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INDUSTRY ANALYSIS
Maria Francesca Balatay| Angelika Bondoc | Pons Anthony Closa | Janine Endaya | Cherlyn May Gatela
TABLE OF CONTENTS
I.
MACROECONOMIC ANALYSIS
A. GLOBAL ECONOMIC CONDITION
B. ASEAN ECONOMIC CONDITION
C. PHILIPPINE ECONOMIC CONDITION
. GDP BY CONSUMPTION EXPENDITURE SHARES
. GDP BY INDUSTRIAL ORIGIN
. POPULATION
. EDUCATION
. EMPLOYMENT
. INFLATION AND INTEREST RATES
. FOREIGN EXCHANGE
. GOVERNMENT BUDGET ALLOCATION
D.
CURRENT BUSINESS PHASE
E.
PHILIPPINE ECONOMIC OUTLOOK
II. INDUSTRY ANALYSIS
A. THE CONSTRUCTION INDUSTRY AND ITS RELEVANCE TO THE ECONOMY
B. SCOPE AND LIMITATIONS OF THE ANALYSIS
C. INDUSTRY SUBSECTORS
D. CONSTRUCTION INDUSTRY ACROSS THE GLOBE
E. CONSTRUCTION INDUSTRY IN ASIA
F. PHILIPPINE CONSTRUCTION INDUSTRY
. INDUSTRY PLAYERS AND PEERS
. SHARE OF CONSTRUCTION INDUSTRY TO GDP
. GROSS VALUE ADDED
. SHARE OF CONSTRUCTION INDUSTRY TO EMPLOYMENT
. INDUSTRY LIFE CYCLE
A. INDUSTRY OUTLOOK
B. PESTLE ANALYSIS
C. PORTERS FIVE FORCES ANALYSIS
III. CONCLUSION
IV . REFERENCES
V. APPENDIX
MACROECONOMIC
ANALYSIS
The global economy for the year 2015 saw a number of emerging and developing economies strengthen, while others were affected
by dropping commodity prices and by tightened financial conditions. Realignments such as rebalancing in China and geopolitical
tensions resulted to weak aggregate demand, falling commodity prices, increasing financial market volatility on major economies, and
declining capital flows to emerging and developing countries created significant uncertainty.
Global growth is anticipated to gradually improve in 2016 and 2017 at 2.9% and 3.2% respectively due to less restrictive fiscal and
easing of downward pressures on commodity prices, which will give confidence to investors and lift growth, mostly in commodity
dependent economies.
As such, global demand on construction industry can continue to have positive growth rates, as the needs of developing megacities
rapidly increase, and as urbanization and globalization accelerates.
Source: Inquirer
Household
Final
Consumption
Expenditures
appreciated to 6.2% in 2015 from 5.4% in the previous
year. This was due to the sustained low inflation
environment and continuous decline in prices of
consumer goods and services available for
households.
(2015)
Sub-sectors of the
Industrial Sector (2015)
INDUSTRIAL SECTOR
POPULATION
According to the Philippine Statistics Authority, among the 101,995,876 of the Philippine population, 70.8% are part of the 1544 age group, wherein 50.62% are male and workers of the Construction industry typically belong. These age and gender
brackets in the Labor Force are considered because of the physical nature of the work in the said industry.
From the current population, the Philippines is expected to continue growing, reaching 128.1 million in 2030, according to the
2000 Census-based population projections.
EDUCATION
The required educational attainment of workers in the construction industry is lower than in most sectors with the
exception of the agricultural industry. The lower level of formal education in construction is due to its high proportion of
blue-collar workers who tend to be appointed based on skills and physical abilities.
Considering the Philippines Labor Force, 83% are College Undergraduates or have lower educational backgrounds and
they are the usual part of the workforce in the Construction Industry.
EMPLOYMENT
FOREIGN EXCHANGE
Source: Bloomberg
2015
Source: Rappler
Overall, the combination of these macroeconomic indicators shows that the Philippine economy sustained its
resilience despite the challenging 2015 global economic condition. The strong performance experienced was mainly
proceeding from a strong private demand, improvement in capital formation, and an increase in government spending.
According to World Economic Forum's (WEF) Global Competitiveness Index, the Philippines was able to improve
its rank from 52nd to 47th out of 140 countries worldwide during 2015. This supports the countrys reputation as a bright
spot in the Asia-Pacific region, making the country attractive to foreign investors. With this, Philippines is expected to
continue outpacing its neighbors into 2016. The World Bank (WB) projected the Philippine economy to grow on an
average by 6.4% in 2016, reflecting accelerated implementation of public-private partnership projects and spending
related to the May 2016 presidential election; and 6.2% in 2017 to 2018.
INDUSTRY
ANALYSIS
The 2009 Philippine Standard Industrial Classification (PSIC) categorized the economic activity of construction industry as (1)
general construction, (2) civil engineering works, and (3) specialized construction activities for buildings. The industry also
covers new work, repair, additions and alterations, the erection of prefabricated buildings or structures on the site and also
construction of a temporary nature.
The 2009 PSIC only includes the aforementioned sub-sectors and classifies activities which are carried out not for later sale
of construction projects, but for their operation (e.g. buying, selling, or renting of real properties, manufacturing and retailing of
construction materials, and other manufacturing activities in these plants), as operational activities under industries such as
Real Estate and Manufacturing.
Given this, the analysis will be focusing on the three market segments as classified by the PSIC. Nevertheless, due to the
relatedness of the Construction industry to the Real Estate sector, the analysis will take into account the performance of the
Real Estate industry as supplementary information for further evaluation of Construction industry. Therefore, for the purpose of
this paper, all businesses that are engaged in any of the said activities, primarily or partially, would be considered as part of the
analysis.
environmental
INDUSTRY WEAKNESSES
Accreditation
Board
(PCAB)
before
PUBLICLY LISTED
CONSTRUCTION COMPANIES
INDUSTRY PLAYERS
INDUSTRY PEERS
ASIABEST
GROUP
INTERNATIONAL INC.
INDUSTRY CONDITION
INDUSTRY CONDITION
INDUSTRY CONDITION
INDUSTRY CONDITION
Construction
industry
in
the
Philippines
is
mostly
222
or
20.0%
are electrical,
plumbing
and other
or
0.5%
establishments
Source: Philippine Statistics Authority
are
demolition
and
site
preparation
industry
cycle
of
the
construction
sector
is
currently
industry
to
employment
leads
to
more
INDUSTRY OUTLOOK
Firms in the construction industry are faced with an increasingly challenging, interlinked, and fast-changing marketplace,
where global economic uncertainty and complex geopolitical challenges exist. In spite of this, the industry is able to stay
resilient.
INDUSTRY OUTLOOK
INDUSTRY ANALYSIS
PESTLE Analysis
Political, Economic, Social, Technological, Legal, Environmental
POLITICAL
The positive outlook for Philippines' construction sector is supported by growth in public construction activity as the
government's Public-Private Partnership programme gains traction, as well as sustained momentum in private construction
activity.
The upcoming election in May 2016 will greatly affect government spending on infrastructure developments
The corruption issues of the Philippines regarding government infrastructure projects is an important political factor that
affects the construction industry of the country
-
POLITICAL
ECONOMIC
The ASEAN Integration will enable easier movement of services, investment, capital and people which will greatly impact
the Construction industry because of growing demand for more and better infrastructures
Growth of other industries such as the Tourism industry, the Business Process Outsourcing (BPO) and the Mining industry
will also open more opportunities for the Construction industry
Companies based outside a member country are anticipated to set up headquarters in the country for expansion, following the
ASEAN Economic Community (AEC)s vision to establish a single market that will give way to a more open flow of capital across
borders and faster transportation of goods, services, and skilled labor, thus the need for more office, industrial, and residential
space to accommodate these businesses
The apparent need for more business spaces will boost the construction industry. Businesses in the industry will compete to
provide better commercial, industrial and residential establishments to support the booming economy.
Local construction firm giants led by EEI Corp. are keen on carrying out infrastructure projects in ASEAN countries.
Firms and engineers coming from the Philippines have established good track records in other parts of the world, mainly in the
Middle East, helping them gain confidence in taking on the ASEAN challenge
A unified Southeast Asia also means that tariffs on different products offered by the industry will be eliminated. In relation to this,
a higher disposable income is foreseen and this will equip consumers with more money to spend. So, the need for more
commercial spaces such as malls, retail complexes, and shopping establishments is expected to grow.
The implication of more industry players signifies an increased rate of construction activities as well.
A primary driver of the rise in demand for office spaces is the business process outsourcing (BPO) industry, as the country
remains to be among the most attractive locations for offshoring services.
The bright prospects of BPO industry will be able to have positive effects in the construction sector as it helps drive the growth
for commercial property space especially in the business districts of Makati, Bonifacio Global City and Mandaluyong.
Eton has finished more than 124,000 square meters of projects in Quezon City and Ortigas dedicated to BPO-IT buildings last
2015 and expanding further by an additional 200,000 square meters to be established this year until 2018.
SOCIAL
Emerging markets have strong population growth which will be reinforced by other demographic factors such as labour
mobility and demands for higher living standards that will be positive for construction, particularly the residential sector.
The majority of the population in the Philippines belongs to the working class who have the capacity to invest in
residential developments
This huge population has resulted to an increasing housing backlog
The majority of the population in the Philippines belongs to the working class. According to Philippine Statistics Authority, among the
101,995,876 of the Philippine population, 70.8% are part of the 15-44 age group. This is the portion of society who are about to start
their own families until those who are about to retire from their respective careers. People in this segment are also the ones who
usually start to invest in residential developments for they have the capacity to do so. OFWs, expatriates, and young professionals
are also driving the demand for real properties This increases the demand for construction sector particularly in the private
construction accounts.
Housing Backlog
The government will tap shelter agencies like the Pag-ibig Fund,
and the National Housing Authority to decrease the housing
backlog by 50% with an annual target of 350,000 housing units.
TECHNOLOGICAL
The Department of Public Works and Highways (DPWH) noted that the country will be able to adapt some of the
Japanese latest techniques and trends on roads and bridge construction.
The Philippine Constructors Associations (PCA) gave way for the government to invest in quality projects to address
issues that the industry faces.
The Philippines considered technological innovations in infrastructure projects in collaboration with Japan International
Cooperation Agency (JICA). This imposed productivity and will
The construction and engineering technologies from Japan will help the Philippines build disaster-resilient infrastructures
that would mitigate the effects of climate change.
Private Construction subsectors also adapt innovation as cement manufacturers such as Holcim Group produced a
green sustainable solution for cement.
LEGAL
Philippine Overseas Construction Board (POCB) formulates policies for developing the Philippine overseas construction
industry and give grants to such businesses
Ownership of Foreign corporations is limited to 40%, protecting Filipino-owned Construction businesses
B.
C.
D.
ENVIRONMENTAL
Over the last decade, the Philippines is included on the top five countries that are most frequently hit by natural disasters
More severe sudden-impact events can generate more construction activities
Construction industry is central to the promotion of disaster resilience through building procurement, design,
construction, etc.
Annually, approximately 80 typhoons develop above tropical waters, of which 19 enter the Philippine region and six to
nine make landfall, according to the Joint Typhoon Warning Center (JTWC).
Typhoon Haiyan - known locally as Yolanda - which struck in 2013, was recorded as the strongest tropical cyclone ever
to make landfall anywhere in the world in recorded history. Over 14 million people were affected across 46 provinces with
their homes severely damaged or destroyed (550,000 houses destroyed and 580,000 houses severely damaged)
Most frequent disasters affect buildings, roads and other infrastructures
The Construction industry plays a key role in responding to disasters - dealing with collapsed and damaged buildings and
infrastructure and providing temporary shelter and services to affected communities - and also in post-disaster
reconstruction efforts
Government speeds up rehabilitation, construction, and recovery projects that will rebuild assets, restore supply change,
and strengthen capacity building
Construction will be one of the priority sectors in employment generation.
The first Philippine International Total Green Movement Exhibition and Conference happened last August 17-19, 2011.
The players in the construction industry lean towards environment friendly development project.
As government launched its massive infrastructure development program with nine major projects nationwide, the
National Economic and Development Authority (NEDA) said a million homes are set for construction in typhoon-hit areas
allowing the construction sector and its allied industries to have a banner year in 2014.
Construction products outside of Yolanda-affected areas are also expected to contribute to the growth this year.
INDUSTRY ANALYSIS
CONCLUSION
Overall, firms in the local construction industry are faced with an increasingly challenging and fast-paced environment. In spite
of this, there is great anticipated positivity in the Philippine construction industry for the next years. However, these should be
matched by initiatives like increasing labor productivity through job opportunities in order to sustain the competitiveness of
firms.
Nevertheless,
the
following
challenges
must
be
taken
into
consideration
to
sustain
growth
infrastructure
prospects:
projects
APPENDIX
APPENDIX A - LEGAL MANDATES IN CONSTRUCTION INDUSTRY (CIAP)
EO No. 679 (Expanding the Composition of the Board of Directors of the Construction Industry Authority of the Philippines)
dated 21 April 1981 included the then Minister of the Public Highways and Minister of Public Works [now the Secretary
of the Department of Public Works and Highways (DPWH)] and the Minister of Transportation and Communications
[now the Secretary of the Department of Transportation and Communication (DOTC)] as members of the Authority.
EO No. 768 (Amending Further the Composition of the Board of Directors of the Construction Industry Authority of the
Philippines) dated January 19 1982 included the then Minister of Labor and Employment [now Secretary of
Department of Labor and Employment (DOLE)] and the President of the Philippine Contractors Association as members
of the CIAP.
EO No. 1008 (Creating an Arbitration Machinery in the Construction Industry Authority of the Philippines) dated 04 February
1985 created the Construction Industry Arbitration Commission (CIAC) as an arbitrary machinery for the construction
industry. Under Section 3 of this EO, the CIAC was placed under the administrative supervision of the PDCB.
EO No. 133 (Reorganizing the Department of Trade and Industry, its Attached Agencies, and for other Purposes) dated 27
February 1987 reorganized the Ministry of Trade and Industry into the DTI.
Presidential Decree (PD) No. 1167 - Overseas Construction Incentives Decree
The PD provided incentives for duly registered Filipino overseas contractors, i.e. (a) tax credit; (b) deduction from gross
overseas income; or at their option (c) pay one and one-half percent (1 %) tax on their overseas gross income.
PD No. 1746 - Creating the Construction Industry Authority of the Philippines
created the CIAP to promote, accelerate and regulate the growth and development of the construction industry in
conformity with national goals
REFERENCES
Inquirerbusiness.com
rappler.co
Trading Economics
ukessays.com
United Nations
World Bank
www.bloomberg.com