Philippines — Infrastructure to bolster growth and business environment

President Rodrigo Duterte’s 2020 budget highlights the Philippines’ continued focus on increasing infrastructure spending. The signing of the budget into law in January—unlike the delayed passage of the 2019 budget until April 2019—provides the government greater ability to accelerate construction of several projects this year. This will help sustain strong economic growth rates ahead; the IMF expects real GDP to grow about 6.4% per annum on average over the five years to 2024.

Underdeveloped and low-quality infrastructure are long-standing constraints on the Philippines' business environment. Traffic congestion, costly shipping and power, and comparatively poor internet connectivity deter investment. In response, the Duterte government embarked on an infrastructure development program, called “Build, Build, Build”. Implementation of infrastructure projects have faced delays due to administrative challenges, regulatory constraints and land reform issues. The program includes more than 8,000 projects in transport, railways, roads, airports, ports, oil and gas and water infrastructure worth US$160 billion over 2017-22 (about 40% of GDP). The 2020 budget allocates almost US$19.3 billion (4.6% of GDP) to infrastructure development.

Ongoing infrastructure investment in the Philippines offers opportunities for Australian exporters of building materials, steel products, aluminium and construction equipment, coal, LNG and water and wastewater treatment products. Relatedly, opportunities may exist to grow financial, legal and engineering services; at present, tourism and education dominate services exports to the Philippines. The business environment should further improve as the government ramps up of infrastructure spending, offering greater opportunities for Australian exporters and investments. According to the World Bank’s latest survey, the Philippines’ ease of doing business rank improved 29 places to 95th out of 190 economies.

Fig 5 Australian Exports To Phillippines