Airport construction to pick up under Duterte


AIRPORT construction in the Philippines is expected to pick up between 2019 and 2022 driven by the current administration’s focus on countryside infrastructure development, Fitch-owned BMI Research said.

“We expect airport construction to pick up following a slowdown over the past several years, as the Duterte government focuses on infrastructure development outside of the Metro Manila region and as strong passenger growth places capacity pressures on existing facilities,” it said in an industry analysis released Tuesday.

BMI said it forecasts growth in the Philippines’ airports segment to pick up between 2019 and 2022 as construction begins on a number of upcoming projects, and expects real growth in the segment to average 4.9 percent over the same period.

This is in line with President Rodrigo Duterte’s approval of several proposed airport projects, his promise to reform and speed up public-private partnership (PPP) program timelines, and improved relations with China, all of which will help projects overcome limitations in the Philippines’ institutional capacity, it added.

“We highlight further upside to our outlook given the sheer size of the airport project pipeline if we see considerable progress on the reforms mooted,” BMI added.

In particular, BMI expects real growth of the segment to peak at 6.2 percent in 2020 as construction starts on P125 billion worth of airport projects that are expected to enter the tendering process by 2018 and begin to be built between 2019 and 2022.

BMI said these projects include the P40.6-billion expansion of Davao Airport; P30.4-billion expansion of Iloilo Airport; P20.26-billion expansion of Bacolod-Silay International Airport in Negros Occidental; P15.3-billion construction of Clark International Airport Terminal 2; P14.6-billion new terminal for Laguindingan Airport in North Mindanao; and the P4.6-billion New Bohol Airport in Central Visayas.

It also noted that the ongoing construction of a new P14.4-billion terminal at Mactan-Cebu International Airport, the P7.2-billion Budget Terminal at Clark International Airport, and the P4.7-billion Bicol International Airport will provide underlying support for its forecast in the near-term.

“Most of the current and upcoming airport projects will be implemented as PPPs, a framework favored by former President Benigno Aquino 3rd, that has drawn significant private-sector interest but is also suffering from delays—of the 53 PPP projects launched since 2010, only three have been completed, according to the Philippines’ PPP Center,” BMI noted.

“Duterte’s finance minister Carlos Dominguez has promised to ‘dramatically review’ the PPP program, including accepting unsolicited private proposals,” it added.

BMI said given the significant volume of projects in the pipeline, improvements to the procurement process “presents further upside to our forecast which currently factors in some degree of sustained delays.”|

Additionally, it said friendlier relations between the Philippines and China following President Duterte’s state visit to Beijing in October will also lift the overall infrastructure outlook.

“Chinese companies will provide another source of cheap financing and construction services—as they have done in other Southeast Asian countries—and help accelerate projects that may not have received as much interest from other investors,” it said.


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