Construction market’s lure limited by risks

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DESPITE favorable rules, the Philippine construction market’s attractiveness is being limited by operational and political risks, think tank BMI Research said on Tuesday.

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“The Philippines’ construction industry has among the most favorable regulatory frameworks for private and foreign investments in Asia, including robust PPP laws, and ambitious infrastructure initiatives,” the BMI said in a report.

“In practice, however, the country’s poor operating and political risk environment limits the attractiveness of the fast-growing market,” it added.

BMI said the construction market was dominated by family-controlled and politically linked conglomerates —posing a significant barrier against other companies.

The think tank also noted that President Rodrigo Duterte’s controversial drug policies and the ongoing threat of Islamic State and other militant groups in the Philippines were lowering the country’s appeal to investors.

Logistics also remains a challenge because of the archipelagic nature of the Philippines, BMI said.

One upside for the sector is Chinese investments given the Duterte administration’s shift towards Beijing.

“While Chinese investment in the Philippines will boost construction activity, Chinese companies are also likely to outbid other foreign firms, thanks to their lower operating costs and government backing,” BMI said.

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