The Philippines is increasingly becoming a preferred investment destination for Chinese capital in the region, according to the new report New Frontiers: Prospects for Real Estate Along the Belt and Road Initiative, unveiled today by leading real estate advisory firm, Santos Knight Frank.
The report, authored by Santos Knight Frank’s global partner, Knight Frank, aims to help investors and occupiers understand potential opportunities that China’s Belt & Road Initiative (BRI) can generate beyond its borders.
The country’s 2019 ranking on the report’s BRI Index jumped up by six notches to 44th place from last year, citing improvements in institutional effectiveness and market accessibility. Institutional effectiveness metrics include areas such as regulatory quality and government effectiveness, while market accessibility pertains to foreign direct investment (FDI) and FDI inward flows and stock.
Nearly USD200 million in net FDI from China was registered in 2018 – seven times the amount in 2017, based on preliminary data from the Bangko Sentral ng Pilipinas. China was the fourth largest source of FDI after Singapore, Hong Kong, and Japan.
The Philippines’ improved relationship with China has resulted in greater investment commitments in infrastructure. Major infrastructure deals signed with China include the Manila-Bicol railway project (USD270 million) with China Railway Engineering and the Davao land reclamation project (USD200 million) with China Communications Construction, according to data compiled by The American Enterprise Institute and The Heritage Foundation.
Santos Knight Frank believes that further infrastructure deals can be anticipated in the second half of the administration’s term, helping keep the Philippines’ infrastructure program, Build, Build, Build, on track towards achieving greater countryside development.
In addition, Chinese companies are also initiating or expanding their presence in key sectors such as residential property, logistics, tourism and industrial. Inbound tourism from China has already risen by almost 30% in 2018 and was the second biggest international market of the Philippines, accounting for 17.6% of arrivals last year.
Rick Santos, Chairman & CEO, Santos Knight Frank says: “The Philippines is increasingly becoming a much-sought-after destination for Chinese capital, helping push the country’s infrastructure development and expand industrial, logistics, manufacturing, residential and tourism sectors. Improvements in accessibility and infrastructure are key to drive growth in the provincial areas and sustain the economic growth of the Philippines.”
In Southeast Asia, Chinese entities have more than tripled their investments in the transport, real estate, and logistics sectors, from USD17.1 billion between 2009 and 2013 to USD59.25 billion from 2014 to 2018. Bolstered by investments under the BRI banner, interest from cross-border real estate investors to Southeast Asia’s industrial sector increased in tandem, from USD330 million between 2009 and 2015 to a peak of USD1.4 billion in 2017 – 72% market share of total industrial investments – the report states.
Nicholas Holt, Head of Research, Knight Frank Asia Pacific says, “The Belt and Road Initiative is having an impact on the industrial and logistics sector in Southeast Asia, as new infrastructure fuels growth prospects across the sectors. With increasing demand from domestic and international occupiers, rental growth has strengthened in most markets, which in turn has attracted cross-border investors. These large volumes of capital investment have driven both rapid development and gentrification of older stock.”