Russia’s construction equipment manufacturers are closely moving to provide an alternative sourcing solution for the Philippines, stating Russian manufacturers can offer better deals for the country’s booming construction sector in terms of price and quality compared to its traditional sources.
A review by Vladimir Antonov, CEO at CHETRA LLC the marketing arm for one of Russia’s largest construction equipment manufacturers -CHETRA, on the Philippines construction industry, cited the huge Philippine construction equipment market given the government’s ongoing infrastructure push, including the various projects under the Build Better More, inter-regional initiatives such as the Belt and Road, and the Regional Comprehensive Economic Partnership, that are stimulating the domestic economy. He also mentioned that the more than 5,000 mega infrastructure projects being lined up to 2028 are worth over $500 billion.
Antonov quoted estimates placing the unmet construction equipment requirement at 2,250 units from 2023 to 2029 to support the construction of various projects in the Philippines. However, this huge demand is not being met by local manufacturers, he said.
“Yes, the Philippines’ machine-building industry exists and is developing, but manufacturing of construction equipment is falling out, being replaced only by dealers of foreign manufacturers,” he said noting that the volume of imported construction equipment in 2023 reached about half a billion dollars.
In his review, Antonov further noted that supply of Philippine construction equipment come mostly from China, Japan, Korea and Western Europe. “The local market is becoming the domain of Japanese, Korean, and, increasingly, Chinese manufacturers,” he noted.
Based on quoted data, China’s share in Philippine imports of construction equipment grew from 41% in 2021 to 51% in 2023 and to 54% in 2024.
This is not surprising, he said, considering the fact that imports of Chinese construction equipment are experiencing a real boom on a global scale. Production volumes are growing, as well as the range of models and the quality, while the prices offered are quite competitive. Currently China maintains global leadership in many key segments of this market.
Costs of choice
But does geographic proximity mean the best choice for Filipino customers? Antonov cited issues of Chinese products, including the materials used and the overall quality issues.
He also cited the quality of warranty service, and many customers are experiencing difficulty of finding spare parts and low level of technical documentation.
Of the top 10 largest global construction equipment companies as of 2024, he said, eight are not Chinese, and there are only four Chinese in the Top 30.
While these issues are irrelevant for suppliers from Europe, US, Japan and Korea, customers have a hard time for their capricious maintenance costs, making such equipment not affordable. India, he said, is a good source but its production is faltering.
With these constraints, Antonov cited national customs statistics from Tradeline Philippines, showing that imports of construction equipment into the country have been consistently falling for the second year in a row, and last year — from $488 million to $384 million year on year.
Looking North
As a result, Antonov said that sourcing Russian products are a better compromise between the largest Western manufacturers and China. He said that Russian manufacturers in comparison to other European companies are capable of providing the Philippines the necessary “fresh blood” at cheaper cost.
“Russia could be a specific promising direction for the Philippines in this regard, with its solid mechanical engineering school, relative geographical proximity, extensive and high-quality resource base (accordingly, high quality materials), attractive price/quality ratio of products,” he said.
Antonov drew special attention to the real boom in the market of construction equipment in Russia. From 26,500 machines sold in 2020, the market grew to 51,500 in 2023. The increasing demand for the segment is manifested both in the stimulation of domestic production (which is supported at the state level in the areas of import substitution, implementation of national projects, etc.), and in the growth of imports.
According to Antonov, improved competencies of domestic machine builders fueled their ambitions to enter foreign markets.
In addition, starting this year, Russian businesses will be able to compensate up to 60% of the costs of transporting industrial products abroad, and machine builders can count on 70% of the total volume of these subsidies. “End foreign consumers will also feel the benefit from this,” he pointed out.
So far, the share of Russian equipment on the Philippine construction market is not large yet. In 2021, Russian manufacturers and brands accounted for only 0.03% of the total volume of imports of construction equipment (Tradeline Philippines).
But in 2022, it grew six times in volume, already up to 0.15%. Moreover, Russian manufacturers have already proven that they are ready to take on both service training for Filipino users and initially make equipment according to the specifics of its use.
“I am sure that the growth of such locally oriented cases and the increase in imports of high-quality special equipment can become a good help for the Philippines in solving the major economic challenges it faces today,” he concluded.
