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Rebuilding the economy through the essentials

/ 06:24 PM July 12, 2021

Megawide CEO Edgar Saavedra

Megawide is no stranger to crises. Since we started operations more than two decades ago, we have developed key insights that have helped us navigate through the different cycles and thrive amid the most difficult times in our company’s—and country’s—unfolding history.

We were born during the 1997 Asian financial crisis and started out as a pure engineering and construction company. Several years later, we solidified our reputation as builder of choice for residential developments while also engaging in commercial and industrial projects to sustain the business.

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Coming off the 2008 global financial crisis, we won our first major infrastructure public private partnership (PPP) project in 2012, through the Department of Education’s (DepEd) PPP for School Infrastructure Project for the construction of 10,000 classrooms in over 2,000 far-flung areas.

This was followed by the 25-year and 35-year concession agreements with the Department of Transportation (DOTr) for the development, operations, and maintenance of the Mactan-Cebu International Airport (MCIA) in 2014 and the Parañaque Integrated Terminal Exchange (PITX) in 2015, respectively.

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In all these, the underlying theme is providing the essentials through infrastructure— education through school buildings, long-distance travel connectivity through modern airports and people mobility through efficient land transport terminals—with engineering and construction as foundations and as enablers. As we developed, we diversified our portfolio into where it currently stands—engineering, procurement and construction services, airport operations, and transport-oriented developments (TODs).

As COVID-19 plagued the whole world and ushered in an unprecedented global economic shock, we stuck with our tried and tested formula to keep on track with our vision of engineering a First World Philippines, regardless of the odds. We believe that our youth, determination and agility will ensure our company’s continuity and growth to create a positive impact on people’s lives and livelihoods, and ultimately, the whole Philippine economy.

Amid the adverse impact of the pandemic, our construction and land port businesses reported strong results to deliver a combined net income in the black, as the airport struggled. The resilient performance of these segments underscores their significance to spur commercial activities and fast-track economic recovery.

Construction contributed the bulk of our revenues, with the economy’s gradual reopening auguring well for worker mobility and supply chain movement. In fact, we ended 2020 with an all-time high order book of P68.4 billion despite the challenging business environment, with some of our projects even undergoing contract renegotiation.

Among the new projects we secured were the Malolos-Clark Railway Project Package 1, the Aglipay Sewage Treatment Plant, Suncity West Side City and the Newport Link. We also completed the Clark International Airport Passenger Terminal Building 2 ahead of schedule and received the notice of award for the Carbon Market modernization project in Cebu.

It is by design that more than half of these projects are infrastructure-related as we intensified our focus on this segment, in anticipation of soft real estate market in the near term and as a key driver of growth in the long run.

The company’s full integration gives it the flexibility to participate in infrastructure bidding as a pure contractor (such as in the DepEd classroom and Clark projects) or as a contractor and operator (such as in MCIA and PITX). This agility enables us to have a higher success rate in bid infrastructure projects.

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Key learnings and adjustments

First and foremost, we believe that construction is the cornerstone of sustainable economic growth. Given its significant economic multiplier effect, the industry will be a catalyst for a quick recovery. Studies have shown that every peso spent in construction activities generates an estimated P2.50 spending in other related and unrelated segments. We are convinced that our unique advantage in this space lies in our vertically integrated platform and our precast technology, where we can offer cost and functional efficiencies, speed to market and environmentally friendly solutions.

Second, over the long term, facilities that promote efficient mobility and increased commerce will establish the foundation for and accelerate economic advancement. This may come in various forms, like traditional airports and seaports, as well as more modern land ports and TODs.

Under the “next normal,” remote work arrangements will be inevitable and smaller commercial districts, which have the potential to achieve full progression through time, should be developed to decongest the capital. Following a hub-and-spoke model, this decentralization will be successful if an effective transport network and supporting structures will be available to maintain connectivity with the primary and other business hubs.

Given this scenario, we are aggressively exploring strategic locations—initially targeting second-tier cities across the country—where TODs can be developed to support this growth model.

Currently, we are in discussion with the local government of Baguio City to expand our existing PITX-Baguio P2P service. We also broke ground for the Carbon District modernization project in Cebu, which will revitalize the historic and economically significant yet aging district and feature a land terminal for in-city travelers and fresh connectivity via a ferry terminal to various attractions as well as the Mactan Airport. This will provide a safe, secure and efficient transport system for tourists, workers and commuters alike.

Third, we believe that intrinsic to a vibrant, sustainable and progressive country—as seen in more advanced neighbors like Singapore and Japan—is road and rail infrastructure.

The government, through the Department of Public Works and Highways, bared its program to develop 1,200 kilometers of road and rail from the current 77 km, to be funded by a massive P2.1-trillion national budget over the next two years. This will include the DOTr’s priority projects like the Japan International Cooperation Agency (Jica)-funded Metro Manila Subway Project and the joint Asian Development Bank and Jica-financed North-South Commuter Railway-South Phase 1 projects.

In fact, we are very eager to participate in these projects because these will definitely boost our technical stock.

Resiliency

Going through several economic down cycles in our history, we have also identified three components to develop crisis immunity and contribute to a successful infrastructure development program—vision, competency and track record.

Vision: Through our engineering and construction backbone, we envision a First World Philippines, not just through construction technology and world-class infrastructure, but in uplifting every Filipino’s quality of life.

Competency: As a construction company, we believe we are well-positioned to offer operational and cost efficiencies as a contractor, being technologically advanced and vertically integrated. This gives us an advantage to participate in big-ticket projects, through joint ventures or consortiums with local or foreign counterparts, to form strategic partnerships that can design, build and manage critical social infrastructure at competitive packages.

Track record: Alternatively, we can offer our full range of services across the entire project cycle—from conceptualization to operations and maintenance—which we have successfully exhibited in our living proofs of concept like the MCIA and the PITX, for now.

As a young and dynamic infrastructure innovator with an engineering DNA, we have developed the flexibility to participate in all phases of the value chain—as a contractor, an operator, or both. We are driven by our indomitable spirit, regardless of the odds, toward engineering a First World Philippines.

We are ready for the next normal and we are helping the country to be, as well. —CONTRIBUTED

The author is chair and CEO of Megawide Construction Corp.

Project Rebound is an advocacy campaign that seeks to help Filipinos overcome the crisis through relevant and timely information they can use to make informed decisions. It is supported by Diwa Learning Systems Inc.,  PLDT, Inc., Smart Communications, Inc. and Toyota Motor Philippines Corporation.

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