What the retail boom means for the Philippines’ industrial sector
What the retail boom means for the Philippines’ industrial sector
A blossoming retail segment could have a domino effect on the country’s sluggish industrial sector
A booming retail segment could be the lift necessary to buoy the Philippines’ industrial sector, marked by years of dormancy and decline.
“Industrial is set to be the next boom because as people see their purchasing power increase, retail companies that serve them are definitely going to need more storage facilities in the country, which is where logistics and manufacturing facilities come in,” Jettson Yu, founder of real estate services firm Prime Philippines, said.
Industry accounts for only 31 percent of the Philippines’ total gross domestic product (GDP), compared with 57 percent for services, according to the Philippine Statistics Authority. Most of the Philippines’ manufacturing segments have faced stagnation or declined since 2000, the Oxford Business Group said in a 2015 report.
The country’s retail sector, in comparison, has matured fast, with gargantuan shopping malls dotting the islands and enjoying staggering revenues.
SM Prime Holdings, which runs the eponymous chain of malls across the archipelago, traced 60 percent of total revenues in the first half of 2016 to its mall operations. Its malls then generated PHP23.6 billion (USD502 million) in total revenues, a 9 percent increase from the previous year.
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Such purchasing power hinges on the ever-increasing clout of the business process outsourcing (BPO) sector in the Philippines, which accounted for 7.5 percent of the gross domestic product in 2015.
Over-reliance on the BPO sector, however, may not be providential in the long run.
“Much of our GDP expansion has come from the business process outsourcing (BPO) sector and foreign remittances. Our worry is that the BPO sector, especially call centres, is plateauing. More efforts should be exerted to shore up manufacturing to achieve inclusive growth,” Crisanto Frianeza, secretary-general of the Philippine Chamber of Commerce and Industry, said.
Sometimes, the retail and industrial sectors come into synergy with each other, as in the case of another mall operator, Robinsons Retail, which has acquired various hardware chains in the last two years. It most recently acquired a majority stake in De Oro Pacific Home Plus Depot, a chain of big-box stores for builders’ hardware in Northern Mindanao. The company has a 3,000-square-meter warehouse in the city of Cagayan de Oro.
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Source: Property Report