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The Philippine Market

Five promising sectors for U.S. exporters are summarized below. This list is not exclusive, so if your products or services are not listed here, please contact us using the form at the bottom of this page for an assessment of the market. You may also send an email to request information on typical market entry strategies, opening an office in Manila, and an unscreened list of potential local representatives for your company.

  • Leading Sector #1: Infrastructure
  • Leading Sector #2: Energy including Renewable Energy
  • Leading Sector #3: Information Technology
  • Leading Sector #4: Aerospace
  • Leading Sector #5: Telecommunications
  • Leading Sector #6: Defense
  • Leading Sector #7: Medical Equipment
  • Leading Sector #8: Water Resources Equipment and Services

Introduction

Almost any U.S. product or service can find an interested buyer in the Philippines. The country is solidly pro-American, and the government and people are strong allies of the United States. The United States exports almost $7billion annually to the Philippines, making this our 30 largest export market. Thanks to our close relationship over the past 100 years, Filipinos are very knowledgeable about U.S. products and services and have a great affinity for them. Moreover, the Philippines is the world’s third largest English speaking nation, so U.S. firms seldom encounter language problems when doing business with Philippine companies. The U.S. presence is strong and growing.

(1) Infrastructure

The Aquino administration recognizes the need for dramatic improvements in Philippine infrastructure and thus it has doubled the Government’s 2011 infrastructure spending from $4.5 billion to $9 billion in 2014. The Philippine Government has set an infrastructure spending target of 5 percent of Gross Domestic Product by 2016, up from 2.8 percent in 2011.

To accelerate infrastructure development, the Philippine Government, through the Public

Private Partnership (PPP) Center, continues to pursue initiatives to create an enabling environment for PPPs. As of June 2015, ten PPP projects worth about $3.7 billion had been awarded.  These are the two school infrastructure, three road, one hospital, one airport, two transportation system and one automatic fare collection system for rail lines projects.

The Asian Development Bank (ADB), together with the Development Bank of the Philippines, will provide joint advisory services to the Department of Transportation and Communications (DOTC) on the tender of the $3.79 billion (Php170.7 billion) North-South Railway Project (NSRP), the Philippines’ largest PPP project to date.

The World Bank and the Asian Development Bank are critical players in Philippine infrastructure given the specialized financing vehicles they offer. These multilateral banks continue to finance Philippine infrastructure projects such as road improvement, water and sanitation, transportation, solid waste management, flood management projects and energy-related projects. The Export-Import Bank of the United States of America (U.S. Ex-Im) offers a financing package for up to US$1 billion in guaranteed loans and direct-dollar loans to finance U.S. exporters in renewable energy and liquefied natural gas (LNG) facilities.

Opportunities

(1) Infrastructure Projects Funded by the Philippine Government – The Philippine Government earmarked about four percent of its 2015 budget of $0.06 trillion (PhP2.606 trillion) to strategic infrastructure programs comprised of the development of national roads and bridges and improvement of railway systems, among others (http://www.gov.ph/2014/12/23/president-aquino-sets-p2-606t-2015-national-budget-in-motion/).

(2) PPP - There are eight PPP projects that are currently under various stages of procurement. These are the Integrated Transport System - South Terminal System; Bulacan Bulk Water Supply Project; Operation and Maintenance (O&M) of Light Rail Transit Line 2; Laguna Lakeshore Expressway Dike Project; New Centennial Water Source - Kaliwa Dam Project; Regional Airport Development, Operations and Maintenance Project; Regional Prison Facilities and Davao Sasa Port Modernization Project (http://ppp.gov.ph/?page_id=26075#). The biggest PPP project to date, the North-South Railway Project (NSRP), is expected to be rolled-out in the second quarter of 2015.

(3) Infrastructure Projects Assisted by the World Bank - Among these are: Studies for Sustainable Flood Management (http://www.worldbank.org/projects/P145391?lang=en) and Cebu Bus Rapid Transit Project (http://www.worldbank.org/projects/P119343/cebu-bus-rapid-transit-brt-demonstration-project?lang=en). The complete list of World Bank-assisted projects in the Philippines is in http://www.worldbank.org/en/country/philippines/projects/all.

(4) Infrastructure Projects Assisted by the Asian Development Bank - These include private sector loan and assistance to a 1500-megawatt wind farm project (http://adb.org/projects/details?proj_id=48325-001&page=overview) and to the Mactan-Cebu International Passenger Terminal Project (http://adb.org/projects/details?proj_id=48271-001&page=overview), as well as, technical assistance to the Metro Manila Water and Sanitation Development Project (http://adb.org/projects/details?proj_id=48173-001&page=overview). The complete list of Asian Development Bank-assisted projects in the Philippines can be found in http://adb.org/projects/search/495.

(5) Infrastructure Projects led by the Private Sector - For instance, major Philippine companies in the power generation and distribution sectors have announced large projects in natural gas, waste-to-energy, smart-grid and rural electrification. Private water utilities are also undertaking major water and wastewater treatment projects.

Please see Leading Sector: #1 Aerospace, #2 Electrical Power Systems, # 3 Information Technology, #4 Telecommunications, #5 Medical Equipment, #6 Water Resources and Equipment for additional opportunities.

(2) Energy including Renewable Energy

Unit: US$ thousands

 

2013

2014 (estimated)

2015 (estimated)

2016

(estimated)

Total Market Size

78,955,866

82,903,659

87,048,842

91,401,284.10

Total Local Production

n/a

n/a

n/a

n/a

Total Exports

79,940,714

83,937,750

88,134,637

92,541,369

Total Imports

984,848

1,034,090

1,085,795

1,140,085

Imports from the U.S.

443,996

466,196

489,506

607,136.25

Exchange Rate: 1US$*

42.23

44.4

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: No statistics available

Total Exports: Unofficial estimates

Total Imports: Philippine Statistics Authority (PSA)

Imports from U.S.: U.S. Census

* Listed exchange rates are not used in the above calculations. Exchange rate shows average value of Philippine Peso to U.S. Dollar. (Source: Central Bank of the Philippines).

Under the Energy Reform Agenda, the Philippine Government mobilized private sector participation and other stakeholders to make a power of choice a reality. Three important pillars provide the framework for the ERA direction: (1) ensure energy security through the development of renewable energy and hydrocarbon fuels; (2) achieve optimal energy pricing in electricity and oil; and, (3) develop a sustainable energy system through the national plans on energy development.

The current installed capacity in the country of about 16,226 MW is expected to increase to 25,000MW (an increase of about 6 percent in 2014). The three major island groups in the Philippines (Luzon, Visayas and Mindanao) will require a substantial capacity addition of 13,000 MW until 2030, yet only 1,800MW has been committed. Grid strengthening and connectivity are key priority investment areas as island grids need to be interconnected. The greatest potential for addressing the energy gap is the Interim Mindanao Electricity Market and the Interruptible Load Program (ILP) in 2014.

The Philippines has had a very strong history of successful independent power producers (IPPs) implementations. In 2001, the Philippine Congress enacted the Electric Power Industry Reform Act 2001 (EPIRA), which was meant to achieve a total overhaul of the power industry. The major changes introduced by the EPIRA include: (1) Privatization and sale of National Power Corporation (NPC) assets and contracts with the Independent Power Producers (IPPs) which would give the government the cash flows needed to pay off NPC’s debts and create a level playing field among generators;

(2) Creation of a wholesale electricity spot market for the trading of energy; and, (3) Implementation of the retail competition and open access.

The expected increase in energy use is fueled by increased economic activity, notably in the business process outsourcing, transportation, building and construction industries (mainly in the public infrastructure, commercial and residential segments). The national grid runs on a very low reserve margin and is sensitive to the prospects of blackouts due to sudden line disruptions for unplanned maintenance.

The country’s conventional energy fuels – oil, gas and coal – will remain indispensable in meeting the country’s energy demand in the short term, even as the country pursues other alternative energy sources. In the case of natural gas, the continuing inventory of other potential sources will be pursued to explore and develop a natural gas supply base. The offshore Malampaya gas field is the country’s largest producing gas field and the main source of gas, with an estimated daily production of 13 million cubic meters. Infrastructure development such as LNG terminals, pipelines or gas-fired power plants are priority investment areas.

Major U.S. players in the energy market include Chevron, which remains a leader in Philippine geothermal steam fields operations; AES Transpower Private Limited, which operates the 600 MW Masinloc Coal Plant; and Intergen-Quezon Power, which has a 460 MW coal-fired electric generating facility and a 31-kilometer transmission line. GE is a key player in providing equipment and latest technology to the generation, transmission and distribution customers.

Industry sources note that the market has become more price-sensitive as there is a growing preference among end-users for lower-priced yet technically-compliant options. Most of the imported electrical power systems are supplied by China, Japan, Taiwan, Singapore and Germany.

Renewable Energy

The Philippines is rich with renewable energy resources, including robust wind energy sites, ideal solar conditions, and an abundance of hydro and biomass resources. The passage of Republic Act (R.A.) 9513, otherwise known as the “Renewable Energy Act of 2008,” establishes a policy environment that offers fiscal and non-fiscal incentives to equipment manufacturers with the goal of achieving 60 percent renewable energy generation by 2017.

The Philippines has been developing large-scale, economically viable green energy projects. While earlier power plants have consisted almost exclusively of hydro and geothermal power, the country’s new National Renewable Energy Program (NREP) contributes to the energy mix. The NREP aims to increase installed capacity from renewable energy at 15,300MW by 2030. Other renewable energy milestones include the creation of the Renewable Energy Management Bureau and the National Biofuels Board, the implementation of the net metering program, and adoption of a feed-in tariff (FIT) incentive scheme. Policy mechanisms such as the Renewable Energy Portfolio Standards are under final review.

One strategy to improve the energy sector is the implementation of the Biofuels Act of 2006 (R.A. 9367), which sets bioethanol and biofuel uptake targets for the transport sector. The Government has set goals to increase biodiesel blend to 20 percent in 2020. Currently, the country enjoys an accelerated use of E10 (10 percent bioethanol blend) as supplied by most gasoline retailers. The major players in the renewable energy sector include San Miguel Energy Corporation (natural gas and hydropower plant), First Gen Corporation and Energy Development Corporation (natural gas, hydropower and geothermal power plant operations), Aboitiz Power Corporation (investments in geothermal, solar, biomass and hydropower). Meralco PowerGen and AC Energy Holdings (Ayala Group) are expanding into renewables business.

Opportunities

The energy sector offers many opportunities for the private sector. In the power generation sector, capacity addition of over 13GW, coupled with setting up high capacity interconnectors between the different parts of this archipelago, would provide large opportunities for investment by the private sector.

  • Generating companies (GenCos) and new entrants are in different stages of rehabilitation, upgrading, and/or regular maintenance work. This presents a range of opportunities for supplying various types of equipment and services, such as infrastructure in power generation, Greenfield generation projects, possible joint ventures with proponents of indicative projects and NPC plants, and NPC-IPP contracts for privatization.
  • Expansion, upgrading, or rehabilitation of existing power plants to augment existing capacity and avert threats of a power shortage in the next few years, particularly in Mindanao.
  • The Transmission Development Plan (TDP) implemented by TransCo is still under way. Initiated in 2005, this US$850 million, 10-year project involves planned expenditures for additional transmission and substation capacity, inter-grid linkages, and the continuous repair and upgrade of existing transmission infrastructure. The National Grid Corporation of the Philippines, through a US$3.95 billion, 25-year concession contract, has taken over from TransCo the operation and maintenance of the country’s electricity transmission facilities.
  • The private distribution utilities are targeting to implement Distribution Automation and Reliability, including smart grid applications and demand response technologies.
  • Increase in demand from local electric power cooperatives requires an enhancement of their distribution capacities. The main concern remains the reduction in systems losses, system reconstruction, and new smart grid technologies.
  • The government’s missionary electrification program is addressing the need for power in remote, off-grid areas. The Small Public Utilities Groups (SPUG) managed by the National Power Corporation will undertake this effort. Meanwhile, opportunities for the supply of stand-by power-generating facilities are seen as a stopgap measure to arrest recurring power outages in certain vulnerable islands.
  • In 2014, a total of 220 renewable energy service contracts were awarded with 3,184 MW potential capacity and 5.1 MW installed capacity.
  • Considering that coal remains to be a leading contributor to the country’s energy supply, the government continues to optimize the exploration, development, production and utilization of indigenous coal reserves. The country has total in-situ reserves of 436 million metric tons (MMMT). Coal mining is under a moratorium by the national government due to concerns by churches and NGO’s that the land and communities would be exploited.
  • Certain initiatives under the National Energy Efficiency and Conservation Program (NEECP) include the Energy Labeling and Efficiency Standards, Government Energy Management Program, among others.

(3) Information Technology

Unit: USD thousands

 

2013

2014

2015 (estimated)

2016

(estimated)

Total Market Size

1,686,278

1,648,099

1,730,504

1,817,029

Total Local Production

4,721,996

5,965,900

6,264,195

6,577,405

Total Exports

4,497,139

5,681,810

5,965,900

6,264,195

Total Imports

1,461,421

1,364,008

1,432,209

1.503,819

Imports from the U.S.

375,217

283,740

297,927

312,823

Exchange Rate: 1 USD

42.45

44.40

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: Estimated (Total Exports + 5 percent)

Total Exports: Philippine Statistics Authority (PSA)

Total Imports: Philippine Statistics Authority (PSA)

Imports from U.S.: U.S. Census Bureau

* Listed exchange rates are not used in the above calculations.  Exchange rate shows average value of Philippine Peso to U.S. Dollar.  (Source: Central Bank of the Philippines).

The Philippine IT industry plays a significant role in the country’s economic development. The major contributors to its growth are financial institutions, telecommunications companies, Business Process Management (BPM) industry, and the Philippine Government (Public-Private Partnership Projects). As a result, the Philippine Senate has passed a bill creating the Department of Information and Communication Technology (DICT). The Speaker of the House of Representatives has issued a statement indicating that he expects Congress to also approve the Senate version of the bill before President Aquino ends his term in 2016.

According to the International Data Corporation (IDC), the Philippines 2014 IT spending reached US$6.76 billion. 76 percent was for hardware, 6 percent for software, while 18 percent is for services). The IDC also projected a 10 percent growth in 2015 due to increased consumer spending and demand from the small and medium enterprises (SMEs).

The BPM industry posted US$18.1 billion revenue in 2014, a 16 percent year-on-year growth, driven by the healthcare information management sector. The BPM industry and software services are among the most important segments of the Philippines’ IT industry. The Philippines is considered one of the world leaders in the BPM industry with an annual growth rate of 20 percent. It is expected to reach its goal of US$25 billion in revenue and 1.3 million employees by 2016. The BPO industry’s contribution to the country’s GDP is now estimated to be 6 percent.

The administration of President Aquino created the Philippine Digital Strategy (PDS) 2011-2016. The PDS outlined IT sector priority areas based on its impact on national development. The PDS has four strategic thrusts: (1) Transparent government and efficient services, (2) Internet opportunities for all, (3) Investing in people: digital literacy for all, and (4) Information communications technology (ICT) industry and business innovation. Under “ICT industry and business innovation”, the PDS specified the following measurable targets:

1. Increased use of ICT among micro, small and medium enterprises (MSMEs):

a. Over 90% of registered companies use the Internet by 2016, from below 80% in 2008;

b. Over 60% of registered companies have a web-site by 2016, from below 50% in 2008;

c. Over 30% of registered companies use ICTs for e-commerce by 2016

d. 10% increase of ICT usage among micro-companies over baseline data to be established.

2. Investment increase and more business for the IT/BPO industry and ICT sector.

3. Enhanced high-value ICT capacity and higher number of ICT-related jobs,

4. Higher rates of innovation and their commercialization.

5. Higher rates of investments in ICT Research & Development.

There are 44 million Internet users in the Philippines. Filipinos, especially the youth, are quite adept with social networking and computer gaming. Filipinos are among the world's top users of social media (Facebook, Twitter, etc.) with 42 million active social media users. They are connected via their mobile devices (36 million active mobile social media users), personal computers or through Internet Café’s.

The sector is dominated by large U.S. companies – IBM, HP, Microsoft, Accenture, Cisco, Avaya, Oracle, Symantec, McAfee, and Apple are just some of the active brands in the market.

Opportunities

The Philippines has launched a massive campaign for Public-Private-Partnerships for major infrastructure projects. The following PPP projects have significant ICT requirements:

  • Automated Fare Collection System (AFCS) - The project aims to use contactless smart card technology for three light rail lines in Metro Manila. It will make use of a centralized back office to perform apportionment of revenues.  The project was awarded to the AF Consortium who will be given a concession of 10 years. Total project cost is US$38.22 million. The long-term plan is for the smart card to also be used for all modes of public transport similar to the Octopus in Singapore.
  • Integrated Transport Systems (ITS – South, Southwest and North) – These three integrated terminal projects aims to create a central hub for all modes of transport to be available in one location. The project includes passenger terminal buildings, arrival and departure bays, public information systems, ticketing and baggage handling facilities, park-ride facilities, as well tracking technology for the buses. The Southwest project (US$55.56 million) was awarded to MWM Terminals, a consortium of Megawide Construction Corp. and WM Property Management Inc. The concession agreement was signed on April 2015. The bid for the South Terminal (cost: US$88 million) is due on June 2015, while the North project is undergoing a feasibility study. This will provide opportunities for U.S. technology companies who can provide an operating system that can integrate several components including, an automated ticketing system, smart tag system, baggage handling, and fee collection settlement scheme.
  • Road Transport Information Technology (IT) Infrastructure Project (Phase II) – This US$6.6 million project intends to upgrade the Land Transportation and Franchising Regulatory Board’s (LTFRB) IT infrastructure. The scope includes the computerization of its manual processes, the development, supply and operationalization of its network infrastructure (hardware) and corresponding software (database and applications). The project has been approved by relevant government agencies and is scheduled for bidding in 2015.
  • Civil Registry System – Information Technology Project Phase II (CRS-ITP2) – The US$35 million CRS-ITP2 project plans to computerize the civil registry operations of the Philippine Statistics Authority (PSA). It includes the collection, access, storage, maintenance and management of civil registry documents and the specimen signatures of all city and municipal registrars using imaging technology. In addition, it is also expected to produce vital statistical information and allow nationwide availability of civil registry services through CRS outlets and other authorized partners. The project is currently undergoing evaluation by relevant government agencies.

(4) Aerospace

Unit: USD thousands

 

2013

2014

2015 (estimated)

2016

(estimated)

Total Market Size

2,455,833

2,578,625

2,707,556

2,842,934

Total Local Production

445,490

467,764

491,152

515,710

Total Exports

424,276

445,490

467,764

491,152

Total Imports

2,434,620

2,556,351

2,684,168

2,818,377

Imports from the U.S.

605,217

148,335

155,751

163,539

Exchange Rate: 1 USD

42.45

44.40

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: Estimated (Total Exports + 5 percent)

2013 Total Exports: Philippine National Statistics Office

2013 Total Imports: Philippine National Statistics Office

2014 Total Exports: Estimated (5 percent increase)

2014 Total Imports: Estimated (5 percent increase)

Imports from U.S.: U.S. Census Bureau

* Listed exchange rates are not used in the above calculations.  Exchange rate shows average value of Philippine Peso to U.S. Dollar.  (Source: Central Bank of the Philippines).

The Philippine aerospace industry presents significant opportunities for airport design companies, aviation consultants, airport ground support equipment, security equipment, wide body aircraft, jet engines, and helicopters.

The Department of Transportation and Communications (DOTC) is prioritizing the development of the country’s civil aviation infrastructure. The DOTC signed a contract with a Filipino-Indian consortium for the expansion, operation and maintenance of the Mactan-Cebu International Airport (MCIA). This public private partnership (PPP) deal was finalized on April 22, 2014. The contract includes the operations of MCIA for 25 years beginning on October 2014 and the construction of a brand new terminal by 2018. The MCIA is the second busiest airport in the Philippines and its expansion has significant opportunities for U.S. suppliers of security and ground support equipment. Several other upcoming airport projects are listed below under ‘Opportunities’.

Philippine Airlines (PAL) flies direct to the U.S. West Coast. PAL announced its intention of adding more U.S. routes after the country regained its Category 1 rating from the U.S. Federal Aviation Administration (FAA). PAL launched its direct flight to New York on March 15, 2015. Cebu Pacific Air has confirmed that they are currently working on permits to allow them to fly to the U.S. They expect to launch flights to Guam and Honolulu in late 2015. Cebu’s longer term plans include direct flights to the U.S. West Coast. These route expansions for PAL and Cebu Pacific opens up opportunities for long-haul / wide-body aircraft.

The Civil Aviation Authority of the Philippines (CAAP and DOTC are undertaking the modernization of navigational aids in the Clark International Airport and several other regional airports. More projects related to upgrading airport security equipment are expected later in the year and through 2016.

The U.S., while having an excellent reputation for quality and reliability, is facing stiff competition from European and Asian companies. Airbus dominates the large commercial jet market.

Opportunities

  • Regional Airports Public-Private Partnership (PPP) Project

Airport Development, Operations and Maintenance of the following airports:

Bundle 1: Bacolod-Silay and Iloilo

Bundle 2: New Bohol (Panglao), Laguindingan, and Davao

This US$2.4 billion project is for the development, operations, maintenance of five regional airports in the Philippines. 

Here are links to the Department of Transportation and Communications (DOTC) website with more information on the project:

Project Information Memorandum (PIM): http://www.dotc.gov.ph/images/PPP/2014/AirportDevt_BacolodSilay_etc/ProjectInfoMemo-6Apts-9.pdf

Invitation to Pre-Qualify and Bid: http://www.dotc.gov.ph/images/PPP/2014/AirportDevt_BacolodSilay_etc/ITPQB-6Apts.pdf

On May 31, 2015, the DOTC announced that they are developing updated bidding terms for the project. This is a result of comments received from prospective bidders who suggested a single bundling system for the five airports. The updated invitation to prospective bidders (ITPB) has not yet been released as of this writing.

  • New Bohol Airport Project

The Japan International Cooperation Agency (JICA) is providing official development assistance (ODA) loan to the DOTC for the construction of the US$158 million New Bohol (Panglao) Airport.

Japanese engineering firms Chiyoda Corp. and Mitsubishi Corp. will build the airport. The construction is expected to start in mid-2015 and completed in 2017 for this new eco-friendly airport with capacity for 1.7 million passengers, and floor area of 8,800 square meters.

  • Manila International Airport Authority (MIAA) Upcoming Procurement for the Ninoy Aquino International Airport (NAIA)

The MIAA is planning to bid the following projects in 2015:

(1) Airport Command Center – Budget: US$1 million

(2) Digital Trunk Radio System – Budget: US$ 1 million

(3) RFID Access Control System – Budget: USS$500,000

(4) Fire Alarm Detection System – Budget: US$ 1 million


Only Philippine-owned firms can serve as the prime contractor for PPP and government funded projects.  U.S. firms with experience in airport design and/or operations, and those who can supply airport security and ground support equipment should contact Post contact indicated below to facilitate introductions with large Philippine companies who may have an interest to participate in these projects.

(5) Telecommunications

Unit: USD thousands

 

2013

2014

2015 (estimated)

2016

(estimated)

Total Market Size

2,704,111

2,717,440

2,853,312

2,995,977

Total Local Production

558,386

666,366

699,685

734,669

Total Exports

531,796

634,635

666,366

699,685

Total Imports

2,677,521

2,685,708

2,819,993

2,960,993

Imports from the U.S.

126,755

122,565

128,693

135,127

Exchange Rate: 1 USD

42.45

44.40

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: Estimated (Total Exports + 5 percent)

Total Exports: Philippine Statistics Authority (PSA)

Total Imports: Philippine Statistics Authority (PSA)

Imports from U.S.: U.S. Census Bureau

* Listed exchange rates are not used in the above calculations.  Exchange rate shows average value of Philippine Peso to U.S. Dollar.  (Source: Central Bank of the Philippines).

The Philippine telecommunications industry is evolving. Mobile has traditionally been the leading mode of telecom service in the country as shown by its over 100 percent penetration rate. Since most people have multiple subscriber identification module (SIM) cards, the actual penetration rate is estimated to be around 80 percent1.

The Filipino consumer’s communication needs are shifting. From a purely text and call culture, mobile connectivity to the Internet is now driving demand. Growth projections for the telecommunications industry is based on the following sub-sectors:

(1) Mobile: the mobile industry has 114.6 million subscribers. Fierce competition between Globe Telecom and SMART Communications has led to lower average revenue per user (ARPU) for voice and short message service (SMS). The traditional mobile revenue is expected to slow as consumers shift to wireless broadband.

(2) Broadband: the broadband sub-sector has over five million subscribers. There is tremendous growth potential for the broadband sub-sector, both fixed and wireless. Wireless broadband is seen as the growth area for the mobile industry. This is based on the continuous increase of smartphone ownership that is becoming more affordable and the growing demand for high-speed Internet access. Smartphone penetration is estimated around 20% but is expected to reach 50% by end of 2015.

The challenge for the Philippines is to continue to upgrade its telecom infrastructure to keep up with the growing demand for broadband. In its “State of the Internet” report published in the third quarter of 2014, Akamai, a content delivery network, states that the Philippines average connection speed is 2.5 Mbps, a 58 percent improvement from 2013 figures, but still behind with its rank of 105th.

(3) Fixed Line: fixed line penetration is at 4 percent with an estimated 4 million subscribers. This sub-sector is expected to remain stagnant.

The Philippine Long Distance Telephone Company (PLDT) and Globe Telecom are the two major telecommunication carriers in the country. PLDT, through its mobile group, SMART Communications and Sun Cellular, controls 70% of the mobile market, with Globe having 30 percent. The current Philippine cellular infrastructure is Global System for Mobile Communications (GSM). 3G service was launched in 2006. 4G was made available in 2010. More recently, SMART and Globe launched long-term evolution (LTE) networks in 2012. PLDT has an existing digital fiber optic connecting the entire country.  They also have an existing digital microwave radio system and a data network.    Globe Telecom also has fiber optic cables and Worldwide Interoperability for Microwave Access (WiMax).

Opportunities

Both Globe and PLDT continue to upgrade their telecom infrastructure to meet strong consumer demand. The focus of both firms will be in expansion of their data networks.

Globe plans to spend $850 million in 2015 for deployments of LTE mobile and in the home, capacity and coverage augmentation of its 3G, HSPA+, and DSL networks, as well as its requirements for domestic transmission and international cable capacities.

PLDT has announced its continuous fiber expansion nationwide. By the end of 2014, PLDT expects to have 85,000 kilometers of domestic fiber optic network (DFON) for long haul applications, fiber-to-the-home (FTTH), fiber-in-the-loop (FITL), and other inter-office fiber systems. With the launch of FTTH, PLDT can offer high-speed internet services to selected parts of the country, such as Metro Manila, regions of Central Luzon, Southern Tagalog, and the provinces of Panay, Negros Occidental, Cebu, and Davao.2 In addition, PLDT expects to complete US$4.8 million project to increase its fiber optic cables underground in areas in Southern Luzon ravaged by a major Typhoon in mid-2014. PLDT has allocated US$899 million for capital expenditures in 2015 to continue building up its network.3

(6) Defense

Unit: USD thousands

 

2013

2014

2015 (estimated)

2016

(estimated)

Total Market Size

76,464

105,843

116,188

127,557

Total Local Production

99,899

100,127

105,133

110,390

Total Exports

90,818

95,359

100,127

105,133

Total Imports

67,383

101,075

111,182

122,300

Imports from the U.S.

9,937

89,688

94,172

98,881

Exchange Rate: 1 USD

42.45

44.40

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: Estimated (Total Exports + 5 percent)

2013 Total Exports: Philippine National Statistics Office

2013 Total Imports: Philippine National Statistics Office

2014 Total Exports: Estimated (5 percent increase)

2014 Total Imports: Estimated (50 percent increase for 2014, 10 percent increase for 2015 and 2016)

Imports from U.S.: U.S. Census Bureau

* Listed exchange rates are not used in the above calculations.  Exchange rate shows average value of Philippine Peso to U.S. Dollar.  (Source: Central Bank of the Philippines).

The Aquino Administration has allocated US$1.9 billion for defense modernization projects from 2013 to 2017. Republic Act (RA) 10349 or The Revised Armed Forces of the Philippines (AFP) Modernization Program was enacted on December 2012. The RA was created to facilitate the capability upgrade of the AFP to achieve “minimum credible defense in a Joint Force Environment”. This is the largest defense modernization undertaken by the Philippines.

RA 10349 identifies the following core security concerns of the AFP: challenges to territorial integrity, maritime security, natural disasters, internal security, and cyber security. These security concerns directly impact the primary goals of RA 10349:

  • Maritime Domain Awareness (MDA)
  • Maritime Security (MARSEC)
  • Territorial Defense (TD)
  • Joint Operations
  • General Support

U.S. defense suppliers have a reputation for high quality and reliability.  However, despite the opportunities, U.S. companies face significant challenges in the local market as well as strong competition from Israeli, Korean and European companies. 

Opportunities

The General Headquarters (GHQ) of the Armed Forces of the Philippines (AFP) is taking the lead in the design and procurement of a Command Control Communication Computer Intelligence Surveillance Target Acquisition and Reconnaissance (C4ISTAR) System. The C4ISTAR project will facilitate command and control of AFP units and provide situational awareness to the President, other senior government leaders, and military commanders. The C4ISTAR project was started four years ago and was originally planned to be procured via direct commercial sale (DCS). In late January 2015, the AFP-GHQ decided to move the C4ISTAR procurement from DCS to Foreign Military Sales (FMS).

Some of the priority projects of the different service commands include:

Philippine Air Force (PAF):

1) Air Surveillance Radar

2) Munitions (Short Range Air-Air Missiles; 20mm Ammunitions; Air-Ground Missiles; Countermeasures)

3) Long Range Patrol Aircraft (LRPA)

4) Close Air Support (CAS) Aircraft

5) Full Motion Flight Simulator

The bid documents for the LRPA and CAS have been released. Both projects will undergo a two-stage bid process where companies will submit their eligibility requirements and technical proposal on the first stage. The DND will review and identify which companies are short-listed and will submit their financial proposals on the second stage.

Philippine Army (PA):

1) Shore-Based Missile System

2) Radio Communications Systems (VHF 2-5W, and HF 50W)

3) Rocket Launcher

4) 4000 units of Night Fighting Systems

Philippine Navy (PN):

1) Frigates

2) Helicopters (Anti-Submarine Warfare capable)

3) Multi-Purpose Attack Craft

4) Amphibious Assault Vehicle

5) Maritime Forces Imagery and Targeting Support System

6) Basing Support System

The procurement process for all the projects listed above has been put on hold. Based on information gathered by Post as of June 2015, the DND is still waiting for Presidential approval on the implementation of these projects.

(7) Medical Equipments

 

2014

2015

(estimated)

2016

(estimated)

2017

(estimated)

Total Market Size

186,838

196,180

205,989

216,288

Total Local Production

Total Exports

192,938

202,585

212,714

223,350

Total Imports

379,776

398,765

418,703

439,638

Imports from the U.S.

91,830

96,422

101,243

106,305

Exchange Rate: 1 US$*

44.40

**44.46

Total Market Size = (Total Local Production + Total Imports) – (Total Exports)

Data Sources:

Total Local Production: No available data

Total Exports: Unofficial estimates; Total Imports: Unofficial estimates

Imports from the U.S.: Unofficial estimates

* Listed exchange rates are not used in the above calculations. Exchange rate shows average value of Philippine Peso to U.S. Dollar. (Source: Central Bank of the Philippines)

**Exchange rate in 2015 shows average value of Philippine Peso to U.S. Dollar from January 2015 to May 2015. (Source: Central Bank of the Philippines)

The medical industry in the Philippines is almost totally dependent on imports and the medical equipment sector continues to present good opportunities for American firms. The U.S. market share of imported medical device is almost 25%.

The Philippine market is familiar with U.S.-made products, therefore, despite perceived high costs, American products enjoy a prominent place in the market. U.S.-trained Filipino doctors prefer the high technology of American medical equipment and instruments, despite their higher costs. American brands face increasing third-country competition from China, Singapore, Germany, and South Korea. Industry believes that much of Singapore’s share could actually be U.S. equipment that is transshipped through its ports.

Several Philippine investment companies/private corporate groups have taken an interest in healthcare and have acquired stakes in the healthcare sector, providing much-needed capital for facilities to upgrade and modernize equipment.

In addition to private investment, the government’s Public-Private Partnership (PPP) program has supported the construction and modernization of public hospitals, the medical equipment requirements of which include expensive linear accelerators, dialysis machines, and radiotherapy equipment.

The market is price-sensitive, which explains the growing presence of inexpensive equipment from China and South Korea. Hospitals with limited budget source medical equipment from these countries.

Official Department of Health statistics indicate that there are more than 1,800 licensed hospitals in the country, of which more than 60% are privately owned. Total bed capacity is more than 100,000.

U.S. suppliers interested in selling in the Philippines must appoint a local distributor. The import duty on medical equipment is 3 percent, plus a 12% value-added tax (VAT).

The Philippines hosted a US-government sponsored ASEAN Medical Device Regulatory Harmonization Workshop on June 15-19, 2015. The workshop is a continuing exercise in improving and standardizing the medical device regulatory process in the region. Its ultimate objective is to facilitate the regulatory process for medical device registration in ASEAN member countries.

Opportunities

Requirements for efficient healthcare services, new technologies, and equipment replacement drive market growth. All hospitals must continue upgrading facilities to remain competitive.

Twenty-five public hospitals listed in the government’s Public-Private Partnership (PPP) program expect to benefit from the modernization that will result from the PPP’s capital infusion.

Some requirements of the hospitals under the PPP program are linear accelerators for eight cancer centers being proposed, dialysis units, various imaging equipment, and devices for treating kidney, heart, respiratory, and diabetes diseases.

Medical device distributors expect a steady 5% growth through 2017.

(8) Water Resources Equipment and Services

Unit: US$ thousands

 

2013 (estimated)

2014 (estimated)

2015 (estimated)

2016 (estimated)

Total Market Size

359,926

379,213

399,479

420,771

Total Local Production

N/A

N/A

N/A

N/A

Total Exports

32,292

32,615

32,941

33,270

Total Imports

392,218

411,828

432,420

454,041

Imports from the U.S.

37,951

39,848

41,840

43,933

Exchange Rate: 1 US$

42.45

44.40

44.46

N/A

Total Market Size = (Total Local Production + Total Imports) – (Total Exports) Data Sources:

Total Local Production: Unofficial estimates

Total Exports: Unofficial estimates

Total Imports: Unofficial estimates

* Listed exchange rates are not used in the above calculations. Exchange rate shows average value of Philippine Peso to U.S. Dollar. (Source: Central Bank of

the Philippines).

The Philippine market for water resource equipment and services is expected to grow by at least five percent yearly in view of the current and upcoming projects that address increasing water requirements, and sanitation and wastewater-related problems.

Government entities fund water-related projects through a mixture of national/local government budgets and foreign (governments and, multilateral and bilateral agencies) loans/grants. There are also projects offered for public-private partnerships. Water districts use internally-generated funds and loans. Private entities finance water and wastewater treatment projects through internal funds and/or loans.

The Philippines is highly dependent on imported water and wastewater treatment products and services. Japan, U.S. and Singapore are the major sources of water and wastewater treatment products and equipment of the Philippines.

Opportunities

Projects of Manila Water Company (MWCI) and Maynilad Water Services, Inc. (MWSI): MWCI and MWSI are the concessionaires of the Government-owned Metropolitan Waterworks and Sewerage System (MWSS). The two companies, which service more than 16 million people, are continuously expanding, modernizing and improving water and wastewater treatment services in their respective areas. .

Projects of MWCI and MWSI include construction/improvement/rehabilitation of water and wastewater treatment facilities, reduction of non-revenue water; pipelaying and/or replacement; development of new water sources; network improvement; upgrading of boosters, pumping stations and reservoirs; and modernization of data management and information system. The list of requirements of MWSI that are up for bid is in http://www.mayniladwater.com.ph/contractor-projects.php.

  • Water Projects under Public-Private Partnership (www.ppp.gov.ph): The following water projects are in various stages of procurement:
  • Bulacan Bulk Water Supply Project (http://ppp.gov.ph/?ppp_projects=bulacan-bulk-water-supply-project)
  • New Centennial Water Source - Kaliwa Dam Project

(http://ppp.gov.ph/?ppp_projects=new-centennial-water-source-kaliwa-dam-project)

  • Water Projects in the Asian Development Bank Pipeline:

(1) Angat Water Transmission Improvement (http://www.adb.org/projects/46362-

002/details; http://www.adb.org/sites/default/files/projdocs/2013/46362-001-phi- pptar.pdf; http://mwss.gov.ph/?p=1579)

(2) Urban Water Supply and Sanitation Project (http://www.adb.org/projects/42363-

013/main)

  • Projects of Water Districts (WDs) Under the Local Water Utilities

Administration (LWUA): There are over 800 WDs that had been formed all over the Philippines. LWUA is the Government entity that provides financial, technical, institutional, developmental and regulatory services to WDs. LWUA's lending programs provide funds to develop water sources and new water supply systems; repair/rehabilitate/expand existing systems, reduce non-revenue water, etc. Requirements of LWUA and water districts are in http://www.lwua.gov.ph/bids_14/philgeps.html.

  • Wastewater Projects of Industrial Plants, Tourism Facilities, Residential/Commercial Buildings, Hospitals, Restaurants, Recreational Facilities and other Similar Establishments: These establishments face fines or closures if they are not able to comply with the effluent concentration limits set by the law.
  • U.S. Agency for International Development’s Water Security for Resilient Economic Growth and Stability (Be Secure) Project (http://www.usaid.gov/philippines/energy-and-environment/be-secure): This is a four-year project that started in 2013 that aims to improve water security and access to water services to support resilient and stable economic growth in the Philippines. The Project is implemented in six focal areas: Basilan, Iloilo, Leyte, Maguindanao and Misamis Oriental Provinces and Tuguegarao City. Among Be Secure’s project objectives are: to strengthen the capacity of water supply and wastewater treatment service providers, to expand coverage and improve services, and to mobilize water sector financing.

Additional Industry Sectors, Market Entry Strategies, Other Information
Remember, you can contact us for an assessment of the Philippine market for other products or services not listed here. This free assistance is available only to U.S. exporters of goods and services that have at least 51 percent U.S. content.

Please send an email at BusinessPhilippines@trade.gov to request an assessment of the Philippine market for your products or services.

1 Oxford Business Group, “The Philippines Report 2014: Broadening Bandwidth”

2 PLDT News Center - http://www.pldt.com/news-center/article/2014/05/26/pldt-fiber-assets-to-reach-almost-100-000-kms-by-yearend#.U56cjPmSz_E

3 PLDT strengthens Southern Luzon fiber optic cable - http://www.philstar.com/business/2015/06/17/1466620/pldt-strengthens-southern-luzon-fiber-optic-cable-network




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