This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 7/18/2019

Overview

The Armed Forces of the Philippines is undertaking a 15-Year modernization program that started in 2012 and will continue through 2027. The total cost of the 15-year program is projected to be over US$40 billion. There are opportunities for the sale of aircraft, ships, unmanned vehicles, intelligence and surveillance systems, communications, personal protective equipment, and weapon systems.  The U.S. is a primary supplier of defense equipment to the Philippines but faces stiff competition from Italy, Spain, France, Germany, Israel, and South Korea.  Russia and Sweden are also gaining momentum. 

Republic Act (RA) 10349 or the Revised Armed Forces Modernization Act was enacted during the time of former President Benigno Aquino II. Current President Rodrigo Duterte has reaffirmed his commitment to continue the AFP’s modernization but with a slight shift in its priority.  Under President Aquino, the focus was to strengthen the AFP’s capability to address external threats, particularly to protect its territorial waters, and advance its maritime domain awareness. President Duterte’s focus is counter terrorism and internal threats. 

A major armed conflict erupted between the AFP and members of the Islamic State in Marawi City in Maguindanao Province on May 2017. The conflict lasted over five months and forced the President to declare Martial Law in the entire Mindanao region. The AFP successfully reclaimed Marawi but this incident shed light on the extent of foreign terrorist involvement in the Philippines.  Despite winning the war in Marawi, Mindanao is still under Martial Law due to continued presence of terrorist activity. Because of this, defense spending in the near-term is expected to focus on the AFP’s counterterrorism efforts. This includes providing adequate equipment to the ground forces, and providing the necessary air and maritime reinforcements.

Firms interested in supplying to the AFP need to find a local representative and conduct a capability brief to the appropriate service command. The local representative must be familiar with Republic Act (RA) 9184, The Philippine Procurement Law, it’s procedures, nuances, and documentary requirements.  The U.S. Commercial Service office in the Philippines can provide a briefing on RA 9184.

Foreign companies can bid directly for large defense procurement projects but a local representative is required to keep tabs on project development, funding source, budget, changes in specifications, procurement schedule, and other relevant information. 

Leading Sub-Sectors

The AFP is not releasing the list of Horizon II projects as it is considered confidential. Post has gathered the following opportunities as likely included in Horizon II plans: 

  • multi-role fighter
  • flight simulators
  • helicopters for combat utility, attack, search and rescue, and medium and heavy lift
  • air surveillance radar
  • trainer aircraft
  • land vehicles (armored personnel carriers, all-terrain vehicles, tactical vehicles)
  • force protection
  • unmanned aerial systems
  • amphibian aircraft
  • intelligence, surveillance and reconnaissance (ISR) systems
Opportunities
The AFP Modernization will be implemented in three phases called Horizon I (2012-2017), Horizon II (2018-2022), Horizon III (2023-2027). Estimated spending for Horizon II is expected to be US$5 billion. There are no available estimates yet for Horizon III.
The following are some of the completed procurement projects under Horizon I: 
    • FA-50 fighter/trainer jets (Korea Aerospace Industries)
    • combat utility helicopters (Bell Helicopter)
    • attack helicopters (Agusta Westland)
    • close air support aircraft (Embraer)
    • frigates (Hyundai Heavy Industries)
    • night fighting systems (Aselsan)
    • long range radars (ELTA)
    • medium lift aircraft (CASA)
    • standardized basic assault rifle (Remington)
    • munitions 
    • artillery systems (Elbit)
    • precision guided missiles (Raytheon)
    • multi-role helicopters (Leonardo)
    • C4ISTAR (Harris)
The AFP is preparing its list of equipment for Horizon III procurement.  Initial reports have indicated that it will include procurement of more combat utility helicopters, heavy lift helicopters, and larger UAS systems.

Apart from its modernization program, the Philippine Security Forces receive an average of US$120-125 million annually in U.S. grant funds inclusive of both Department of State (DoS) Foreign Military Fund (FMF) and International Military Education and Training (IMET) and Department of Defense (DoD) Building Partnership Capacity (BPC) programs 333 and 1263.  This is separate and aside from defense related construction projects, as well as Defense Threat Reduction Agency (DTRA) endeavors in the Philippines. A handful of examples of new equipment inclusive of training delivered to the Armed Forces via U.S. Grant programs in 2017-2018 are:
    • Raven UAS System
    • Scan Eagle UAS System
    • Two Cessna 208 Surveillance Aircraft
    • Aerostat Surveillance System

Additionally, as a U.S. Grant recipient country, the Philippines has acquired numerous ships (high-endurance cutters or WHEC vessels), aircraft (C130H/T models), and hundreds of wheeled and tracked vehicles via the U.S. Government’s Excess Defense Articles Program (EDA).

Web Resources

Department of National Defense: http://www.dnd.gov.ph/home.html
Armed Forces of the Philippines: http://www.afp.mil.ph/

Trade Show:

ADAS 2020 (Asia Defense and Security Conference and Exhibition) 
September 23 – 25, 2020
Manila Philippines
 

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Philippines Aerospace and Defense Trade Development and Promotion