The Philippines is one of the most attractive investment destinations in Asia because of its positive economic growth, a large infrastructure deficit, lack of public funding and an improving regulatory outlook.
This is according to the latest analysis released by Fitch Group’s Business Monitor International (BMI) Ltd. Research.
In a research note, BMI said infrastructure markets in Asia, including the Philippines’, were still relatively under-penetrated by international construction players.
“A substantial infrastructure deficit, coupled with the limited ability of governments to fund large-scale development plans will leave much scope for investment,” it said.
BMI highlighted the Philippines, Indonesia, Vietnam and India as upcoming destination.
“We believe that Association of Southeast Asian Nations (Asean) countries such as Philippines, Indonesia and Vietnam are key markets that will be increasingly attractive to international players over the next two to three years,” it said.
It noted that domestic firms accounted for about 60 percent to 70 percent of companies involved in local infrastructure projects, based on its Infrastructure Key Projects Database.
“We note that foreign companies will have an increasingly important role to play in developing the infrastructure sector in these markets,” it added.
BMI believes economic growth will be contingent on the country being able to develop supporting infrastructure. Years of underinvestment have resulted in a lack of transport and energy facilities, raising logistics costs and capping growth.
In particular, it said the Philippine economy may grow by an average of 5.9 percent in the next five years, outperforming most of its Southeast Asian peers on the back of ongoing reforms.
BMI said political and economic reforms in the Philippines were gaining traction, which should help accelerate investment growth over the medium term.
“Owing to the fiscal and monetary prudence in the Philippines, we expect the national savings rate to increase over the coming years, which will, in turn, fuel rapid investment expansion,” it said.
The governments of the Philippines, Indonesia and Vietnam are aware of their infrastructure deficit and have set out ambitious plans to develop the sector, it said.
In the Philippines, BMI cited the government’s recent move to open the construction sector to foreign companies through the creation of a new license category called the Quadruple A, which will allow the firms to be registered as regular contractors.
Lastly, BMI said that despite the large infrastructure gap in these Asean countries, the bulk of investment is expected to come from the private sector.
“Despite Philippines being in a healthier fiscal position, the private sector is still expected to play a crucial role, as underscored by the government’s public-private partnership (PPP) program,” it said.