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Subway project to boost Philippine construction sector

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MAKATI CITY will get its own subway by 2025. — DENISE A. VALDEZ

By Denise A. Valdez, Reporter

FITCH Solutions said it raised its growth forecast for the Philippine construction and railway sectors this year with the expected groundbreaking of the Metro Manila Subway Project within the first quarter.

In a report released on Friday, Fitch Solutions said it raised its growth forecast for construction sector to 10.9% this year and 10.5% next year, and for the railway sector to 9.1% this year and 8.6% next year, as the government begins work on the $7-billion (P355.6-billion) Metro Manila subway.

“[The] growth of the Philippines’ construction sector will be boosted by positive progress made on Phase I of Metro Manila Subway Project… The project, the largest of President Rodrigo (R.) Duterte’s ‘Build Build Build’ infrastructure programme…is expected to commence (construction) in Q1 2019. In view of these positive developments, we have raised our growth forecast,” it said.

The government is planning to build a 30-kilometer underground railway connecting Mindanao Avenue in Quezon City to the Ninoy Aquino International Airport (NAIA) in Pasay City. Its first three stations is scheduled for partial opening in 2022, and full operations by 2025.

At the same time, Fitch Solutions said it has a “positive” outlook for the Philippine transport sector in the next five years.

“We believe relative political stability within the country will be a plus for the sector as policies enacted by the current government will benefit from continuity over the next few years. The sector will be exposed to a smaller degree of political and election risks in the short term as President Rodrigo Duterte is only slated to step down after the 2022 General Elections,” it said.

Fitch Solutions noted there are 64 transportation projects in the pre-construction phase, accounting for more than 75% of the total value of construction projects in the pipeline. These include the New Manila International Airport in Bulacan; Makati City Subway; and Metro Cebu Expressway Project.

“The healthy project pipeline lends support to our positive outlook that is underpinned by political stability,” it added.

The global research firm noted the President’s move to ease ownership restrictions for foreign contractors to 40% from 25% has helped increase foreign direct investments to the construction industry.

“We believe these efforts will have a positive effect on the sector in the long term as easing restrictions will make the country a more attractive destination for foreign investment and this will encourage more inflows of foreign capital. This then allows the country to benefit from a larger pool of funding to plug the expanding financing gap in the transport sector,” it said.

Fitch Solutions said Public-Private Partnerships (PPPs) are still expected to play an important role in the government’s infrastructure program.

“Despite the numerous PPP opportunities, we believe delays as a result of financing, land acquisition and contract renegotiation issues will continue to pose a downside risk to use of PPPs…,” it said.

Based on its Key Projects Database, Fitch Solutions said 44 out of 64 transport projects are under the PPP program.

“Given tight government budgets and an increasing demand for transport infrastructure, PPPs will be used to attract private capital into the sector,” the report said.