THE PHILIPPINES can expect higher investor confidence in emerging industries next year particularly in telecommunications, renewable energy, insurance, logistics and agriculture, according to PwC Philippines.

“The government and businesses are having a positive outlook for the upcoming year,” the accounting firm said in its year-end report on mergers and acquisitions (M&A). “With the current changes in regulations, deals with foreign investors are expected to increase.”

“More businesses will be leaning towards sustainability practices as more consumers are now aware of the importance and benefits of being sustainable,” it said. “As the situation in the Philippines slowly goes back to normal, businesses will continue to normalize their operations and pursue their expansion plans.”

Major companies will continue commercializing their assets to fund network expansion plans especially with expanding 5G connectivity.

The Philippines is estimated to require as many as 4,000 new telecommunication towers yearly, while renewable energy companies are expected to increase their investments in alternative energy because of the moratorium on coal plants and declining sources of coal.

Foreign investors are also expected to keep an eye on the insurance industry amid recent discussions between the Philippine Insurers and Reinsurers Association and companies representing capital firms in South Korea, Thailand and Japan.

The incoming increase in the minimum capital requirement to P1.3 billion from P900 million would make M&A a major option for some insurers that will be unable to comply.

As the government expands the country’s logistics capacity, the market for the logistics sector is expected to reach P1 trillion by 2024, PwC Philippines said in its report.

The expansion plan includes a national strategy for logistics, for which it has mapped out 455 priority infrastructure projects in the private sector.

“Dealmakers will also seek investment in agriculture following the emergence of agribusinesses and agricultural innovations, such as data-driven farming and automation,” the accounting firm said.

Next year, the Philippine economy is expected to grow amid rising prices, food security issues and continuing geopolitical concerns.

Government efforts to attract foreign investors, support the public and private sectors and improve businesses’ framework so these are aligned with international standards would probably drive growth, PwC Philippines said.

It cited changes to several laws such as the Retail Trade Liberalization Act, Foreign Investment Act and Public Service Act, which all seek to open up the economy to foreign investments.

“To remain relevant and stay ahead of the competition, businesses need to consider how they can reinvent their operations, products and services,” it said. “M&A activities will be a crucial factor in this transformation as they enable businesses to innovate and achieve exponential growth.”

As of Dec. 15, M&A deals in the country had reached $8.1 billion covering 33 deals. The Philippines ranked 83rd in the 2022 Global Opportunity Index, which measures a country’s investment landscape.

Most inbound M&A deals came from China, Japan and other Southeast Asian countries, and the high number was attributed to the economic recovery of the country’s service sector.

“The reduction of mobility restrictions helped increase investor confidence as work and recreation activities gradually returned to pre-pandemic levels,” PwC Philippines said.

PwC Philippines cited 10 major deals in the country for 2022, including San Miguel Corp.’s acquisition of Eagle Cement Corp. for $1.87 billion; the sale by Globe Telecom, Inc. of its towers to Frontier Tower Associates Philippines, Inc. for $812 million; and the sale by Smart Communications of its telecommunication towers to Axiata Group Berhad worth $800 million.

This year, economies continued to recover from the coronavirus pandemic as countries started to fully open schools, businesses and institutions with little to no restrictions PwC said. “However, the global economy faced new headwinds that disrupted the M&A space across all regions.”

Dealmakers faced several challenges as the cost of doing business was affected by geopolitical pressures and global supply chain issues that resulted from Russia’s invasion of Ukraine, it said.

High inflation and interest rates also created financial concerns for dealmakers as companies reported lower profit margins due to high costs. “These factors heightened the persisting uncertainties from the pandemic in global markets. The new conditions drove the business leaders to adapt and develop new strategies to win in the market.”

While deals slowed in major markets such as North America, Europe and China, multinational companies sought new market opportunities and refocused their investments in the emerging regions, such as the developing countries in the Asia-Pacific region. — Justine Irish D. Tabile