OBG talks to Don Lee, President, Lafarge Holdings (Philippines)

Don Lee, President, Lafarge Holdings (Philippines) (

Interview: Don Lee

What measures could further accelerate the growth of the cement industry?

DON LEE: Total investment in construction, including private, public and public-private partnerships (PPPs), based on industry, was estimated to grow by 10% in 2013 to $28bn, accounting for 6% of gross value added of a total $284bn GDP. At roughly $1bn in construction investment, translating into 1.2m tonnes of cement demand in the Philippines, the market may surpass the 20m tonnes for the first time in history. In the past, private construction accounted for 70% of total construction, which explains the growth of mid- to high-rise buildings and individual homes across the country but also the lack of roads, airports, and other infrastructure. There is a commitment by the government to increase public infrastructure investment from 2.6% to 6% of GDP by 2016. While this is an improvement, this level of investment as a percentage of GDP is still amongst the lowest within ASEAN when compared to Malaysia at 11% and Indonesia at 5%. As such, it is key for the PPP projects to be successful so that the country can become more regionally competitive. With the success of the PPPs, total construction investment growth can be sustained at 15% or higher. Naturally, the increase in total construction investment will drive demand for cement, aggregates and other construction materials. Given the strong fiscal position of the national government, well-capitalised domestic banks, and the low debt levels of the private sector, we are confident construction investment will grow over the next five years.

How has the cement industry developed value-added products and services?

LEE: The cement industry is undergoing a fundamental transformation from having been internally focused on industrial operations and manufacturing costs to realising the need to better understand and serve different requirements of distinct customer segments. As a result, the number of new products and services that are being launched is accelerating. We have also seen more demand for environmentally conscious products and services as leading architects, developers and construction companies increasingly seek Leadership in Energy and Environmental Design or Building for Ecologically Responsive Design Excellence certification.

However, the conservative nature of the construction industry and the higher initial cost of any new technology make it challenging to develop, launch and sustain demand of new products and services. For example, the Philippine cement industry has already developed masonry cement for Concrete Hollow Block (CHB) laying and finishing of wall surfaces, which provides better performance with a lower overall cost. However, there are still contractors and developers who are not taking advantage of using masonry cement.

How can the industry sustain rapid growth while adopting environmentally sustainable initiatives?

LEE: We have the unique distinction of seeking to be a leader of environmentally friendly construction despite a relatively low GDP per capita within ASEAN. This poses some unique challenges as the Philippines cannot afford the high priced environmental solutions of more affluent developed countries such as Malaysia or Singapore. As a result, every stakeholder within the domestic construction industry will need to develop lower cost eco-friendly solutions. The cement industry plays a key role in successfully developing “green” products to supplement traditional CHBs and concrete. The industry, particularly Lafarge, has developed lower cost, environmentally sustainable CHBs in partnership with leading power generation companies by recycling bottom ash from coal-fired boilers into the production of CHBs. Blocks made out of bottom ash cost less and are equal, or even better, in quality. It will take consumers time to accept the new “green” products but given the higher price sensitivity of the affordable housing segment, we believe this type of win/win innovation will become more common. We believe it is a worthy ambition to which Lafarge in the Philippines is dedicated to contributing.

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Don Lee

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The Report: The Philippines 2014

Construction & Real Estate chapter from The Report: The Philippines 2014

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