In some cases, major construction companies are importing building materials directly to the building site.

Architects and project managers play a very important role in product specification, so it is critical for suppliers to forge relationships with those responsible for a project’s implementation.

The cost of materials is also a significant factor for project managers, as building and construction in the Philippines is a very price sensitive market.

Transport

Sea freight to the Philippines from Australia takes approximately two weeks, with transhipment points in Singapore or Hong Kong. Manila is the main port, followed by Cebu (Visayas) and Davao (Mindanao). Sea freight is generally used by most exporters.

Links and industry contacts

Bureau of Customs
New Clark City
Bases Conversion and Development Authority
Build, Build Build
Department of Public Works and Highways 
Department of Transportation and Communication 
Philippine Constructors Association 
Philippine Green Building Council 
Philippine Institute of Civil Engineers 
Philippine Institute of Interior Designers 
Philippine Society of Ventilating, Air Conditioning & Refrigerating Engineers 
United Architects of the Philippines 

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
• strengthen Australia's tourism industry
• seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.