decosntructing (1)

Construction

Deconstructing the Philippine Construction Roadmap 2020-2030

Emmanuel Lapus, Nadine Saddi, and Dave Devilles | 5 April 2019

Themed “TATAG AT TAPAT 2030”, the Philippine Construction Industry Roadmap 2020-2030 was launched on March 28, at the ASEAN Convention Center in Mabalacat Pampanga.

The roadmap is proof of the Philippine government’s holistic commitment in improving the quality of construction services consistent with principles of sustainability, increasing the number of globally competitive Filipino construction industry players, and equipping the whole project cycle with efficient and modern technologies. It is also expected to complement the government’s push for infrastructure development through the Build Build Build program.  – Ramon Lopez, Secretary, Department of Trade and Industry.

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Aboitiz Construction, Inc. participated in the consultations and dialogues held in 2018 and early 2019 prior to the launch of the roadmap. Below are excerpts of ACI’s key takeaways:

  • WHAT THE ROADMAP SETS OUT TO DO

  • The Construction Industry Roadmap 2020 to 2030 was crafted by the Department of Trade and Industry through the Construction Industry Authority of the Philippines and the Philippine Contractors Association (PCA). The construction industry is aiming to boost its contribution to the economy to PHP130 trillion from just P2.3 trillion last year.
  • Implementation of the roadmap would increase job opportunities for construction to seven million by 2030 from four million last year. The roadmap is targeting an estimated 30,000-45,000 unlicensed contractors to draw into government regulation for security and capacity building.
  • The roadmap identifies roadblocks in the construction industry, as well as ways to address such to achieve the targets.
  • The four pillars of sustainability, institutions, globalization, and productivity are key to the success of the roadmap. We also agree to enhance the education and training of construction professionals and manpower.
  • The goal of the construction industry is to be a key driver towards the design and building of structures with globally competitive quality for nation building. It serves many sectors of the economy — government, ownership dwellings, banking, real estate, food, communication
  • When the construction industry achieves modernization, it will aid the deficiencies of these sectors.
  • Analyze the construction value chain that will help the PCA to add more value to the construction industry and enhance competitiveness.
  • The industry is being hurt by the increasing cost of logistics, increasing of the unpredictable transport of logistics services. That’s why we see construction companies buying their own flatbeds, trucks, equipment, etc.
  • HOW IT RELATES TO GOVERNMENT PLANS AND OTHER IMPACT

  • Through the Philippine-Japan Economic Partnership Agreement (PJEPA), Japan would like to get 40% participation in the local construction industry. In return, Japan offers market participation for Filipino contractors in their geothermal services, shipbuilding services, and aerospace repair and maintenance. — PJEPA is currently working with a Japanese shipyard company to make them use the facilities in Cebu, and to partner with Cebu shipyards in building their ships. Japan is expected to replace 100 ships per year. The idea is to do this on a per block basis (ie. Tsuneishi and Aboitiz partnership).
  • The roadmap could also benefit from Regional Comprehensive Economic Partnership (RCEP), which is a 16-party negotiation between the 10 ASEAN member states and partners, namely Australia, New Zealand, Korea, Japan, and India. The RCEP has a combined GDP of USD 22.4 trillion or 29% of the global total trade – this will be the largest trade in terms of market access size outside of the multilateral trading system. This partnership will provide market access not only for the Filipino service suppliers but also foreign suppliers who would like to come into the country.
  • In the 1970s, Filipinos are better known as contractors than overseas workers in the Middle East, Hong Kong, Malaysia, Indonesia. The roadmap could revive this image as we promote the Philippine construction industry as a globally competitive choice for infrastructure endeavors in new markets.
  • The construction industry in the Philippines grew over the past years due to the following– emergence of the Business Process Outsourcing sector, increase in the number of tourists and investors, as well as the government’s flagship program Build Build Build. The next 10 years may bring a potential implosion in its capacity unless a system and a harmonized intervention of the key players of the industry is agreed upon.
  • The PCA also observed that the construction industry practices a monopolistic competition:
    • Has differentiated product, brands, or companies
    • Small contractors – has the same competition (termed as a political capital)
    • Prices vary on the sophistication of the project; big firms are the only ones who can engage into research and division
    • Customer relations has purely become a domestic orientation among the contractors.
    • High growth but only profit in B segments but very low in small contractors
    • According to the Philippine Economic Society, a possible economic crisis will occur if we don’t address the widening trade deficit of the trade industry while dollar reserves  dwindle.

 

  • INSIGHTS DURING CONSULTATIONS

  • Take a step back and assess our current situation:  local business is given to foreign contractors. What’s the point of going outside if the local business is being given to the foreigners?
  • Globalization means increasing competition. Our market structure today could be vetted and validated through the Philippine Competition Commission.
  • Incentives shouldn’t necessarily come from the government. It could be in the form of access to finance may it for small or big contractors.
  • In order to advance our capabilities, we should learn outside and adapt the advancement/technologies of foreign countries that are not currently here in the country.
  • Example: Italpinas Development Corporation
    • Italian design with Filipino craftmanship
    • Cebu is overcrowded but serves as their business model.
    • Listed company, 9 buildings in Cagayan de Oro. The rest will be done in the next five years.
    • Next project in Batangas for 3 buildings.
    • Properties to build in Visayas. Ideal cities are Ormoc, Dumaguete.
  • On Korean and Japanese contractors: they could come in locally but with the government making sure that they will do joint ventures/partnership with the local companies to help grow and build capacity.
  • We have limited market orientation: Engineering, Procurement, Construction, Operation, and Maintenance. We lack exports of construction services: ie. not enough designs that we could send outside

 

PCRoadmap

  • CHALLENGES

  • By 2023, construction industry will become a 10 trillion industry. How much is being outsourced: 20% roughly 40 billion which affects the aggressive market.
  • Current challenge: not enough finance to support this movement. Local big players are going to die if they are not protected if the foreign big wealthy companies will come here in the Philippines.
  • What about the Chinese contactors here in the PH? We observe that they do not employ Filipino engineers.
  • The shift to digitalization: How do you exploit this one? To upgrade engineering practice and education and investing on hardware and technology to be able to get the advancement of the industry. Come up with something to get modern equipment and technologies.
  • What about engineers who who worked abroad but couldn’t come back? Their work and technologies used abroad are not applicable in the country.
  • Government to provide social stability. Consider green job acts in developing the industry locally.

 

  • CONCLUSION

  • Partnership and agreements on liberalization and reciprocity – firms and people. Lack of reciprocity with international players
  • Human Capital Capacity Development – Skills training and development, technology, competitive wages
  • Policy support – Industry assistance, subsidies and guarantees, safety nets to protect locals to compete locally and internationally

Not everyone can be an engineering, procurement, and construction (EPC) entity.  One could do an EP and one could do C. Not everybody has the capacity or chance to grow big but there’s a lot of opportunities to specialize in your field. We should develop long term plans instead of short-term plans for projects between government and agencies to help contractors to grow and reap the benefits of this national construction roadmap.