Philippines Infrastructure: Islands of Opportunity
By the EMIS Insights Editorial Team
On April 19, the Philippines launched the first phase of its National Fiber Backbone (NFB) project, encompassing 28 nodes along 1,245 km with an initial 600 Gbps optical spectrum capacity. The first phase will bring high-speed internet access to over a dozen provinces in Northern and Central Luzon, two National Government Data Centers, and four BCDA ecozones. “Additionally, it will extend a digital lifeline to more than 3,000 Filipinos and different Free Wi-Fi Sites, enabling direct internet access for approximately 750,000 beneficiaries in Regions 1, 2, 3, and here in the NCR (National Capital Region),” President Ferdinand R. Marcos said at the launching ceremony as cited by the Philippines News Agency. “This is the infrastructure that will open employment opportunities, improve market efficiency, attract foreign investment, and stimulate livelihood across the different sectors of our economy and our society. It will close the digital divide and bring to our people the transformative power of free and fast access to information,” Marcos added. The NFB project covers 28,000 kilometers of fiber to connect the islands of Luzon, Visayas and Mindanao and is a core component of the government’s National Broadband Plan to speed up the use of fibre optic and wireless technology.
This is just one of a multitude of ambitious infrastructure projects that the Philippine government has in the pipeline and that are bound to attract investment to the country and generate economic growth in the future.
The Philippines economy has been growing quietly and steadily and it will soon, according to the World Bank, join the club of upper-middle income countries. The country’s GDP reached USD 436bn in 2023, up by 5.6% y/y, IMF data shows. Although this growth fell a little short of the government’s 6%-7% target, the country managed to outpace the other ASEAN 5 countries (Indonesia, Malaysia, Singapore, and Thailand). Consumer spending in 2023 reached USD 280bn and the government expects a GDP growth within the 6.5%-7.5% range for 2024. The solid macroeconomic fundamentals make the country an excellent choice for investment.
The Philippines’s favourable demographics, with a big number of working age citizens and a vast potential for urbanization, certainly tips the scales towards optimism but the government is also working hard to improve the situation in the country. President Marcos is keen on building an upgrading the necessary infrastructure that links the Philippines’s thousands of islands and has continued the efforts of his predecessor in this direction by launching the Build-Better-More initiative, a successor of the Build, Build, Build programme. The Build-Better-More programme aligns with the goals of the Philippine Development Plan 2023-2028, which is focused on transforming production and social sectors through infrastructure expansion and upgrades. The road projects included in the government’s infrastructure investments “must link not only our three major islands, but all prospective sites of economic development,” president Marcos said as cited by the Philippines News Agency. These road projects include the 1,200-kilometer Luzon Spine Expressway Network Program and the Mega-Bridge Program that involves the construction of 12 bridges. The Build-Better-More rail transport programme includes projects such as the North-South Commuter Railway System, Metro Manila Subway Project Phase I, LRT Line 1 Cavite Extension Project, Philippine National Railways South Long Haul Project, and MRT 3. The land public transportation programme includes upgrading transport services in Davao City, alleviating congestion in Cebu City, building bike lanes, public transport stops, and safe walkways in metro Manila, as well as enhancing the EDSA Busway Project. As regards airports and seaports, the programme envisages the renovation of key airports and seaports including the Ninoy Aquino International Airport, the Kalibo International Airport, and the Laoag International Airport, among others.
Public-private partnerships and foreign investments are vital in helping the government achieve its ambitious targets and in December 2023 the country adopted the Public-Private Partnership Act to attract foreign investments and key infrastructure and other development projects in the Philippines.
As of April 2024, there were a total of 185 flagship infrastructure projects in the Philippines, according to data from the country’s National Economic and Development Authority (NEDA), with indicative total cost of PHP 9,143bn. A total of 36.22% of these were ongoing, 16.33% were approved for implementation, and 22.7% were under project preparation. There were 15 national projects worth PHP 501bn, 37 interregional projects worth PHP 3,299bn, and 133 region specific projects worth PHP 5,342bn. The bulk of these projects were physical connectivity ones – a total of 134. Water resources projects were a distant second with a total of 29.
Infrastructure is a top priority for the Philippines government, which has carried out reforms to promote foreign investments in the sector, including removing foreign ownership caps in the renewable energy and transportation sectors.
In particular, big opportunities exit in rail transit expansion projects, such as expanding the Manila rapid transit system. Also in the water infrastructure segment, the water network in the Manila metro area is also expected to need upgrades, which will hinge on support from private investors. The energy sector is gradually emerging as an investment hotspot, on the back of a favourable regulatory environment. Foreign investments estimated at over USD 100bn will be needed if the country is to achieve its renewable targets as set in the Philippine Energy Plan 2020-2040.
Government plans to build affordable housing will, in turn, drive residential projects, while the thriving tourism sector and the overall economic growth will support investments in hotels, offices, and production facilities.
“The Marcos Administration is committed to prioritizing infrastructure development in the Mindanao region – one of the country’s most promising regions because of its significantly untapped potential for various growth drivers, particularly in agriculture and agro-processing,” NEDA secretary Arsenio Balisacan said as cited by the Philippines News Agency in September 2023.
The government will focus on projects to reduce the cost of connectivity and power in Mindanao, improve the region’s resilience to shocks caused by climate change, and raise Mindanao’s productivity as a growing agricultural and industrial hub, Balisacan added. Currently, there are 66 infrastructure flagship projects worth PHP 2.035bn in Mindanao.
The Philippines is proactively pushing its infrastructure agenda with foreign investors. After a US-Japan-Philippines summit in April 2024, the country’s ambassador to the US Jose Manual Romualdez said, as cited by Reuters, that the Philippines is eyeing around USD 100bn in investment deals in the next five to ten years, covering a range of sectors including energy and digital infrastructure.
In March 2024, the Philippines secured USD 5bn in investment pledges from German and American firms in sectors such as healthcare and energy, Reuters reported. Some of the projects agreed during the US Commerce Secretary Gina Raimondo’s trade mission to the Philippines were a USD 400mn investment by private equity firm KKR & Co in telecoms tower operations and expansion in the Philippines and a USD 400mn deal between Ally Power and the Manila Electric Co to build a hydrogen and electric refueling station.
For decades, the Philippines has struggled with poor infrastructure, which has resulted in logistic costs among the highest in ASEAN. Now the country is set to change this, and the determination opens up key opportunities for foreign investors in over 3,700 projects worth a combined USD 372bn to 2028, according to ASEAN Briefing figures. With its stable macroeconomics and favourable demographics, the country is bound to become more interesting to investors and without a doubt the infrastructure sector will be one of the key areas of interest.