Beruflich Dokumente
Kultur Dokumente
INDUSTRY ANALYSIS
Maria Francesca Balatay| Angelika Bondoc | Pons Anthony Closa | Janine Endaya | Cherlyn
May Gatela
TABLE OF CONTENTS
I. MACROECONOMIC ANALYSIS
A. GLOBAL ECONOMIC CONDITION
B. ASEAN ECONOMIC CONDITION
C. PHILIPPINE ECONOMIC CONDITION
❖ GDP BY CONSUMPTION EXPENDITURE SHARES
❖ GDP BY INDUSTRIAL ORIGIN
❖ POPULATION
❖ EDUCATION
❖ EMPLOYMENT
❖ INFLATION AND INTEREST RATES
❖ FOREIGN EXCHANGE
❖ GOVERNMENT BUDGET ALLOCATION
D. CURRENT BUSINESS PHASE
E. PHILIPPINE ECONOMIC OUTLOOK
II. INDUSTRY ANALYSIS
A. THE CONSTRUCTION INDUSTRY AND ITS RELEVANCE TO THE ECONOMY
B. SCOPE AND LIMITATIONS OF THE ANALYSIS
C. INDUSTRY SUBSECTORS
D. CONSTRUCTION INDUSTRY ACROSS THE GLOBE
E. CONSTRUCTION INDUSTRY IN ASIA
F. PHILIPPINE CONSTRUCTION INDUSTRY
❖ INDUSTRY PLAYERS AND PEERS
❖ SHARE OF CONSTRUCTION INDUSTRY TO GDP
❖ GROSS VALUE ADDED
❖ SHARE OF CONSTRUCTION INDUSTRY TO EMPLOYMENT
❖ INDUSTRY LIFE CYCLE
A. INDUSTRY OUTLOOK
B. PESTLE ANALYSIS
C. PORTER’S FIVE FORCES ANALYSIS
III. CONCLUSION
IV . REFERENCES
V. APPENDIX
MACROECONOMIC
ANALYSIS
GLOBAL ECONOMIC CONDITION
The global economy for the year 2015 saw a number of emerging and developing economies strengthen, while others were affected
by dropping commodity prices and by tightened financial conditions. Realignments such as rebalancing in China and geopolitical
tensions resulted to weak aggregate demand, falling commodity prices, increasing financial market volatility on major economies, and
declining capital flows to emerging and developing countries created significant uncertainty.
Global growth is anticipated to gradually improve in 2016 and 2017 at 2.9% and 3.2% respectively due to less restrictive fiscal and
easing of downward pressures on commodity prices, which will give confidence to investors and lift growth, mostly in commodity
dependent economies.
As such, global demand on construction industry can continue to have positive growth rates, as the needs of developing megacities
rapidly increase, and as urbanization and globalization accelerates.
ASEAN ECONOMIC CONDITION
● The Philippines posted the second-fastest economic growth ● Indonesia’s gross domestic product (GDP) in 2014
among the ASEAN in 2014, realizing a GDP of 6.1%. Over the
totaled $888 billion, with Thailand a far second at
last five years, the Philippines has been in the top quartile of
$373 billion. Malaysia, Singapore and the Philippines
economic growth in the ASEAN. This is mainly due to strong
economic fundamentals distinguished by low and stable follow closely at $326 billion, $308 billion and $285
inflation rate and proper fiscal management in utilizing the billion, respectively.
country’s savings.
● However in 2015, it is evident that most ASEAN countries
faced a slower growth rate in terms of percentage change in
gross domestic product. This shows that Asia could expect a
slower economic expansion in the region.
PHILIPPINE ECONOMIC CONDITION
GROSS DOMESTIC PRODUCT
● In 2011, typhoons destroyed different parts of
the country. Agriculture slowed down to 2.5%
in the 4th quarter due to bad weather. To
prove that infrastructure projects are based on
anti-corruption efforts, the Aquino
Administration in 2011 resulted in massive
delays that only one road project out of the
almost 10 in the list of Public-Private
Partnership (PPP) program was bid out.
(2015)
● GDP growth in the 4th quarter of 2015 was driven Sub-sectors of the
largely by the Services sector, which accelerated to
7.4% from 5.6% last year. Trade, Other Services
Industrial Sector (2015)
Real Estate, Renting & Business Activities exhibited
positive growth in this period.
● Agriculture slowed to 0.2% from last year’s 1.6%
growth. This sector persists to be the biggest road
block in attaining a higher and more conclusive
growth.
● Along with Agriculture, the Industrial sector also
slowed to 6.0% from 7.9% last year.
INDUSTRIAL SECTOR
● Manufacturing remained as the biggest growth
driver of the Philippines’ GDP in the IndustrIal
sector comprising more than half of it.
● Next to it is Construction, contributing 5.8% (at
constant prices) to the economy. Source: Bangko Sentral ng Pilipinas
● Turnover in both public and private sector
construction activities is seen to reach about P1.7
trillion.
POPULATION
● According to the Philippine Statistics Authority, among the 101,995,876 of the Philippine population, 70.8% are part of the 15-
44 age group, wherein 50.62% are male and workers of the Construction industry typically belong. These age and gender
brackets in the Labor Force are considered because of the physical nature of the work in the said industry.
● From the current population, the Philippines is expected to continue growing, reaching 128.1 million in 2030, according to the
2000 Census-based population projections.
THE PHILIPPINE ECONOMY
EDUCATION
● The required educational attainment of workers in the construction industry is lower than in most sectors with the
exception of the agricultural industry. The lower level of formal education in construction is due to its high proportion of
blue-collar workers who tend to be appointed based on skills and physical abilities.
● Considering the Philippines’ Labor Force, 83% are College Undergraduates or have lower educational backgrounds and
they are the usual part of the workforce in the Construction Industry.
THE PHILIPPINE ECONOMY
EMPLOYMENT
FOREIGN EXCHANGE
● From 2012 to the first quarter of 2013, The Philippine
peso was getting stronger and has started to weaken
up until the first quarter of 2016. On a year-on-year
basis, the peso depreciated against the US dollar in
Source: Bloomberg
4th quarter of 2015 by 5.0% which closed at
P47.06/US$1, moving in tandem with most Asian
countries. The weakening of the peso is mainly
because of the uncertainty of the external
environment, particularly due to possible impact of
the normalization of interest rates in the US and the
effect of the slowdown in the Chinese economy. A
rise in the exchange rate has a negative impact to
2015
● The 2015 budget supports the government’s
commitment to enable poor Filipinos to own safe
and affordable homes through socialized housing.
Source: Bangko Sentral ng Pilipinas Economic indicators confirm that the Philippine economy is in the
expansion phase of the business cycle. Money supply and stock prices
were the leading indicators considered; these showed an increasing
trend for the past 5 years. From 2316.4 billion pesos in 2014, money
supply increased to 2667.4 billion pesos in 2015. In 2016, it is expected
for the Philippines Stock Market to trade at 7070.00 points by the end of
this quarter. In 12 months, it is estimated to trade at 6490.00.
Coincidental indicators such as GDP and Industrial Production also
showed an increasing trend for the past 5 years. In 2015, industry
production contributed 2537.8 billion pesos to GDP. Inflation rate,
another coincidental factor, declined at 1.4% in 2015. For the lagging
indicators, interest rate and employment rate were considered.
Employment showed a positive trend from 2010 to 2015 while the
interest rate remained stable at 4.0%. As money supply continues to
increase, interest rate will eventually decline for the next years. With
Source: Bangko Sentral ng Pilipinas
lower interest rates, firms will get better access to loans. Thus, this
favorable economic condition will drive growth of construction projects.
THE PHILIPPINE ECONOMIC OUTLOOK
Overall, the combination of these macroeconomic indicators shows that the Philippine economy sustained its
resilience despite the challenging 2015 global economic condition. The strong performance experienced was mainly
proceeding from a strong private demand, improvement in capital formation, and an increase in government spending.
According to World Economic Forum's (WEF) Global Competitiveness Index, the Philippines was able to improve
its rank from 52nd to 47th out of 140 countries worldwide during 2015. This supports the country’s reputation as a bright
spot in the Asia-Pacific region, making the country attractive to foreign investors. With this, Philippines is expected to
continue outpacing its neighbors into 2016. The World Bank (WB) projected the Philippine economy to grow on an
average by 6.4% in 2016, reflecting accelerated implementation of public-private partnership projects and spending
related to the May 2016 presidential election; and 6.2% in 2017 to 2018.
INDUSTRY
ANALYSIS
THE CONSTRUCTION INDUSTRY AND ITS RELEVANCE
TO THE ECONOMY
● The 2009 Philippine Standard Industrial Classification (PSIC) categorized the economic activity of construction industry as (1)
general construction, (2) civil engineering works, and (3) specialized construction activities for buildings. The industry also
covers new work, repair, additions and alterations, the erection of prefabricated buildings or structures on the site and also
construction of a temporary nature.
● The 2009 PSIC only includes the aforementioned sub-sectors and classifies activities which are carried out not for later sale
of construction projects, but for their operation (e.g. buying, selling, or renting of real properties, manufacturing and retailing of
construction materials, and other manufacturing activities in these plants), as operational activities under industries such as
Real Estate and Manufacturing.
● Given this, the analysis will be focusing on the three market segments as classified by the PSIC. Nevertheless, due to the
relatedness of the Construction industry to the Real Estate sector, the analysis will take into account the performance of the
Real Estate industry as supplementary information for further evaluation of Construction industry. Therefore, for the purpose of
this paper, all businesses that are engaged in any of the said activities, primarily or partially, would be considered as part of the
analysis.
CONSTRUCTION INDUSTRY SUBSECTORS
THE CONSTRUCTION INDUSTRY HAS THREE
SUBSECTOR INSIGHTS ARE AS FOLLOWS:
SUB-SECTORS. NAMELY:
INDUSTRY STRENGTHS
✓ Infrastructure and housing development
projects provide numerous market opportunities
in developing countries
✓ Positive impact of new environmental
standards in mature markets
✓ Well-established major players
INDUSTRY WEAKNESSES
● The construction industry is set to remain sluggish. Presently, the ✘ Small companies with fragile financial
industry faces a major shift: production in emerging markets will structures (e.g. high leverage ratios) mainly
continue to grow; at the same time, advanced economies will make up the industry, resulting in high exposure
rebound. to market fluctuation
● The industry is considered risky, with negative outlook in most ✘ Longer payment terms in comparison to other
countries observed due to its structural weaknesses, together with sectors
long-term price burdens mean. Another reason for this is because ✘ Investments in infrastructure put on hold in oil
construction is composed of small firms with very high leverage exporting countries due to low oil prices
ratios, which means that there are longer payment terms in
comparison to other sectors.
● Strong cyclicality and cross-country differences such as the
Recovery in the UK economy and low oil prices provide more
complexity to the industry.
CONSTRUCTION INDUSTRY IN ASIA
● Due to its rapid recovery from the financial crisis,
Asia has become the largest construction
spending continent – contributing 44% of total
value in 2013.
❖ Countries with highest construction spending
in Asia include China, Japan, and India.
❖ China, India, Vietnam were the top in terms of
growth rate.
❖ In 2025, Oxford Economics predicts that
emerging and developing countries will take
on 60% of total global construction spending.
The Construction Industry is one of the most important sectors of the Philippine economy. It is responsible for the erection of buildings
and infrastructures, development of roads and bridges that are necessary for a well-functioning economic system. Output of the sector
allows less disruptions in transporting goods and services across the country. The industry continues to provide services that help not
only in building of structures and facilities, but also that of the nation.
ASIABEST GROUP
INTERNATIONAL INC.
INDUSTRY CONDITION
● Construction is forecast to remain buoyant, though the ● The Gross Valued Added (GVA) in Construction shows an
rapid growth in building approvals seen in recent years increasing trend from 2011-2015, which confirms that the
started to cool in 2013. Private investment focuses on construction industry plays an important part in the
offices, shopping malls, and housing, where demand is country’s economy. Private constructions account for a
strong. The government raised its infrastructure budget in greater share, mainly sourced from higher number of
2014 to the equivalent of 3.0% of GDP for projects such as residential units and commercial buildings. Public
constructing national roads and bridges, rail systems, and constructions, on the other hand, are primarily sourced
ports to provide better access to the provinces. from infrastructure projects of the government.
INDUSTRY CONDITION
● Firms in the construction industry are faced with an increasingly challenging, interlinked, and fast-changing marketplace,
where global economic uncertainty and complex geopolitical challenges exist. In spite of this, the industry is able to stay
resilient.
PESTLE Analysis
Political, Economic, Social, Technological, Legal, Environmental
POLITICAL
● The positive outlook for Philippines' construction sector is supported by growth in public construction activity as the
government's Public-Private Partnership programme gains traction, as well as sustained momentum in private construction
activity.
● The upcoming election in May 2016 will greatly affect government spending on infrastructure developments
● The corruption issues of the Philippines regarding government infrastructure projects is an important political factor that
affects the construction industry of the country
● The ASEAN Integration will enable easier movement of services, investment, capital and people which will greatly impact
the Construction industry because of growing demand for more and better infrastructures
● Growth of other industries such as the Tourism industry, the Business Process Outsourcing (BPO) and the Mining industry
will also open more opportunities for the Construction industry
- Companies based outside a member country are anticipated to set up headquarters in the country for expansion, following the
ASEAN Economic Community (AEC)’s vision to establish a single market that will give way to a more open flow of capital across
borders and faster transportation of goods, services, and skilled labor, thus the need for more office, industrial, and residential
space to accommodate these businesses
- The apparent need for more business spaces will boost the construction industry. Businesses in the industry will compete to
provide better commercial, industrial and residential establishments to support the booming economy.
- Local construction firm giants led by EEI Corp. are keen on carrying out infrastructure projects in ASEAN countries.
- Firms and engineers coming from the Philippines have established good track records in other parts of the world, mainly in the
Middle East, helping them gain confidence in taking on the ASEAN challenge
- A unified Southeast Asia also means that tariffs on different products offered by the industry will be eliminated. In relation to this,
a higher disposable income is foreseen and this will equip consumers with more money to spend. So, the need for more
commercial spaces such as malls, retail complexes, and shopping establishments is expected to grow.
- The implication of more industry players signifies an increased rate of construction activities as well.
- A primary driver of the rise in demand for office spaces is the business process outsourcing (BPO) industry, as the country
remains to be among the most attractive locations for offshoring services.
- The bright prospects of BPO industry will be able to have positive effects in the construction sector as it helps drive the growth
for commercial property space especially in the business districts of Makati, Bonifacio Global City and Mandaluyong.
- Eton has finished more than 124,000 square meters of projects in Quezon City and Ortigas dedicated to BPO-IT buildings last
2015 and expanding further by an additional 200,000 square meters to be established this year until 2018.
SOCIAL
● Emerging markets have strong population growth which will be reinforced by other demographic factors such as labour
mobility and demands for higher living standards that will be positive for construction, particularly the residential sector.
● The majority of the population in the Philippines belongs to the working class who have the capacity to invest in
residential developments
● This huge population has resulted to an increasing housing backlog
The majority of the population in the Philippines belongs to the working class. According to Philippine Statistics Authority, among the
101,995,876 of the Philippine population, 70.8% are part of the 15-44 age group. This is the portion of society who are about to start
their own families until those who are about to retire from their respective careers. People in this segment are also the ones who
usually start to invest in residential developments for they have the capacity to do so. OFWs, expatriates, and young professionals
are also driving the demand for real properties This increases the demand for construction sector particularly in the private
construction accounts.
Housing Backlog
● Despite the annual increase in real estate developments, housing
backlog in the Philippines, which is a result of the higher demand
in the market than the supply, currently stands at 5.8 million.
● Players in the industry sector say that housing backlog would
increase in the following years until 2030 if the demand for mass
houses in particular is not addressed.
● The government will tap shelter agencies like the Pag-ibig Fund,
and the National Housing Authority to decrease the housing
backlog by 50% with an annual target of 350,000 housing units.
● To achieve this, the government administration needs to
implement more PPP programs in order to use the underutilized
government lands.
TECHNOLOGICAL
● The Department of Public Works and Highways (DPWH) noted that the country will be able to adapt some of the
Japanese latest techniques and trends on roads and bridge construction.
- The Philippine Constructors Association’s (PCA) gave way for the government to invest in quality projects to address
issues that the industry faces.
- The Philippines considered technological innovations in infrastructure projects in collaboration with Japan International
Cooperation Agency (JICA). This imposed productivity and will boost the nation’s economic growth through new
projects in the construction industry.
- The construction and engineering technologies from Japan will help the Philippines build disaster-resilient infrastructures
that would mitigate the effects of climate change.
- Private Construction subsectors also adapt innovation as cement manufacturers such as Holcim Group produced a
green sustainable solution for cement.
LEGAL
● Philippine Overseas Construction Board (POCB) formulates policies for developing the Philippine overseas construction
industry and give grants to such businesses
● Ownership of Foreign corporations is limited to 40%, protecting Filipino-owned Construction businesses
● Over the last decade, the Philippines is included on the top five countries that are most frequently hit by natural disasters
● More severe sudden-impact events can generate more construction activities
● Construction industry is central to the promotion of disaster resilience through building procurement, design,
construction, etc.
- Annually, approximately 80 typhoons develop above tropical waters, of which 19 enter the Philippine region and six to
nine make landfall, according to the Joint Typhoon Warning Center (JTWC).
- Typhoon Haiyan - known locally as Yolanda - which struck in 2013, was recorded as the strongest tropical cyclone ever
to make landfall anywhere in the world in recorded history. Over 14 million people were affected across 46 provinces with
their homes severely damaged or destroyed (550,000 houses destroyed and 580,000 houses severely damaged)
- Most frequent disasters affect buildings, roads and other infrastructures
- The Construction industry plays a key role in responding to disasters - dealing with collapsed and damaged buildings and
infrastructure and providing temporary shelter and services to affected communities - and also in post-disaster
reconstruction efforts
- Government speeds up rehabilitation, construction, and recovery projects that will rebuild assets, restore supply change,
and strengthen capacity building
- Construction will be one of the priority sectors in employment generation.
- The first Philippine International Total Green Movement Exhibition and Conference happened last August 17-19, 2011.
The players in the construction industry lean towards environment friendly development project.
- As government launched its massive infrastructure development program with nine major projects nationwide, the
National Economic and Development Authority (NEDA) said a million homes are set for construction in typhoon-hit areas
allowing the construction sector and its allied industries to have a banner year in 2014.
- Construction products outside of Yolanda-affected areas are also expected to contribute to the growth this year.
INDUSTRY ANALYSIS
Overall, firms in the local construction industry are faced with an increasingly challenging and fast-paced environment. In spite
of this, there is great anticipated positivity in the Philippine construction industry for the next years. However, these should be
matched by initiatives like increasing labor productivity through job opportunities in order to sustain the competitiveness of firms.
Nevertheless, the following challenges must be taken into consideration to sustain growth prospects:
EO No. 679 (Expanding the Composition of the Board of Directors of the Construction Industry Authority of the Philippines)
dated 21 April 1981 – included the then Minister of the Public Highways and Minister of Public Works [now the Secretary
of the Department of Public Works and Highways (DPWH)] and the Minister of Transportation and Communications
[now the Secretary of the Department of Transportation and Communication (DOTC)] as members of the Authority.
EO No. 768 (Amending Further the Composition of the Board of Directors of the Construction Industry Authority of the
Philippines) dated January 19 1982 – included the then Minister of Labor and Employment [now Secretary of
Department of Labor and Employment (DOLE)] and the President of the Philippine Contractors’ Association as members
of the CIAP.
EO No. 1008 (Creating an Arbitration Machinery in the Construction Industry Authority of the Philippines) dated 04 February
1985 – created the Construction Industry Arbitration Commission (CIAC) as an arbitrary machinery for the construction
industry. Under Section 3 of this EO, the CIAC was placed under the administrative supervision of the PDCB.
EO No. 133 (Reorganizing the Department of Trade and Industry, its Attached Agencies, and for other Purposes) dated 27
February 1987 – reorganized the Ministry of Trade and Industry into the DTI.
Presidential Decree (PD) No. 1167 - Overseas Construction Incentives Decree
- The PD provided incentives for duly registered Filipino overseas contractors, i.e. (a) tax credit; (b) deduction from gross
overseas income; or at their option (c) pay one and one-half percent (1 ½%) tax on their overseas gross income.
PD No. 1746 - Creating the Construction Industry Authority of the Philippines
- created the CIAP to promote, accelerate and regulate the growth and development of the construction industry in
conformity with national goals
REFERENCES