THREE foreign investors are in the advanced stages of acquiring the country’s largest shipyard, operated by bankrupt Hanjin Heavy Industries and Construction Philippines (HHIC-Phil), and no Chinese firm is on the list.
Trade Undersecretary Ceferino S. Rodolfo disclosed three offshore shipbuilders vowed to come up with studies and a business proposal in a shot to take over Hanjin’s facilities in Subic Bay. However, none of these three prospective white knights come from China, in spite of the government’s earlier statement that two Chinese firms are looking to bail Hanjin out of its financial mess.
“Those who committed that they will come up with studies, with a business proposal—and of course, they have to give this to the banks because they control Hanjin’s assets—are [Dutch] Damen Group, [French] Naval Group and a consortium of American firms,” Rodolfo said in an interview with reporters last week.
HHIC-Phil in January filed for corporate rehabilitation, after struggling to pay $412 million in loans to five domestic banks. Investment officials are searching far and wide to try and save the shipyard that once employed over 30,000 workers.
Days after HHIC-Phil sought help from the courts, Rodolfo told reporters two Chinese firms—one in the production of commercial vessels, the other in small ships—are eyeing the shipyard.
Security concerns
HOWEVER, security experts, including former Navy Chief Alexander P. Pama, warned the government it will compromise national security should it allow China to take over the shipbuilder’s facilities in Subic Bay. The shipyard sits at a strategic area near West Philippine Sea, where Beijing has been building up military presence and harassing Filipino fishermen.
Pama argued the shipyard can be turned into a naval base and a maritime facility, making it a crucial asset for the Philippines that the government should take care of.
“The ownership of Hanjin shipyard in Subic Bay will give the owners unlimited access to one of our most strategic geographic naval and maritime asset. Although it is a commercial shipyard, nothing can prevent the owners from making it into a de facto naval base and a maritime facility for other security purposes,” Pama said in a Facebook post.
In March executives of the Netherlands-based Damen Shipyard Group visited the Philippines to talk to Navy officials over a possible partnership on the building and supply of defense vessels, as well as survey Hanjin’s facilities.
Chairman Kommer Damen said his firm is in a position to take over the Subic Bay-located shipyard, as it is not affected by the overcapacity in the cargo ship market that caused Hanjin to scale down its operations. Unlike Hanjin that makes large container ships, Damen produces smaller vessels such as yachts, cruise ships, navy ships and tug boats.
Further, Rodolfo said the facility will most probably be retrofitted for another function, as keeping it as is seems no longer viable for business due to the decline in demand for cargo vessels.
2 options
“THE proponents are considering two options: will [they] operate it as a going concern, or retrofit it for some other things? As a going concern, it could be difficult given the global demand, situation and competition from China,” Rodolfo explained. “Unless you can compete with China and you can take the beating and ride through this downturn in global demand, then you can keep it as is,” he added.
In spite of the financial trouble HHIC-Phil got into, the trade official said the government is determined to keep shipbuilding as a priority investment area. However, changes must be introduced into the kind of shipyard that will be allowed, as some types are no longer doing business.
For one, the trade official said Hanjin’s facilities being highly specialized was its boon back then, but became its bane when demand for large container ships fell.
Since taking over the Subic Bay shipyard in 2006, South Korea’s Hanjin invested over $2.3 billion and delivered 123 cargo ships by the end of 2018. The firm that will take over the facilities must have a working capital of $12 million monthly to shoulder all of HHIC-Phil’s debts.
Image credits: Nonie Reyes