FOUR months after it was declared bankrupt, the Hanjin shipyard, one of the world’s biggest, is still awaiting firm government decision on what to do with Hanjin’s 300-hectare sprawling facility in Subic.
Should the government take over Hanjin and, together with the local creditor banks, transform it as the nation’s prime shipyard, meaning as the center for the production and servicing of the nation’s naval and commercial ships? This is what Vice Admiral Alexander Pama proposed in January.
Apparently, the Philippine Navy and the Department of National Defense (DND) have been supportive of the Pama proposal. In a recent roundtable organized by the UP Center for Integrative Development Studies, Rear Admiral Giovanni Bacordo pointed out that the proposed transformation of the Hanjin shipyard as a naval-commercial shipping complex for the country is very much doable based on the studies they have conducted and their assessment of similar successful naval-commercial transformation programs undertaken by Indonesia, Malaysia and other countries. Of course, such a program of transformation will also help strengthen the economic and military capability of the Philippines, particularly in defending our seas and in lessening our dependence on the two quarrelling giants: China and the United States.
But where to get the seed money for the rehabilitation of Hanjin? As we pointed out in a previous column, the Philippine military has a huge modernization budget amounting to P300 billion alone for 2019. Most of this goes to the Philippine Navy, which uses its budgetary allocations for the importation of new frigates, corvettes, offshore patrol vessels, strategic sealift vessels, etc., and for the repair of old and rickety naval boats in the naval shipyards of our neighboring countries. So why not use the naval modernization and procurement budget for the Navy’s takeover of Hanjin? As outlined in the talk of Admiral Bacordo, the shipyard can be divided into three segments: one for the building and servicing of naval ships, another for the commercial ships, and the last for general business and administration. The Philippine creditor banks should sit down with the officers of the DND and the Philippine Navy, and help make the naval-commercial vision work.
Now what is the stand of the nonmilitary agencies of the government, the Department of Trade and Industry (DTI) in particular?
Sadly, it is not clear. This explains why four months have already elapsed and still there are no explicit government announcements on what it intends to do with the lumbering shipyard. Moreover, the position taken by the DTI appears very passive. The DTI champion for shipbuilding and iron and steel, Reynaldo Lignes, simply issued a vague statement that DTI shall follow the “national objective.” But this national objective has not been spelled out.
When DTI Undersecretary Ceferino Rodolfo showed up in the RTD, he announced that the government is pursuing a program of waiting for would-be investors. Very BOI indeed, that is announcing an area for priority investment areas and waiting for would-be investors to come in and register and avail themselves of possible fiscal and other incentives in the select investment areas. He happily repeated the names of the countries and regions where interested shipbuilding investors are coming from—China, Japan, Europe and the United States. In particular, he cited the lobbying by one investor group from the United States, which, like the Philippine Navy, is interested in setting up a naval-commercial complex. This group is obviously competing with those coming from China, which may have noncommercial or geopolitical interests, as well.
The stand of the amiable Usec Rodolfo is a bit surprising. Surprising because he is known as one of the champions of the DTI’s new-found love for “industrial policy,” a policy neglected by the DTI in the neo-liberal decades of the 1970s-2000s. He is on top of the DTI’s National Comprehensive Industrialization Strategy and the DTI’s Manufacturing Resurgence Program.
The transformation of the Hanjin shipyard into a naval-commercial complex can very much be part of the country’s renewed industrialization drive. The late Sen. Leticia Ramos Shahani lamented that the Philippines, an archipelagic country, does not have a decent shipping and maritime industry, which, together with the missing steel industry, could propel the country to higher levels of industrial growth. Incidentally, these two industries—shipbuilding and steel—were among the leading industries that catapulted South Korea to the status of a developed industrialized country in a period of three decades.
In a study by Prof. Kyoung-ho Shin (Missouri State University) and Prof. Paul Ciccantell (Western Michigan University), the two industries—steel and shipbuilding—greatly contributed to the accelerated growth of South Korea because these were closely linked to the overall development of other sectors of the economy. They described these industries as “generative sectors,” defined as follows: “Leading economic sectors that are simultaneously key centers of capital accumulation, bases for a series of linked industries, sources of technological and organizational innovations that spread to other sectors, and models for firms and for state-firm relations in other sectors.”
In short, the generative sectors are not only oriented to the export market but also linked to the domestic industry and state-guided domestic capacity-building programs such as skills development, technology acquisition, linkaging between big and small enterprises, and infra support modernization. Thus, they wrote, these sectors “became the catalyst and linchpin for a number of industries, such as automobiles, shipbuilding, containers, railroads, construction and appliances, which complemented each other in a virtuous cycle of economic growth over the last three decades.”
The concept of generative sectors is very much related to the proposal of the participants in the CIDS RTD, that is for the revived and transformed shipyard to help meet the requirements not only of the Philippine Navy but also of the domestic shipping industry, especially in the transport of goods and people between islands. How long have we been hearing complaints from the business groups on the high cost of transporting goods from Mindanao to Luzon and vice versa? How long have we been hearing complaints that domestic shipping is not only costly but also accident-prone because we are highly dependent on imported secondhand vessels from Japan and South Korea?
And don’t forget, the Philippines, once upon a time, was the foremost builder of ocean-going ships in Asia. These were the galleon ships that transformed Manila into a transshipment center between Mexico and China. Can the Philippines regain this image, as Asia’s leading shipbuilder?