Philippines Countryanditmarketreport Summary 131025023734 Phpapp01

8/17/2019 Philippines Countryanditmarketreport Summary 131025023734 Phpapp01

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Zinnov Management Consulting

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may be quoted, circulated or reproduced for distribution outside the clientorganization without prior written approval from Zinnov

Philippines Country and IT MarketReport (Summary)

Global Market Expansion Advisory

For more details andcomplete copy of thereport, write to us at

[email protected]


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Table of Contents

Summary

Macroeconomic Environment

Infrastructure Overview

Vertical Insights

IT Market Landscape

International IT majors / Indian Companies Landscape


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3

Table of Contents

Summary

M o r e t h a n

~ 40 mn strong Labour force~ 20 mn Youth~ 816K SMEs

No.1 Destination for Voice BPO

World’s 4 th largest Ship Builder

Increasing Consumption & Disposable incomes

Soon to reach 100 million mobile subscribers


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5

Summary - Infrastructure Overview

World’s 4 th

largest ship

builder

National highways are majorly paved;

however local city roads not well

maintained / paved

Tourism a key driver; Poor quality of

airports an issue

Low investments in Railways ; Poor

quality & limited reach inhibits

movement of goods and people

Shipping is a key mode of transport

owing to geographical location of

Philippines – 7000 islands

Investment -

$10 bn 2013-16

112 th Rank –

Airport quality

1,060 km

Railway LinesNegative

Negative

Neutral

Positive


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6

Mainly import dependent industry; Free imports on

cars would impact the local manufacturing market

Mass grocery retail dominates the retail market;

Organized retail is concentrated only in prominent

business districts

2 nd largest Geothermal energy producer in the world;

Very high electricity rates in the country;

Privatisation bringing huge investments

Very poor airport infrastructure; Over-congestion in

the main airports; Budget airlines dominate 60% of

the aviation market

Lowering of interest rates driving loans growth;

Capital Adequacy requirements may impact balance

sheets

Summary - Vertical Insights (1/2)

Cars sales grew by

10% in 2012

Estimated to grow by

~12% CAGR till 2016

$19.5 Billion to be

invested till 2016

Contributes 0.4% to

country’s GDP

Total deposits grew by

6.3% in 2011

Positive

Positive

Positive

Negative

Neutral


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Summary - Vertical Insights (2/2)

Ranks top destination for BPO outsourcing;

BPO alones contributes $11 Billion; Scarcity of

employable IT professionals

IT-BPO currently a $13

Billion market

One of the fastest urbanizing countries in

East-Asia; Office space stock projected to

reach 7 Million sq. m in 2014

Real Estate and related

activities contributed

11% to country’s GDP

~98 Million mobile subscribers; 8 th largest

Facebook users in the world; Mature mobile

market with low growth forecast

High mobile penetration

ratio of 106%

$5.9 Billion(2011) budget approved; Poorquality of education system producing

unemployable graduates; Direct foreigninvestment not allowed in Education

High adult literacy rate

of ~95%

Highest exporter of Nurses in the world;Current ratio of 1 Doctor to patient 26,493

patients is very poor; Counterfeit drugs causefor concern

Medicines are one of the

costliest in the country

Negative

Positive

Positive

Neutral

Neutral


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Summary – IT Market Landscape

PC Installed

Base

~2.2 Mn annual new PC

shipment~10 Mn

Smartphone

UsersTo increase to >50 Mn by 2015Over 29 MN

MobileSubscribers

SMS capital of the world ~ 2 bn

SMS sent daily by FilipinosOver 98 MN

Internet Users ~ 8 Mn broadband connectionsOver 30 MN

Total Domestic

IT Market

Hardware (61%), IT Services

(27%), Software (11%)Over US$ 3.6 Bn


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Basic Facts & Figures

Source: Philippines Government

Capital City – ManilaKey Services hotspot,

manufacturing hub andport

Filipino and English

Catholic 82.9%, Muslim 5%,Others rest

Davao City

Financial Year - Calendar yeari.e. ending 31 December of

each year

Presidential Form ofGovernance, Multi party

Cebu City, BPO hotspotMajor Port

Philippine Peso, (sign: ₱; code:PHP)

Manila International CargoTerminal and the EvaMacapagal Port Terminal


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Table of Contents

Summary



Sector Overview

IT Market Landscape


GDP Forecasts

Financial Performance

Governance scores

Demographics details


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Table of Contents

Summary



Sector Overview

IT Market Landscape


Infrastructure Spending

Aviation

Roadways

Railways


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Infrastructure Spending Forecast (in $ Billions)

Current infrastructure spending at 2.4% ofcountry’s GDP is one of the lowest

High cost of electric power in the country

Years of neglect and under investments

Source: Philippines Government, The National Economic and Development Authority

5.8

10.5

13.9 14.8

2%

4%

5% 5%

0%

1%

2%

3%

4%

5%

6%

02468

10121416

2012 2013 2014 2015Infrastructure spending % of GDP

Infrastructure spending to be increased to 5%of GDP by 2016

Private investments allowed and promoted inPower sector

Government encouraging private investmentsacross power, infrastructure, roadways etc.

$10.1 Billion worth infrastructure projects approved for Metro Manila

Current status Proposed initiatives


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Passenger seats available on flights grew by16% to reach 28.26 Million in 2012

Infrastructure Overview - Aviation

Total carrier departures

worldwide(2010)-1,69,405

20.512.5

Domestic Passengers InternationalPassengers *(Q3)

Total Airline passengers

2012(in Millions)

With over 7000 islands, air travel is thepreferred choice of travel

Source: Civil Aviation Authority of Philippines, IATA

Dominated by six players: Cebu Pacific,Philippine Airlines, Airphil, Zest Air, Sea Air & Air Asia

85 ~111

Public Airports Private AirportsLow airport infrastructure

raking112 th Rank

Government focus on PPP’s for efficientimplementation of projects

Budget airlines dominate 60% of theaviation market

More than 90% of air traffic served byNAIA (main international) airport alone


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Infrastructure Overview - Aviation

Investments for improving currentairport infrastructure

$111 Million Bicol international airport project inDaraga, Albay

$172 Million Panglao airport project in Bohol

Source: Civil Aviation Authority of Philippines, IATA, Ninoy Aquino International Airport

Rehabilitate Ninoy AquinoInternational Airport’s Terminal 1

$41Million

Albay airport’s runway and taxiwaydevelopment

$50Million

Development of access point to

Central Mindanao via Cotabato

$4Million

Leyte’s Tacloban Domestic Airportinfrastructure improvement

$20Million

New airport projects approved

Number of tourists grew by 18% in 2012

98% of foreign tourists travelling byairlines

Growth of tourism acting as the maincatalyst


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Infrastructure Overview - Roadways

~$ 10 Billion to be spent for improvingnational roads till 2016

2.1 2.32.7 2.9

2013 2014 2015 2016

Spending on national roadsinfrastructure (in $ Billion)

Source: Philippines Government, Department of Public Works and Highways

Ranks 87 th for overall state of publicinfrastructure

$3.1 Billion for road improvement till 2016

Mindanao which produces ~70% of totalvegetables and fruits has very poor roadwaysinfrastructure

Poor roadways infrastructure hamperingagricultural sector

80% 31% 34% 7%

National Roads /

Highways paved

Provincial Roads

paved

Municipal Roads

paved

Small Village /

District paved


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Infrastructure Overview - Seaports

Government inviting PPP’s forimproving port infrastructure

Source: MARINA, Philippine Ports Authority , Department of Transportation and Communications

DOTC approves $12.5 Million for keysea-ports upgrades

World’s 4th largest ship builder

Manila International Container Terminal accounted for 10.6% of totalcargo shipped

All ports serviced ~331,455 ships in 2011

Budget airlines causing shift of sea-travelers to air travel

42%

58%

Share ofCargo Shipped in 2011

201140%

60%

Share ofCargo Shipped in 2012

2012

Foreign cargoshipped increased

by 2%

Foreign cargo Foreign cargoDomesticcargo

Domesticcargo

Presence of over 7000 islandsmake water transport very

important

25 main ports, more than 1000ports across the country

~8%growth

49.4Million

53.2

Million

Total passengers(in Millions)

2012

2011


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Table of Contents

Summary



Sector Overview

IT Market Landscape



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Automotive Industry – Market Overview

7.7%Growth

44,862

96,754

48,328

1,08,321

Passenger Car Commercial Vehicle

Vehicle Sales Figures

2011 2012

1,56,649 Units

1,98,100Units

2012

2016Growth of26.5%

Projected Vehicle Sales Figures

Generates ~ $3.2 Billion in exportrevenues

Employs ~ 75,000 skilled workers

Contributes ~ 12% of theindustrial sector output

4% GDP contribution byAutomotive Manufacturing

Source: CAMPI (Chamber of Automotive Manufacturers of the Philippines, Inc.), TMA (Truck Manufacturers Association) and AVID (Association of Vehicle Importersand Distributors)

HyundaiToyota

35%

Mitsubishi

19% 12%

Market share of Top players in 2012

12%Growth

Import oriented market with 54%of cars sold are imported


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Automotive Industry - Drivers

• 3884 Km’s of roads

added in 2012• Introduction of PPP’s

in roadways

infrastructure projects

• Banks providing

easier auto loans

which grew by

~21.5% in 2011• Low interest rates

offered

• 8% discount for car

exports• Export zone locaters

get exemption from

duties on imported

equipment

• Plan to replace old Land

Transport vehicles with

locally made ones

Governmentinitiatives

Supportivepolicies

EasierBankingnorms

Improvingroadways

infrastructure

Source: CAMPI (Chamber of Automotive Manufacturers of the Philippines, Inc.), TMA (Truck Manufacturers Association) and AVID (Association of Vehicle Importersand Distributors)


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Ford closing theirmanufacturing plant citinginadequate supply networkand economies of scale

Automotive Industry - Inhibitors

More than 54% to cars purchased arestill imported

Large low income group population

Inadequate supply network

Signed ASEAN trade agreement allowingfree import of cars

Foreign players preferring to import cars

Manufacturers may choose to put plants inbigger / mature neighboring markets likeThailand, Malaysia etc.

Source: CAMPI (Chamber of Automotive Manufacturers of the Philippines, Inc.

Inhibitors

Import friendly trade policies


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Passed special bill providingincentives for manufacturers,distributors of alternate fuel cars

Hyundai’s hatchback Eon

became the fastest selling car in

2012

Consumer do a lot of researchbefore purchasing and looks forbest after sales services

Changing customer purchasingbehavior and preferences

Automotive Industry - Emerging Trends

Source: CAMPI (Chamber of Automotive Manufacturers of the Philippines), AT Kearney Report

Emerging trends in Automotive

industry

Hatchbacks to dominate car sales

Investment Priorities Planfocusses on manufacturing

alternate fuel vehicles


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Retail Industry - Market Overview

~13% GDP contribution

from Retail industry

Source: Philippine Retailers Association, Business Monitor Report

Constitute 33% of the

services sector

Dominant Players: SM Group, AyalaCorporation, Robinsons and Rustans

~50% of total retail sales concentrated inManila Metropolitan Area

Employs ~5,000,000 people

~30% of total retail sales fromfranchisee retail

Registered ~ $32.4 Billion Sales

in 2012

32.4

36.3

2012 2016

Retail Sales Forecast(in Billions)

Mass grocery retail sales growth forecast

$ 13.9Billion

$ 19.7Billion

2013

201741.5%Growth

Mass grocery retail to contribute $13.9 Billonsales in 2013

More than 124,000 franchiseesemploying ~1.1 million people

~12%Growth


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Entry of foreign brands in themarket (Forever 21, Uniqlo,etc.)

Growth of franchisee retail(contributes 30% total retailsales)

Increase in dual-income andmiddle class families

Huge overseas remittances($21.3 Billion in 2012)

Unemployment ratiodecreased from 7.1%(2011)to 6.8%(2012)

Banks financing up to 60%of capital for franchisingconcepts

Retail Industry - Drivers

Growth oforganized

retail

Rise inconsumerspending

Source: Philippine Retailers Association, The National Statistics Office (NSO), National Economic and Development Authority

EasierBankingFacilities1

2

3


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Absence of efficient logistics system and

courier service affecting online retailing

Foreign investments need

to have paid up capital of

$2.5 Million or more

Parent company should

have net worth of more

than $200 million

Minimum investment of

$830,000 per store is

required

~51% of total

population belong to

rural areas

54% of total retail space

concentrated in Manila

Traditional retail outletsstill preferred in rural

areas

Retail Industry - Inhibitors

Restrictivegovernmentregulations

In-efficient

logistics system

Untapped

rural areas

Source: Philippine Retailers Association, PwC report


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Retail sales of global brandsdriven the young workingcrowd

Filipino’s top in onlineshopping research in AsiaPacific region

Brands like Forever 21,Uniqlo, APPLE & Bee , etc.entering the market

30% of retail salescontributed by franchiseeretail

Retail Industry - Emerging Trends

Source: Philippine Retailers Association, A.C Neilson

Growth of Online shopping amongyoung Filipino population

Franchising of brands evolving as anemerging trend

Growing entry of foreign brands inthe Philippine market

Awareness of global brands amongyoung BPO crowd and overseastravelling Filipino’s

EmergingTrends


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Energy & Utilities Industry - Market Overview

Philippine Power IndustryElectricity generation estimated to grow

by 4.3% CAGR till 2021

83% of the total households are

electrified as of 2011

Placed in top 5 most energy efficient

countries in Asia

Generation Transmission Distribution

Total Power generationcapacity of ~ 67,743Gwh

Presence of ~ 20,129Circuit Kilometers oftransmission lines

Around $ 2 Billionallotted to expandtransmission linesnationwide

Meralco is largestpower distributor with$ 400 Mn in Revenue

Players: NPC,Western MindanaoPower Corporation,Meralco, AboitizEnergy, Meralco

Players: NTC,National GridCorporation ofPhilippines

Players: Meralco,

Abiotiz, VECO,

DAVAO Light, PECO

Focusing on Gaspowered plants whichare cheaper than oilbased plants

Meralco partnering withJapanese company toset 3000 MW LNGpowered power plant

1

2

3

Source: Department of Energy, Business Monitor Report, The Asian Development Bank

$ 19.5 Billion to beinvested between

2013-2016

5.2%4.4%

0.3%

9.2%

7.6%

10.2%

8.7%

4.8%

Residential Commercial Industrial Others

Growth in Power Consumption

2009 2010


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Energy needs met from Non-renewablesources of energy

Energy & Utilities - Market Figures

Estimated growth of Electricityproduction through gas powered plants

37.7 %44.7 %

2012

2021

11.7%14.7%

10.4%

34.4%

28.9%

Hydro andOther

Renewable

Geothermal Oil Based Coal Natural Gas

Electricity Production from differentsources

2nd Largest producer of Geothermal energy inthe world

43.8%

55.7%

0.5%

Electricity Generation from differentrenewable sources

Hydro Geothermal Other Renewable Sources

Focusing on Gas powered plants which are

cheaper than oil based plants

73.7%

Energy needs met fromRenewable sources ofenergy

26.3%

+

Source: Department of Energy, Business Monitor Report


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Energy & Utilities Industry - Emerging Trends

Focus on power

production

through

RenewableSources of

Energy

Focus on

investing in end-

to-end Smart

grids solutions by

various players

Plans to develop

Smart Cities and

Smart Country-

sides especially

BPO’s

Free distributionof energy

efficient CFL’s

and phasing outincandescentbulbs

Introduction ofenergy efficient

e-trike electric

vehicles

replacing

traditional petrolbased vehicles

Renewable

Source of Energy Smart Cities & Smart Grids Energy Efficiency

Source: Department of Energy, Business Monitor Report,


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Aviation Industry - Market Overview

Aviation industry

contributes 0.4% to GDP

Source: Civil Aviation Authority of Philippines, IATA

Generates $4.8 Billion incatalytic benefits through

tourism

Employs ~123,000 people

Budget airlines dominate 60% ofthe Philippines aviation market

45%

21% 22%

10%

2%

CebuPacific

PhilippineAirlines

AirphilExpress

Zest Air Sea Air &Air Asia

Domestic Aviation Market Share

55%

24%16%

2% 3%

ForeignCarriers

PhilippineAirlines

CebuPacific

Zest Air Sea Air &Air Phil

International Aviation MarketShare

15.512.5

Domestic Passengers InternationalPassengers

Total Airline passengers in2012 (in Millions)


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Over 7000 islands make airtravel the most convenient

Large investments toimprove airportinfrastructure

• Grew by 18% in2012

•

98% foreigntourists by airlines• Luzon, Visayas &

Mindanao rated toptourist destinations

Aviation Industry - Drivers

Drivers

Source: Civil Aviation Authority of Philippines, National Statistics Office

Drivers

Country’sgeography

Growth ofOutsourcing& Offshoring

LargeGovernment

infrastructureprojects

Oversea’s Filipino

Workers

Tourism

IT-BPO to grow by 18%till 2016To and fro journey of

~2.2 Million overseasFilipino’s


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Aviation Industry - Inhibitors

Future plans to improve current

state

Poor airport infrastructure

(Ranks 112)

Source: Civil Aviation Authority of Philippines, Cebu Pacific Report, World Economic Forum


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Aviation Industry - Emerging Trends

EmergingTrends

Focus on modernization ofairports

Foreign carriers expandingoperations Airlines modernizing flights

Cebu Pacific adding 20 moreAirbus A320 and 30 Airbus

A321neo aircraft

Philippines Airlines orderedadditional 10 Airbus A330-300

Emirates starting direct flightsfrom Luzon to UAE

Source: Civil Aviation Authority of Philippines, Cebu Pacific Report, The Department of Transportation and Communications

$8 Million worthmodernization drive atTacloban and Dipolog airports


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BFSI Industry - Market Overview

Philippines Banks rated ASEAN

region’s Best Performing Bankstocks prices

Source: The Bangko Sentral ng Pilipinas, Business Monitor Report

Loans Outstanding in Banking Institutions

~$65 Billion

Total deposits in Banking Institutions

Total deposits grew by 6.3% in 2011

~$75 Billion

~$96 Billion

20112010

~$101 Billion

20112010

Moody’s rates Philippines Banking

system as Positive in creditworthiness

Loan growth increased by 14% andprofit to 15% since 2011

Consists of 730 players in the BankingIndustry

Non Performing Loans ratio declined to2.9% in 2011 from 3.6% in 2010

Total banking network of 9,207

Loans for production activities comprisedaround 84% of commercial bank’s total

outstanding loans


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As long as their capital supports,banks can now put up as many

branches

Rates were lowered to 3.5 percent

for overnight borrowing and 5.5percent for overnight lending

One Network Bank (ONB)and Iloilo-based RuralBank of San Enrique

Bank loans grew by14% in 2012

Drivers

Maybank plans to invest $100- $200million to its local subsidiary Maybank

Philippines

BFSI Industry - Drivers

Low interest rates beingoffered

Growth in economydriving SME & Corporate

loans

Government effort tomerge rural banks with

other players

Lifting restrictions onnumber of branches

Increasing foreigninvestments in the BFSI

industry

Source: The Bangko Sentral ng Pilipinas, Business Monitor Report

Drivers


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Resulted in 5 Foreign banksclosing down operations inPhilippines

PNB and Allied Bank mergewith combined assets of $12.2 Billion(2012)

Country’s Commercialand universal banksrequired to put inmore equity capital

Reduced lending rateto 5.5% to boostdomestic economy

BFSI Industry - Inhibitors

InhibitorsPhilippine

Central Bank

regulations& initiatives

Encouraging

mergers

Financialproblems in

foreigncountries

Source: The Bangko Sentral ng Pilipinas


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Philippine Resources Savings Bankchooses IBM Power Systems

Rizal Commercial BankingCorporation deploys Infosys’sFinacle Core Banking Solution

Philippine Postal Savings Bankadopting 3i Infotech’s corebanking solution

Rural areas benefitting from mobile paymentsolutions in micropayments services

Online banking usage in Philippines grew by 39%in 2011

BFSI Industry - Emerging Trends

Internetbased

bankingservices

Mobile basedbankingservices

Adoption oflatest

technologies

Source: The Bangko Sentral ng Pilipinas, ComScore, XMG Global

1

2

3


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Healthcare/Pharmaceutical Industry - Market Overview

Pharmaceutical IndustryGrowth Forecast

$3.9 Billion~$3 Billion

Presence of ~1,500 hospitals(2011)

~21,500 Healthcare units and

centers(2011)

Highest exporter of Nurses in theworld

Source: Business Monitor Report

20132010

2.9

8.4

0.3

2.8

9.1

0.35

PharmaceuticalExpenditure

HealthcareExpenditure

Medical DevicesExpenditure

Expenditures projections(in

Billions)2011 2012

Budget of $1.1 Billion approvedfor healthcare

Key Players in the market:Unilab, Pascual Labs, Pfizer, Novartis,Merck & Co, Sanofi-Aventis, AbbottLaboratories etc.


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Healthcare/Pharmaceutical Industry - Drivers

14 of the top

pharmaceutical companies

in the world have

manufacturing plants

Foreign drugs dominate

the healthcare market

Citizens above 65 years to

grow at CAGR 1% till

2020 resulting in high

healthcare spending

Government assigning $1.1

Billion in their 2012 budget

for healthcare Governmentfocused onimprovinghealthcare

scenario

Increasingnumber of

senior citizens

Growingmarket for

foreignhealthcare

players

Toppharmaceutical

companieshave

manufacturingplants in the

country

Source: Business Monitor Report


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Same medicine in Philippineswould cost 5-30 times morethan in India, Pakistan

~ 30% of the medical shopsin Philippines sell fakemedicines

Special Law with CriminalSanctions against sellingcounterfeit drugs

Rotavirus Vaccination program forvaccinating children

PINOY Health Insurance Act for healthcareto benefits to the poor

Healthcare/Pharmaceutical Industry - Inhibitors

Philippines ranks as one ofthe most expensive countries

for drugs

Counterfeit drugs creating aroadblock

Government initiatives toimprove healthcaresituation

Government Laws forhealthcare industry

Source: Bureau of Food and Drug, Department of Health


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IT / ITeS Industry - Market Overview

3 rd Largest supplier of ITTalent in Asia Pacific

region ~$16 Billion

IT-BPO Growthforecast

~$13 Billion

20162012

IT-BPO industry employs~772,000 people(2012)

Healthcare Outsourcing industrycontributed ~$433 Million

Worlds top destination for BPOoutsourcing

Hardware

Software

IT Services

$2.2Billion

$401Million

$1 Billion

$2.4Billion

$460Million

$1.2Billion

2012 2013

Estimated to grow by 18%

BPO industry alone isvalued at $11 Billion

IT Products/Services Sales figuresSource: Business Monitor Report, Philippines Software Industry Association

Produces ~90,000 Technicalgraduates annually


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Enabling consumers tospend on PC’s

Computer hardware salesgrew by ~10%

Various e-governanceprojects driving IT adoption

across country

Produces ~90,000 Technicalgraduates annually

Drivers

Growth in Animation & Gaming,Accounting & Finance

outsourcing, Healthcareoutsourcing

IT / ITeS Industry - Drivers

Rising PC penetration inrural areas

Government ICTinitiatives driving IT

adoption

Rise in wage structure

Growth in number of

Graduates

Rapid growth of

Outsourcing andOffshoring Industry

Drivers

Source: Department of Science and Technology (DOST), Business Monitor Report, Philippines Software Industry Association


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Lack of skilled IT graduatesdue to poor quality ofeducation

Financial crisis might preventforeign banks fromoutsourcing their work

US-Philippine Business & ITdelivery council launched inSilicon Valley

Data Privacy Act of 2012 signed to preventillegitimate use of data

Cybercrime Prevention Act 2012 fortackling cybercrimes

IT / ITeS Industry - Inhibitors

Scarcity of employablehigh/middle-end ITprofessionals

Government initiatives tobring businesses from foreigncountries

ICT related regulationsintroduced by Government

Financial crisis faced by US &European Banks which account

for 30% BPO spending



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TV White Space (TVWS), to tap unused frequenciesbetween TV channels to deliver broadband services

Develop payment gateway catering to possiblepayment gateways

Integrate existing government networks together torun government applications

Criminal tracking across all police stations byPhilippine National Police (PNP) using moderntechnology

IT / ITeS Industry - Emerging Trends

E-governanceinitiativesdriving ITadoption

$11 MillioniGovPhilproject


1

2


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Real Estate Industry - Market Overview

~11% GDP contribution from realestate, renting and related business

activities

One of the fastest urbanizingcountries in East Asia

Source: CBRE, Business Monitor Report, Colliers Research

Office space stock projected to reach 7 Millionsq.m in 2014

Average hotel occupancy rate

exceeds 70% in 2012 compared to67% in 2010

8.5%6.1%

15.1%

Makati CentralBusiness District

Ortigas Center Bonifacio Global City

Land value growth rateProminent Business Districts

4,66,7606,01,219

2,39,831

2012 2013 2014

New office supply forecast

Makati, Ortigas, Fort Bonifacio, Eastwood, Alabang &other locations

8,669

6,261

3,007

2012 2013 2014

New residential units supply

Makati, Ortigas, Fort Bonifacio, Eastwood, Alabang &other locations

Major urbanized locations Major urbanized locations

BPO sector takes up ~4.5 Million Sq.feet annually

23,600 new units to introduced by2016 in Makati CBD


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Real Estate Industry - Market Overview

Tourism aiding in

growing demand for

hotels

Residential, gaming and

leisure sectors also grew

Interest rates for the

low-income group

reduced from 6 to 4.5

percent

BPO sector accounts for

~85% of the total office

space which grew by 25%

in 2011

Growth ofOutsourcing

andOffshoring

industry

HomeDevelopmentMutual Fund

reducinginterest rates

Growth ofretail sectoraiding real

estate

Growth oftourism

Large remittances from Overseas

Filipino workers($21.3 Billion)

Source: CBRE, Business Monitor Report, Colliers Research


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Affecting outsourcing industrywith 5 banks closing downoperations in the country

Causing decline in remittances

Limited options for lowincome group

Foreigners are barred from taking amajority interest in land

Corporations or partnerships with 60%Filipino ownership are entitled to acquireland in the Philippines.

Real Estate Industry - Inhibitors

Political unrest in themiddle-east

Financial crisis faced by US& European Banks

Government Regulations forReal Estate industry

Housing backlog

Source: CBRE, Urban Land Institute, Business Monitor Report,


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Real Estate Industry - Emerging Trends

EmergingTrends

Growing trend ofpurchasing Vacation

homes among Filipino’s

Real estate purchases byOverseas Filipino’s

Growth in economy andpurchasing power

Growth in organizedretail like Malls,

Shopping Centers etc.

Source: CBRE , Business Monitor Report, Colliers Research

Strong desire amongOverseas Filipino’s to

buy/build home in theirnative land

Strong desire amongOverseas Filipino’s to

buy/build home in theirnative land

l d k


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Telecom Industry - Market Overview

~10% Contribution tothe country’s GDP

$5.3 Billion inRevenue (2011)

Other Players

PDLT & Digitel

30%

Philippine Mobile market share

Presence of ~103 Million mobilesubscribers

High mobile penetration rate of106%

8 th Largest Facebook users in theworld

Filipino’s account for 10% of world’sglobal SMS’s

Smart phone sales estimated to growby 60% till 2016

Mobile Broadband Fixed Line

Estimated growth rate till 2016

3.5% 9.6% 0.01%

Source: PwC Report, National Telecommunications Commission

70%

T l I d D i


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Current broadband market has alow penetration rate of 7.4%Expansion allowingaddition of morecustomers from ruralareas

Consists of four 3Glicense holders

PDS 2011-16 plan tocreate further demand fortelecom services fromcorporate segment

• World’s 8 th largestFacebookpopulation

• Growing use of

internet serviceson mobile

Telecom Industry - Drivers

Huge

potentialbroadbandmarket

Social mediapopularity

GovernmentICT plans

Networkexpansion by

telecomoperators

Liberalized andcompetitive

telecom sector

Source: PwC Report, National Telecommunications Commission, *ARPU(Average revenue per user)

Drivers

T l I d I hibi


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Telecom Industry - Inhibitors

Mature mobile marketwith low growth rate

projections (3.6% p.a till2016)

Rural market comprising51% of total population

still untapped

Geographical constraintsfor expansion and

operations

Mobile market dominated by Pre-paid constituting 92% of total userswhich brings low ARPU

Source: CBRE , Business Monitor Report, Colliers Research

Inhibitors

T l I d E i T d


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Telco Operators investing in 4Gand LTE technologies

Smart Communication tomodernize its 2G/3G networkand mobile broadbandnetworks.

Globe Telecom networkmodernization plan Smartphone penetration to

grow to 50% till 2015

WiMAX enabling greaternetwork access to remoteareas

Launch ofWiMAX

Investing inmodernizing

infrastructure

Growing use ofSmartphones

Adoption of newtechnologies

$141.5Million

$790Million

Telecom Industry - Emerging Trends


1

2

3

4

Ed ti I d t M k t O i


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Education Industry-Market Overview

~58,914 (2011) public and

private schools and

learning centers

Employs ~316,000 people

Produces more than 500,000

Graduates annually

Very high adult literacy rate ofnearly 95%

$5.9 Billion budgetapproved for Education

Sector2011 projection: 500,783 graduates,

3.9% growth

Source: Philippines Software Industry Association, Board of Investments

Total Graduates produced annually

College Degree Graduates 2010

Medical and natural sciences, alliedfields 1,19,378

28.7%

Business, accounting, and relatedfields 1,17,339

28.2%

Social and behavioral sciences,education 68,811

16.5%

Engineering and architecture 50,734 12.2%

IT-related and mathematics 47,928 11.5%

Fine arts, masscom, humanities 12,269 2.9%

Total ~ 417,000

Ed ti I d t D i


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Education Industry - Drivers

Fuelling demandfor employable

graduates

$5.9 Billion(2011) budgetapproved

Attracting foreignstudents with

26,000enrollments in

2012

Average median age of 22Huge youngpopulation

AffordableEducation

Governmentinitiatives

Growth ofOutsourcing&

Offshoringindustry

Source Bureau of Immigration, Board of Investments

Drivers

Ed ti I d t G t P li i


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Education Industry - Government Policies

Government initiatives foreducation sector

Free kindergarten education to fiveyear old children all public schools

Procuring more than 31.1 millionTextbooks

Restrictive Government Regulationsin Education sector

Foreign Investment Act does not allowdirect investment

Foreign investment possible throughcorporation and partnerships

Initiated K+12 curriculum for qualityeducation

Focus on PPP’s for construction of

school buildings and infrastructure

Source: Philippines Software Industry Association, Board of Investments, Government of Philippines

Telecom Ind str Emerging Trends


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Vibal Publishing House and Microsoft partneredto create e-textbooks

Vibal distributed 1,000 tablets to public school

students in Laguna

Growing use of cloud based tools and learning

platforms

Use of E-Learning product and solutions grew

by ~33% in 2012

Telecom Industry - Emerging Trends


Use of cloudbased

solutions

Moderntechnologiesin education

Growing useof e-learning

solutions1

2

3

Phili i G t I iti ti


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Philippines Government - Initiatives

Various Government reforms for industry growth

Focus on various Public-private

partnerships

Government signing agreements with

various Asian countries

Government focus on improving education

standards

• Government inviting PPP’s across education,

infrastructure, construction, transportation,

e-governance etc.

• Signed the ASEAN agreement for duty

import of cars within ASEAN countries

• Allocated an increased budget of $5.95

Billion in 2012•

Introduction K-12 curriculum to quality ofstudents

Philippines Digital Strategy 2011-16 to

maximize use of ICT for national

development

• Use ICT technologies to collaborate across

departments for better e-governance• Create additional demand for ICT services

from corporate segment

Source: Philippines Software Industry Association, Board of Investments, Government of Philippines, PwC Report

Philippines Go ernment Initiati es


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Philippines Government - Initiatives

Various Government reforms for industry growth

Bringing peace to the country

Efforts to bring the high corruption level

down

Government stress on healthier

environment

• Reaching an agreement with the country’s

largest Muslim group in Mindanao

• Corruption level in public sector decreased to

42%(2012) from 64%(2009)

• Introduction of locally manufactured electric

public transport vehicles•

Stress on using the vast renewable sourcesof energy for power production

Focus on using modern ICT enabled

services for agriculture, transport and

smart grid

• Signed Memo of Understanding between

ASEAN and the International

Telecommunications Union on Joint

Cooperation on ICT development in ASEAN

Source: Philippines Software Industry Association, Board of Investments, Government of Philippines, PwC Report

Philippines Go ernment Using modern IT


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Philippines Government - Using modern IT

Source: Government of Philippines

Government to implement a National Justice Information

System (NJIS), an integrated Big Data criminal justicedatabase system

The Philippines Bureau of Internal Revenue Reduces FederalDeficit, Improves Tax Collection Processes with SAS,

Realizing 400 Percent ROI

Department of Finance’s implements financial analyticsand data warehouse

Department of Transport and Communication’s Infrastructureand Information Systems Project

Table of Contents


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Table of Contents

Summary



Vertical Insights

IT Market Landscape


Connectivity - PC, Broadband and Mobile Penetration

Social Media Penetration

IT Spending estimates and SMB status

Government ICT Plans

Table of Contents


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Table of Contents

Summary



Vertical Insights

IT Market Landscape



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Zinnov Point Of View

Phili i


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Philippines

Philippines presents an exciting space with a 95million strong domestic market.

Sick Man of Asia,Low GDP growth

One of potential

Breakout Nations

beating growth

expectations

1990’s

2010’s

The government which was rated inefficient and

corrupt recently, is focussing on increasing

transparency and promoting the business

environment.

The world’s second largest outsourcing destination

with its young and English speaking population has

started on journey of strong macro-economicdevelopment.

With an estimated IT market of ~ USD 3.6 bn,

companies would have potential to grow and expand

in Philippines.

Negative

Positive

Positive

Positive

However there are some pitfalls


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However there are some pitfalls

Growth vs.

Saturated

Areas

Market

Potential -$$$

Buy vs. Grow

vs. Partner

Cloud vs.

hosted vs. in-

house

Potential

Growth Areas

Competition –

Current and

Potential

Government

Regulations

Partner

Ecosystem

Which Zinnov can help you navigateWe help organizations globalize their business and improve people


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We help organizations globalize their business and improve peopleperformance

Peer GroupBenchmark

GrowthStrategy

Definition

OrganizationRestructuring & Change

Management

CostOptimization

VendorSelection,

locationAnalysis &

Audit

Value

analysis &Maturity

model

PortfolioAnalysis &

TalentContract

Structuring

Riskmanagement

Innovation Eco-systemConnect

Operationalefficiency

GlobalLeadership

Network Research Benchmark OptimizeGlobalization

CouncilSharedServices

Zinnov Management Consulting


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g g

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