A report issued by International Enterprise Singapore (IES) and written by Huimin Liu and Yin Yin Lam said: “The Philippines holds significant economic growth potential and has begun to come into the investment spotlight as a result.”
“Although the country has in the past been hampered by political instability and poor investor perception, we believe President Benigno [S. C.] Aquino III has been able to make progress on both fronts,” it added.
IES specifically identified the infrastructure, private real estate, utilities, food, and retail industries as possible investment destinations for Singapore companies.
In the infrastructure sector, the IES recommended that Singapore companies participate in the Public-Private Partnership (PPP) program, which allows private firms to bid for various government projects that include road construction, water supply improvement, and government buildings.
In particular, the report said Singapore companies have competitive advantages in PPPs involving aviation, rail and water projects. They can also participate in renewable energy projects, particularly solar energy generation.
“Interested Singapore companies have to prepare the PPP project tenders thoroughly to avoid disqualifications, which are not uncommon, and partner with local conglomerates or complementary industry leaders with the necessary PPP track record for these tenders,” the report read.
The report also noted growing private infrastructure opportunities, and urged investors from Singapore to participate in residential, commercial and industrial real estate development projects.
The report said the remittances from Overseas Filipino workers are fueling the growth in the demand of housing projects, saying that 40-45% of the sales of residential development is being funded by funds sent from abroad.
Meanwhile, the report noted the increasing demand for office and commercial infrastructure due to the booming business process outsourcing (BPO) sector in the Philippines.
The IES said that despite the rising rental rates, office occupancy -- especially in key business districts in Metro Manila -- remains at 97%, indicating steady demand.
“This demand for office space generates opportunities for self-contained mixed use township developments, involving residential, retail, and other commercial spaces in these developments,” the report read.
In the industrial real estate development, the demand is being driven by the revival of the manufacturing sector, the report said.
“The government wants to create employment by revitalizing the manufacturing sector. Political instability and rising operating cost in other regional economies, coupled with cheaper labor cost in the Philippines have lead to more multinational corporations (MNCs) to consider relocating to the Philippines,” the report said.
The IES noted that the Philippines is an ideal investment site for MNCs because of the country’s talented work force, who are young and fluent in English.
Meanwhile, the report also recommended investors to take a look into the Philippine utilities sector.
In particular, the report endorses investments in the Philippine renewable energy, power generation, and water supply businesses.
Being one of the largest consumer markets in Southeast Asia, the report also sees great opportunities for investments in food, clothing and footwear retail sectors.
Driven by strong remittances, steady BPO income, and a growing middle-class population, the Philippines’ rosy consumer outlook should encourage Singaporean companies to invest, the report said.
It also said household spending in the Philippines is expected to increase annually by 10.5% to $322.6 billion (about P14.5 trillion) in 2018, from $210.5 (about P9.5 trillion) estimated for this year.
“The country’s demographics also boost consumer spending. About 3% of the population are well educated Filipinos between the age of 24 and 34. This demographic group accounts for more than 20% of discretionary consumption and is expected to contribute 50% of the country’s discretionary expenditure by 2020,” the report said.
“In general, the dual-income, middle-class families and young professionals who are willing and able to pay for what they want, coupled with a low lending rate as well as an increase in the number of foreign expatriates and tourists into the country due to the expansion of Manila’s gaming industry are key drivers of the Philippine consumer market,” it added.
The IES also sees huge investment potential in the food industry, with food and drink making up 53% of household expenditure, which is estimated at $171 billion (about P7.7 trillion) this year.
“Filipinos have a hearty appetite. It is typical for them to eat at least five times a day,” the report noted.
While consumers are becoming more health conscious by looking for products that are low in fat, or with reduced sugar content, Filipinos remain to be meat lovers and have a sweet tooth. But above all, rice would always remain as a staple food. “A meal without rice is deemed incomplete to Filipinos -- they eat rice even with Western cuisine such as burgers, pizzas, and other fast food,” the IES report noted.
The report said Filipino restaurant diners spend as much as $25 (about P1,126) per meal. “[This is] an indication of the viability of casual dining concepts, which is a strength of many of our Singapore companies,” the IES said.
However, the report puts in a caution, saying that affordability remains the key for the mainstream market.
“Singapore companies looking at the Philippine market should keep in mind their pricing strategy, and consider options, such as offering bundled deals or individually packaged sachets as compared to large packets,” the report said.
Aside from the food sector, the IES sees bright investment prospects in the Philippine clothing and footwear market, which growth is being driven by the young population aged 20 to 39.
The report said clothing and footwear, which currently account for a modest slice of the overall household spending pie, is forecast to see strong growth, with the retail category expected to increase by an average of 9.4% to $8.6 billion (about P387.5 billion) in 2018, from $5.8 billion (about P261.3 billion) estimated for this year.
Based on consumer insights that IES collected from the Philippines, foreign brands are considered aspirational purchases for most Filipinos. It also noted that clothing and footwear companies would have a strong chance in the local retail market if they have popular celebrity endorsers.
The report said retailers in the Philippines like the Filipino lifestyle brand Bench are strong in their marketing campaigns, and visual merchandising.
“Therefore, it is important for Singapore brands to invest in advertising and promotion; and to not only position themselves as a foreign brand, but also include the use of celebrity endorsers, television commercials, giant billboards, and attractive visual merchandising as part of their marketing strategy,” the report read.
It added that Singapore brands can participate in the local retail sector either by joint ventures, leasing, franchising, distribution, or by partnering with local multi-brand operators like Store Specialists Inc. (which carries a variety of brands from Gucci to Marks and Spencer), and Robinsons Retail (which carries Top Shop, Top Man, and Dorothy Perkins, among others.)
While the report paints a rosy picture for investment in the Philippines, it cautions Singapore investors to consider that national elections are scheduled in 2016, when the current administration steps down.
“Major policy flip-flops from one government to the next can undermine confidence in contract durability,” the report warned. “Without political continuity, private investor interest will be dampened,” it added.
However, the report also believes that the government has “put in legislation to institutionalize these polices, such as the ‘pocket open skies’ policy.”
It also noted the consumption-driven nature of the Philippine economy, making it relatively more resilient to external shocks, unlike export-driven economies.
The report advises Singapore companies to build key relationships in the business sector, since 40 wealthiest Filipino families practically control trade and commerce in the country.
The report also advises Singapore companies to allow adequate time in getting business permits and licenses since they may take long, and delay operations. It cited that it took five steps and 42 days to obtain a new electricity connection.
The IES also recommended that Singapore companies to look for investment opportunities beyond Manila. It cited Cebu and Davao to be potential locations for the next big central business districts in Visayas and Mindanao respectively.
“Singapore companies can consider going beyond Manila to tap these emerging market opportunities,” the report said.
The IES also sees huge investment potential in the food industry, with food and drink making up 53% of household expenditure, which is estimated at $171 billion (about P7.7 trillion) this year.
“Filipinos have a hearty appetite. It is typical for them to eat at least five times a day,” the report noted.
While consumers are becoming more health conscious by looking for products that are low in fat, or with reduced sugar content, Filipinos remain to be meat lovers and have a sweet tooth. But above all, rice would always remain as a staple food. “A meal without rice is deemed incomplete to Filipinos -- they eat rice even with Western cuisine such as burgers, pizzas, and other fast food,” the IES report noted.
The report said Filipino restaurant diners spend as much as $25 (about P1,126) per meal. “[This is] an indication of the viability of casual dining concepts, which is a strength of many of our Singapore companies,” the IES said.
However, the report puts in a caution, saying that affordability remains the key for the mainstream market.
“Singapore companies looking at the Philippine market should keep in mind their pricing strategy, and consider options, such as offering bundled deals or individually packaged sachets as compared to large packets,” the report said.
Aside from the food sector, the IES sees bright investment prospects in the Philippine clothing and footwear market, which growth is being driven by the young population aged 20 to 39.
The report said clothing and footwear, which currently account for a modest slice of the overall household spending pie, is forecast to see strong growth, with the retail category expected to increase by an average of 9.4% to $8.6 billion (about P387.5 billion) in 2018, from $5.8 billion (about P261.3 billion) estimated for this year.
Based on consumer insights that IES collected from the Philippines, foreign brands are considered aspirational purchases for most Filipinos. It also noted that clothing and footwear companies would have a strong chance in the local retail market if they have popular celebrity endorsers.
The report said retailers in the Philippines like the Filipino lifestyle brand Bench are strong in their marketing campaigns, and visual merchandising.
“Therefore, it is important for Singapore brands to invest in advertising and promotion; and to not only position themselves as a foreign brand, but also include the use of celebrity endorsers, television commercials, giant billboards, and attractive visual merchandising as part of their marketing strategy,” the report read.
It added that Singapore brands can participate in the local retail sector either by joint ventures, leasing, franchising, distribution, or by partnering with local multi-brand operators like Store Specialists Inc. (which carries a variety of brands from Gucci to Marks and Spencer), and Robinsons Retail (which carries Top Shop, Top Man, and Dorothy Perkins, among others.)
While the report paints a rosy picture for investment in the Philippines, it cautions Singapore investors to consider that national elections are scheduled in 2016, when the current administration steps down.
“Major policy flip-flops from one government to the next can undermine confidence in contract durability,” the report warned. “Without political continuity, private investor interest will be dampened,” it added.
However, the report also believes that the government has “put in legislation to institutionalize these polices, such as the ‘pocket open skies’ policy.”
It also noted the consumption-driven nature of the Philippine economy, making it relatively more resilient to external shocks, unlike export-driven economies.
The report advises Singapore companies to build key relationships in the business sector, since 40 wealthiest Filipino families practically control trade and commerce in the country.
The report also advises Singapore companies to allow adequate time in getting business permits and licenses since they may take long, and delay operations. It cited that it took five steps and 42 days to obtain a new electricity connection.
The IES also recommended that Singapore companies to look for investment opportunities beyond Manila. It cited Cebu and Davao to be potential locations for the next big central business districts in Visayas and Mindanao respectively.
“Singapore companies can consider going beyond Manila to tap these emerging market opportunities,” the report said.
source: Businessworld
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