The bankruptcy of Hanjin Heavy Industries and Construction Philippines is the biggest corporate bankruptcy to hit the country since the debt crisis of the 1980s. At the height of its operations, Hanjin employed, through a score of manpower agencies, over 30,000 employees. This number is equaled only by the work force of the country’s leading conglomerates, such as those in the payroll of the SM-BDO group, San Miguel group and Cebu Pacific/URC/JGSummit group.
Not surprisingly, the nation’s labor centers are united on what to do with the idled Hanjin shipyard in Subic: the government should take over the sprawling facility, reported to be one of the biggest in the world. The argument: keep jobs and keep the communities that have sprouted around the Subic shipyard humming.
Another group that expressed interest in a possible government takeover of the facility is the Department of National Defense. In fact, the National Defense College and the Philippine Navy have been conducting workshops on what the government can possibly do in relation to the shipyard. It is difficult to get the results of these workshops. But one can easily guess that the national security issue is at the center of the DND discussions.
In particular, the ship modernization requirement of the Philippine Navy must have also cropped up. According to Defense Secretary Delfin Lorenzana, the defense establishment has a military modernization budget for 2019 amounting to P300 billion. The lion’s share of the budget shall go to the Philippine Navy because of the complex defense requirements of an island republic. The Navy seeks to procure new frigates, corvettes, offshore patrol vessels, strategic sealift vessels, landing platform docks, multi-purpose assault crafts, mine countermeasures vessels attack crafts, and ASW helicopters and maritime patrol aircraft.
All the foregoing vessels are expensive. For the purchase of two new missile-firing frigates alone, the DND signed with another Korean shipbuilder, Hyundai Heavy Industries, a P16 billion contract for the delivery of the said vessels in 2020 and 2021. The Navy has also been spending several hundreds of millions for repairs and dry docking of sea vessels for maintenance.
So why not transform the Hanjin shipyard as a facility to build the sea vessels needed by the Philippine Navy and use the yard’s dry docks for the repair and maintenance of the Navy’s various sea vessels? Is this not part of the national security program of the country, that is, to be able to build at home the bulk of the military’s equipment and vessel requirements?
Of course, some economists have the usual “economistic” attitude: Let new investors, preferably foreign, come in. Who are the knights in shining armor? So we hear reports that the DTI has been talking to some European and American investors. The Japanese ship builders, who have facilities in the Visayas, are also interested. And so are the Australians.
There are also news on the possible entry of Chinese investors. These have generated worries among those concerned on the growing economic and military influence of China in the Philippines and in Southeast Asia. A Western reporter wrote: “A move by China to take over the base is a political and strategic as well as financial question for the government and one that will be closely followed by neighbors already nervous about the Philippines’ susceptibility to Chinese money lures.”
So far, Malacanang has not issued any formal announcement on what exactly are its plans and intentions in relation to the rehabilitation of the Hanjin facility. The shipyard occupies around 300 hectares of the Subic freeport. The bankrupt company owes local banks over $400 million. And most of the displaced workers and the communities around Hanjin are desperate for help.
It is against this backdrop that the UP Center for Integrative Development Studies, Freedom from Debt Coalition, Action for Economic Reforms and LEARN held a roundtable on what to do with the shipyard.
The participants, coming from the government, academe, trade unions and civil society organizations, all agree that the government must come up with “pantawid” measures for the affected workers and communities in the short term and medium- and long-term programs to revive the shipyard not only to sustain jobs but also to strengthen the image of the Philippines as a global ship builder.
Along this line, one popular proposal advanced by an academic, Dr. Ed Tadem of UP CIDS, is for the workers, with the help of the government, to take over the facility and manage it to save jobs and the shipyard. He came up with a list of countries where factories and establishments abandoned by bankrupt investors have been successfully taken over and transformed into viable enterprises by the workers. Why not? But this deserves a separate discussion.
Another issue tackled in the roundtable is Industrial Policy — with a capital I and capital P. It was pointed out that the government, with a clear vision of industrial upgrading, can use Hanjin as a platform to build a true shipbuilding industry, alongside other basic industries such as the steel industry.
It is truly ironic that the Philippines, an archipelago of 7,100 islands, has a poor and underdeveloped maritime industry. Most of the inter-island ships, including the “ro-ros”, are second-hand imports from Japan and South Korea. The millennium-old bancas have not been modernized. The transport of goods from Mindanao to Luzon and vice-versa has always been blamed for the high cost of goods due to the inefficient shipping industry. Certainly, a modern shipbuilding industry that is fully integrated in the economy can serve as a pillar in the all-out industrialization and modernization of the country.
The problem, however, with Hanjin and other similar facilities set up by the Japanese and Singapore (Keppel) investors in the country is that they were established as “enclaves” with limited linkages with the domestic economy. It is similar to the old export-oriented garments industry, which had no linkage with the domestic textile industry. The latter is now dead, while the former is now comatose.
In contrast, in South Korea, the steel and shipbuilding industries were developed in the 1960s-1970s as pillars in the transformation of a backward and semi-agrarian economy. Despite the resistance from the World Bank and lack of basic resources such as iron ores, the regime of Park Chung Hee nurtured these industries by pushing the chaebols to acquire knowledge and technology from overseas, giving these industries credit and other financial assistance, limiting imports and so on. At one time, Park Chung Hee himself sat down with the then emerging Korean industry captains on a monthly basis just to keep track with the progress of industrialization.
The result: South Korea, once the poorest in Asia in the 1960s, became one of the most industrially prosperous by the 1990s. In contrast, the Philippines, rated by the World Bank as second to Japan in the 1960s in industrial development, became a laggard in the 1990s.
More on the South Korean experience in the next column.