The Philippines: A New Awakening

The Philippines:
A New Awakening
Liu Huimin
Southeast Asia Group
12 November 2014
Agenda
1.
Why the Philippines?
2.
Where are the opportunities?
•
How to tap on them?
•
Who to work with?
3.
What other considerations to look out for?
2
Agenda
1.
Why the Philippines?
2.
Where are the opportunities?
•
How to tap on them?
•
Who to work with?
3.
What other considerations to look out for?
3
4
Why relook the Philippines?
Good governance
Well-managed economic
HSBC estimates
fundamentals
the Philippines to
leap to #16 spot by
2050 (44th largest
economy in the
world today)
Young population fluent
in English
#1 destination for BPO
services
>US$20b OFWs’ remittances
Sources: CBRE; Business Process Outsourcing Association of the Philippines, DBS, HSBC, Philippine Daily Inquirer, Wall Street Journal
5
Singapore companies have successes in the
Philippines
Logistics
Shipyard
Aviation
Consumer Food
Telecommunication
Real Estate/ Hospitality
Utilities
Consumer Retail
6
Agenda
1.
Why the Philippines?
2.
Where are the opportunities?
•
How to tap on them?
•
Who to work with?
3.
What other considerations to look out for?
7
Public Infrastructure
The Philippine government remains committed to
infrastructure spending
•
Whilst still lower than China and India, Philippines could see the largest increase
in demand for infrastructure as a % of GDP amongst the ASEAN countries, with a
projected spending of US$110bn by 2020.
•
The government plans to ramp up public infrastructure spending to 5% of GDP
by 2016 from 2.8% in 2013.
Source: Goldman Sachs
9
According to the ADB, the Philippine offers the
most ideal environment for PPPs in ASEAN
•
PPP Centre - specialised agency under the President’s Office
•
Central project development fund institution, Project Development and Monitoring
Facility (PDMF) to fund pre-investment studies.
•
Open and transparent tendering process, and a dedicated PPP Centre website
•
Projects are moving since the PPP programme was launched in 2010..
• 8 awarded (i.e. Daanghari – SLEX Link Road; School Infrastructure Project SIP
(Phase 1); NAIA Expressway; SIP 2; Modernization of the Philippine Orthopedic
Centre; AFCS, MCIA, LRT Line 1)
• 9 under tender
• 27 under preparation
• 13 new projects - conceptualisation or in process of procuring transaction
advisors
Source: PPP Centre
10
Recommendations for Singapore companies
pursuing PPP projects
1
Prepare thorough tenders
2
Partner with conglomerates/ industry leaders with
PPP track record
11
Recommendation 1: Prepare thorough tenders
•
Singapore companies can look out for news on the PPP Centre website
and key local newspapers
•
Companies can also engage a transaction advisor familiar with the PPP
project tender process to form a consortium and front the tender
submission
•
Bidders can be disqualified due to incomplete submissions
12
Recommendation 2: Partner with conglomerates/
industry leaders with PPP track record
•
Conglomerates are important to the Philippine economy, with many
owning companies in energy, telecommunications, property, retail trade and
banking.
• Increasing trend of industry leaders who specialise in their respective
industry verticals e.g. construction, participating and winning public
infrastructure/ PPP project tenders.
13
Private Infrastructure
On the private infrastructure front, robust growth in
residential, commercial and industrial
developments
•
Bullish Philippines construction sector - FT reports 33.7% YoY construction growth in
the Philippines from first quarter 2013 to first quarter 2014
o
Rising demand for housing from OFWs and high-net-worth individuals
drives demand for new residential developments.
o
Office segment set to continue its robust growth with demand outpacing supply –
The Philippines is the number one destination for BPO services, surpassing
India.
o
Revitalisation of the manufacturing sector to create sufficient employment Several local developers who were not traditionally involved in industrial real
estate developments are considering activities in this space
Sources: Financial Times, Business Monitor International
15
Furthermore, utilities demand exceeds supply
•
Currently, electricity cost is high and supply intermittent due to a lack of power plant
investment
•
Net power consumption in the country is projected to increase from an estimated
64TWh in 2013 to 100TWh in 2023
•
The Department of Energy launched the Philippine Energy Plan 2012-2030 to
privatise and deregulate the power sector
o Expansion plans for conventional power generation to address electricity
shortage
o Untapped potential in the renewable energy sector, especially for wind and
solar power. One key development to support RE sector growth was the passing
of a FiT in 2012 by the Energy Regulatory Commission
o Growing demand for water in Metro Manila, especially as population is
expected to grow to 30million by 2025
Source: Business Monitor International
16
Recommendations for Singapore companies
pursuing private infrastructure projects
Partner emerging tier players
• Bigger local conglomerates are typically well-integrated; hence
Singapore companies can add greater value to mid-sized local
partners
Offer niche services for private sector
developments
• E.g. Affordable housing and solar energy generation, which
Singapore companies may have a track record in, and where
developments are demanded in the market
17
Consumer
Philippines’ consumption expenditure is one of the
highest in ASEAN
List of consumer markets, 2012
Country or area
World
Asia
United States
United Kingdom of Great
Britain and Northern Ireland
Japan
China, People's Republic of
India
Republic of Korea
Indonesia
Thailand
Philippines
Malaysia
Singapore
Viet Nam
Lao PDR
Myanmar
Brunei Darussalam
Household consumption
Currency Year
expenditure (USD)
US$
US$
US$
2012
2012
2012
41,859,018,557,247.10
12,270,529,805,268.20
11,149,600,000,000.00
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
US$
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
1,626,778,135,156.88
3,631,024,518,983.37
2,992,761,104,748.73
1,065,616,920,037.65
604,326,880,232.62
479,018,966,251.20
208,810,147,074.80
185,605,121,465.53
148,880,429,609.22
108,469,537,627.64
100,502,256,577.68
5,489,362,014.08
34,449,446,476.00
3,467,761,186.70
Consumption
total Expenditure
consumer
as % of GDP
GDP (USD)
Projected
expenditure growth58%
of 5.4%
72,689,733,756,135.80
annually from 201349%
to 2030
24,820,800,177,357.90
% of World
Consumer
Market
16,244,600,000,000.00
69%
100%
29.313945%
26.636076%
2,471,600,098,476.47
5,960,180,293,677.56
8,358,399,572,298.94
1,875,213,100,478.63
1,129,598,273,240.92
878,043,028,446.05
3rd in
385,693,883,981.77
ASEAN;
250,182,051,519.88
and 7th in
304,725,697,979.16
Asia
276,520,028,928.98
155,820,001,920.49
9,099,848,263.32
59,443,607,841.47
16,953,952,625.40
66%
61%
36%
57%
53%
55%
54%
74%
49%
39%
64%
60%
58%
20%
3.886327%
8.674414%
7.149621%
2.545728%
1.443720%
1.144363%
0.498841%
0.443405%
0.355671%
0.259131%
0.240097%
0.013114%
0.082299%
0.008284%
Sources: National Accounts Main Aggregates Database; United Nations Statistics Division; Euromonitor
19
This robust consumption is driven by:
Strong OFWs’ remittances
Steady BPO income
Growing middle-class population
20
Sources: Bangko Sentral ng Pilipinas, D&B, Business Monitor International, Euromonitor, Financial Times
Food & drinks category takes up more than half of
household budget
•
Household retail spending projected to grow from US$211bil in 2014 to
US$323bil in 2018
Expected to lead the trend and grow by an
average annual 10% from US$171bil in 2014
Source: Business Monitor International
21
Recommendations for Singapore consumer
companies
1
Collaborate with local consumer giants
2
Work with multi-brand retail operators
22
Recommendation 1: Collaborate with local
consumer giants
•
•
Local consumer giants are companies who are mall developers/ owners and retailers.
Collaboration models - Leasing, JV, Consignment
Consumer Giant
Market Positioning
SM Prime Group



Largest mall operator
SM department store and SM supermarket
Mass market, housing local and international brands like Forever 21,
H&M and Breadtalk
Robinsons Land



Second largest retailer
Robinsons Retail
Mass market, housing brands like Payless, The Body Shop and Seoul
Garden
Ayala Land


Third largest mall operator
Mid-high end positioning, housing international brands like Zara and
Charles & Keith
New department store targeted mass market

23
Recommendation 2: Work with multi-brand
operators
•
•
Local multi-brand operators could be distributors, master/ area franchisees, or
retailers with their own brands and other acquired brands
Collaboration Models – JV, Franchise, Distribution
Company Name
Franchised Brands
Stores
Rustans
Specialist/ Gucci, Ferragamo, YSL, Prada, Burberry, Cartier, Raoul, Banana Republic, DKNY, Bally, Armani
Exchange, Furla, Gap, Jimmy Choo, Marc Jacobs, Lacoste, Nine West, Zara, Lush, Springfield,
Steve Madden, Samsonite
Robinsons Retail
Toys "R" Us, Saizen (Japan Daiso), Topshop, Topman, Dorothy Perkins, Warehouse & Trucco
Cinderella
Esprit, NaFnaf, British India, Clark, Pierre Cardin, Oshkosh B’Gosh, GATE ONE, Pretty FIT
Suyen
Corporation
(Bench)
Celine Marketing
Global
Restaurant
Concept
Bistro Group
Max’s Company
Cotton On, La Senza, Celio, Chopard, American Eagle Outfitters, Charles & Keith, Pedro, Aldo,
Early Learning Centre, Mothercare, Paul, The Face Shop
Matthews, Staccato, Lewre, BCBG, UNISA, Melissa, Oro Nero and Marble Ink.
Mad for Garlic
T.G.I.Fridays, Bulgogi Brothers, Italianos
Pancake House, Yellow Cab, Teriyaki Boy, Sizzlin’ Pepper Steak, Dencio’s, Singkit, Kabisera, Le
Coeur De France, Maple, Chicken Rice Shop, Max’s Restaurant, Max’s Corner Bakery, Krispy
Kreme, Jamba Juice
24
Agenda
1.
Why the Philippines?
2.
Where are the opportunities?
•
How to tap on them?
•
Who to work with?
3.
What other considerations to look out for?
25
Other macro business considerations
1
Factor time for business processes
2
Relationship building is key
3
2016 Election watch
26
Going beyond Manila…
27
Thank You
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