MANILA (Reuters) - Philippine President Ferdinand Marcos Jr signed into law a bill on Tuesday that aims to develop the country's defence industry to reduce its reliance on imported sources and create equipment tailored to its security challenges.

"It's a logical move forward for a country that finds itself at the fulcrum of geopolitical shifts and volatilities. At its core this act is about cultivating a robust and sustainable national defence industry," Marcos said after signing the bill.

To promote and encourage investments in the country's defence technology and production, the new self-reliant defence law will offer fiscal incentives ranging from tax breaks and government-backed financing, Marcos said.

"We will prioritise R&D to develop systems that meet our unique requirements to stay ahead of evolving threats, particularly asymmetrical threats that traditional systems may not be completely equipped to address," Marcos said.

"It establishes a structured approach to defensive development, starting with research and production capabilities that align our defence sector with our strategic objectives," Marcos said.

The law is expected to complement government efforts to modernise its military, as it would help ensure that the Philippines can manufacture, maintain and upgrade military equipment.

The Philippines has a relatively small defence industry capable of producing small arms and ammunition, but it has yet to achieve large-scale production of advanced military systems such as fighter jets.

It has allocated $35 billion for the buildup, spread over the next decade, as it has faced off with China in sea and air confrontations over contested areas of the busy waterway.

(Reporting by Karen Lema; Editing by Michael Perry)