Infrastructure In-depth: Philippines 2015 Investment Guide by KPMG in the Philippines In this issue: Philippine Economy and Good Governance Infrastructure Development Plan Insights and Perspectives The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice and after thoroughly considering the circumstances of a particular situation. The views and opinions The articles do not purport to give advice on any particular issue or situation but are meant to be a general guide to the reader who expressed herein are those of the authors and interviewees and do not necessarily represent the views and opinions of R.G. should seek the advice of qualified professionals on issues specific to his situations. Although we endeavor to provide accurate and Manabat & Co., KPMG International or KPMG member firms. timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. © 2015 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. KPMG International provides no client services. No member © 2014 R.G. 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Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. Infrastructure The Infrastructure Issue In-depth: PhilippinesPhilippines 2015 Investment Guide Growthby and KPMG Opportunities in the Philippines in the Philippine Infrastructure Sector 2014-2015 Edition © 2015 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. ContContentsContContentsentsents IntroductionIntroduction 01Introduction Contributors 02Introduction Contributors02 03Contributors Acknowledgements 02 03 Contributors Acknowledgements03 Acknowledgements 0304 AcknowledgementsAppendix 04 Appendix 0467 Appendix Glossary 8504 GlossaryAppendix8574 AboutGlossary 86 85the About 86PhilippinesGlossary About the Philippines 86the 75 AboutPhilippines the 87 Philippines 87 Directory Directory Directory87 of Government of of DirectoryGovernment Government Agenciesof Government Agencies Agencies 90 90 KPMG 90Agencies KPMG KPMG Directory Directory 76 Directory About of Partners of ofKPMG Partners Partners and 77 and Principals and Directory Principals Principals 92 of Partners 92 Our 92 Our Values Our Valuesand Values 94Principals 94 94 78 Our Values 79 08050808 14111414 22192222 36253636 45314545 TheAThe Economic PromisingThe Economic Economic NEDATheNEDA NEDA Philippine DPWHPavingDPWH DPWH- Paving -the Paving - Way Paving Building BuildingBuilding TheAddressingThe The PromiseEconomyPromisePromise mediumMediummediummedium term term termthe Throughthewaythe way through way through Good through through Throughthrough through ChallengestheChallenges Challenges developmentDevelopmentdevelopmentdevelopment GoodGovernanceGood Good PartnershipsPartnershipsPartnerships of anChallengesof anof an planPlanplanplan GovernanceGovernanceGovernance EmergingofEmerging anEmerging GlobalEmergingGlobalGlobal CityGlobalCity City City 2 | Infrastruct2 | Infrastruct2 | Infrastructure Guide:ure Guide:ure Philippines Guide: Philippines Philippines © 2015 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. IntroductionIntroduction 01Introduction Contributors 02Introduction Contributors 02 03Contributors Acknowledgements 02 03 Contributors Acknowledgements 03 Acknowledgements 0304 AcknowledgementsAppendix 04 Appendix 04 67 Appendix Glossary 85 04 Glossary Appendix8574 AboutGlossary 86 85the About 86PhilippinesGlossary About the Philippines 86the 75 AboutPhilippines the 87 Philippines 87 Direct Direct Dir87oryect oryof ory Government of of DirectoryGo Goververnmentnment Agenciesof Government AgAgenciesencies 90 90KPMG 90Agencies KPMGKPMG Directory Dir76 Direct ectAbout oryofory Par of ofKPMG tnersP arPartnerstners and 77 and Pr and Directoryincipals Pr Principalsincipals 92 of Partners 92Our92 Our Values Our Vand aluesValues 94Principals 94 94 78 Our Values 79 575739 636347 717153 80 8057 61 WaterWaterEnhancing IssuesIssuesIssues Developingin inin TaxationTaxationTaxation of of of ProjectProjectFunding Risk Risk of Project Risk ResourcesResourcesWater DevelopingDevelopingEnergy InfrastructureInfrastructureInfrastructureInfrastructure Management ManagementInfrastructure Management Resources EnergyEnergyResources ProjectsProjectsProjects Projects ResourcesResources InfrastructureInfrastrInfrastruct Guide:ure Guide: Philippines Philippines | 3 | 3 © 2015 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG network of independent firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved. IntrIntroductionIntroductionoduction PhilippinePhilippine realThe realgrossPhilippines gross domestic domestic continues product product to (GDP)be one(GDP) gre ofw grethe 5.7w strongest percent5.7 percent inand the infastest-growing firstthe firstquarter quarter of 20of14, 2014, whicheconomies which was was low in er low Southeast thaner than the 7theAsia..2 percent 7.2 With percent angro impressivewth gro wthfor full for average yearfull year 201 GDP 3201 and3 growth andthe the of 6.8 percent6.8 percent6.3% growth grosince wthin 20the in12. 20start 12.Notwithst of Notwithst the Aquino andinganding administrationthe slothewdo slowdown inwhicwn 2010, which was theh was attributedcountry attributed to theto impactthe remainsimpact of the of strong nattheural nat in uraldisasters its economicdisasters in 20 inmanagement1 320 on13 agricult on agricult ureand and ureis committed andto a totightening a tightening to biasbias in monet in improvingmonetar y policies,ary itspolicies, investment the Philippinesthe Philippines climate w asin w orderstillas stillthe to thirdtheachieve third fastest furtherfastest growing progress.growing economyeconomy inRating Asia in Asia afagenciester af Chinater China have and alsoandMala Malaconsistentlyysia.ysia. In theIn upgradedlastthe lastfive fivy ears,thee y ears,credit the Philippinesthe ratings Philippines of the real realGDP GDP grePhilippines.w gre atw an at a anv Moody’serage average of assigned6.33 of 6.33 percent, percent,a positive the thirdthe outlook third highest highestof Baa3 growth gro to wththerate country rateafter after in SingaporeSingapore Septemberand andChina. China. 2014 while Standard & Poor’s improved its rating with a stable outlook of BBB in May 2014. Fitch affirmed the country’s long-term RobertoRoberto G. Manabat RobertoG. Manabat G. Manabat The countrThe countr y'sforeign strongy's strong andperf ormancelocalperformance currency has caughthas issuer caught the atdefault thetention attention ratings of global of globalat ‘BBB-’ and ‘BBB,’ ChairmanChairman & CEOChairman & CEO & CEOinvestorsinvestors andrespectively, hasand beenhas been recogniz in recogniz Marched, someed, 2014. somewhatwhat belatedly belatedly, by rating, by rating agencies.agencies. Last Lastyear, y theear, three the three rating rating agencies, agencies, Moody’s, Moody’s, Standard Standard & & R.G.R.G. Manabat ManabatR.G. & Co. Manabat& Co. & Co. According to the East Asia and Pacific Economic Update report Poor’s (S&P) and Fitch finally upgraded the rating on the country’s Poor’s (S&P)released and Fitc hrecently finally upgraded by World theBank, rating1 the on government the countr needsy’s to ramp external debt to investment grade although the markets have, for external debtup to its investment spending ingrade order although to sustain the the markets country’s have, economic for several years, been pricing Philippine debt at tighter spreads than its several years, momentum. been pricing Infrastructure Philippine debt spending at tighter and spreads development, than its in particular, credit rating. credit rating.are essential in order to support growth, calling the projects under the public-private partnership program as “new sources of growth”. Underlying the remarkable