Infra industry to remain investor-friendly – BMI

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THE INFRASTRUCTURE industry will stay as one of the major investor-friendly Philippine sectors in the region despite the dominant stature of family-owned conglomerates in the country.

In a report, Fitch Group’s BMI Research noted a handful of Philippine family-owned conglomerates dominate the industry like San Miguel Corp., Ayala Group, SM Investments and DCMI Holdings.

These conglomerates constitute a significant share of the domestic economy with controlling interests in subsidiaries capable of financing, building, supplying and operating infrastructure projects across sectors.

“According to our Key Projects Database, companies linked to conglomerates together have a more than 30 percent of the infrastructure industry market share,” it noted.


Despite such reality, BMI said regulatory policies will likely remain welcoming to foreign and smaller private partners.

The country’s relatively open regulatory framework and the previous administration’s focus on public-private partnerships (PPPs) have created opportunities across project phases and sectors, while government agencies and state-owned enterprises remain confined to financing and operating less profitable or more regulated projects.

In such an environment, foreign companies have the advantage when it comes to projects that require technical expertise such as energy and rail transport.

On the financing side, BMI noted the investment comes from sovereign and multilateral development banks like the Asian Development Bank, the Japan International Cooperation Agency (JICA) or the US Millennium Challenge Corporation.

“A number of private infrastructure investment funds, such as Macquarie’s P26-billion Philippine Investment Alliance for Infrastructure, have also been set up,” it said.

BMI observed that foreign companies in the transport sector are primarily involved in financing, advising, or supplying technology and equipment, while domestic firms take care of construction and operations.

The development agencies like JICA and the US Millennium Challenge provide financing and advisory services for large-scale projects like the proposed $13-billion Manila Bay International Airport, the North-South Railway Project and a number of expressways in Luzon, it said.

Technology-endowed firms like Hyundai Rotem and Mitsubishi are involved in supplying equipment for road, rail and airport developments. Conglomerate subsidiaries like DM Consunji, Ayala Land and San Miguel Corporation take up most of the construction and operations aspects of the projects, it added.

The most significant shift BMI expects to see in the next five years is greater involvement from Chinese companies as a result of President Rodrigo Duterte’s newly-adopted foreign policy.

“Durterte’s friendlier stance toward Beijing and China’s eagerness to invest and influence the region will lead to more Philippine infrastructure projects being handed to Chinese firms,” it said.

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