SparQbites by: Peter Burton
The Philippines grew at a remarkable rate of 6.8% of GDP in 2016 and is projected to continue its growth over at least the next 5 years. What industries have thrived in this period and what sectors show the most promise? We take a quick look at seven industries that are set to benefit from the country’s rapid development.
Business Process Outsourcing (BPO)
The BPO industry was worth US$22.9bn in 2016 and is expected to grow to US$24.5bn in 2017, contributing to 9% of Philippine GDP. The industry has found huge success in the Philippines thanks to the young and highly educated population, their strong English proficiency and government incentives provided to export-oriented companies setting up in the Philippines.
Supported by strong domestic consumption and export markets, the Philippines is becoming more competitive as a regional manufacturing player. Prioritised under the new Manufacturing Resurgence Program (MRP), the manufacturing sector contributed 23.2% of GDP in 2015 and is steadily increasing its stake. The country is expected to strengthen its manufactured exports with rising FDI inflows. The Philippines is currently one of the largest global manufacturers of semiconductors.
Investment in the BPO sector, residential buildings and infrastructure projects are contributing to a thriving construction industry. Projected to grow at a CAGR of 9.2% until 2020, the industry was worth US$30.2bn in 2015. The private sector has consistently been the largest contributor to the development of infrastructure and this is set to continue under a hybrid-PPP initiative. Foreign participation in the industry has also expanded, especially in roles providing technical expertise to local companies.
The healthcare industry is undergoing a period of significant private sector investment, including major expansions and acquisitions by large Philippine conglomerates. At 1 bed per thousand people, healthcare requires significant investment to catch up to its Asian neighbours, especially considering the health trends in the country. The medical device industry is worth £250m and has grown at a rate of 9% annually in recent years, with almost 100% of those medical devices being imported. The pharmaceuticals market is worth £2.4bn.
Strong household consumption combined with rising income levels in higher and middle income groups has contributed to robust growth in the retail sector. The rapid expansion of a young and affluent middle class is helping to further attract international brands. The Philippines is also home to some of the biggest shopping malls in the world, the largest of which reaches 1 million footfall each day, a clear reflection of its robust private consumption.
Food & Beverage
The food and non-alcoholic beverage industry was worth roughly £65 billion and will grow at an annual growth rate of 8.3% until 2021. The alcoholic beverage industry is expected to grow 7.7% in 2017 alone. Supported by an expanding consumer base in the new middle-class, many international brands are seeking to leverage on Filipino’s diverse tastes.
Over the past 5 years, the government has attempted to significantly expand capacity due to shortages across the country. Increased demand but limited domestic fuel supplies is the leading cause of this. The Philippines will remain reliant on imported energy such as coal and oil, but the government is committed to harnessing renewable energy projects to take on a greater share of energy production. The country has significant potential in hydro, geothermal, solar and wind power generation.