Restoring ‘glory days’ of shipbuilding

A “new era of shipbuilding” may be dawning in the Philippines.

Thus declared President Marcos, who cheered the entry into the Subic Freeport of South Korea’s HD Hyundai Korea Shipbuilding and Offshore Engineering, a global leader in shipbuilding and heavy industries that expects to invest $550 million over the next 10 years and generate around 10,000 new jobs over the next three to five years.

HD Hyundai, which will initially focus on offshore wind platforms, forged an agreement to lease the large dry dock at the Agila Subic shipyard run by US equity firm Cerberus Capital Management, which took over in 2022 a 350-hectare shipyard complex in the former US navy base that was abandoned in 2019 by bankrupt Hanjin Heavy Industries.

“With this initiative of Cerberus and HG Hyundai, we will have a fresh start and a strong foundation in realizing our vision to be among the largest and most consequential shipbuilders in the world,” said Mr. Marcos, adding that the investment would “restore the glory days of shipbuilding to our shores.”

Stellar reputation

It has to be emphasized, however, that even prior to HD Hyundai’s entry into Subic, the Philippines already has a solid shipbuilding industry with 17 large and medium-sized shipyards and about 90 small shipyards across the country that together employ some 48,000 workers.

Indeed, since 2010, the Philippines has been ranked among the world’s five largest ship producers in terms of gross tonnage, with locally manufactured vessels sailing to such markets as Japan and Germany.

Tsuneishi Heavy Industries (Cebu) Inc., Austal Philippines Pty Ltd., and Keppel Philippines Marine Inc., local units of global leaders in the shipbuilding sector have also helped establish the Philippines’ reputation as a reliable source of commercial marine vessels such as bulk carriers and container ships.

Mr. Marcos wants to leverage that stellar reputation, the country’s strategic location near shipbuilding behemoths Korea, Japan, and China, its local expertise developed over decades, and a large pool of skilled workers to solidify the Philippines’ ranking among the world’s largest shipbuilders.

Competitive advantage

The President already took a step in the right direction when he signed an executive order approving the implementation of the updated Maritime Industry Development Plan 2028, which among others called for the improvement of the country’s shipbuilding and repair industry and upskilling of the maritime workforce.

This skills upgrading is especially crucial to the growth and development of the shipbuilding sector, as the Department of Trade and Industry (DTI) stressed in its 2017 policy brief on the sector.

The DTI said the abundant, cost-competitive, and hard-working workforce often goes overseas—primarily to the shipyards in the Middle East and Singapore—to earn higher wages while the graduates of education and training programs geared toward shipbuilding often do not meet international standards.

This situation must not be allowed to continue if the Philippines were to stand a chance of making itself indispensable to the growth of the global shipbuilding industry where the country has already carved a niche and developed a competitive advantage.

‘Very talented’ workforce

Mr. Marcos thus made the right call when he encouraged HD Hyundai to partner with the Commission on Higher Education and the Technical Educational and Skills Development Authority to train the country’s “very talented” workforce on valuable skills required by the competitive industry such as computer-aided design.

As the DTI noted, foreign shipbuilders that have invested in the Philippines have continued to grow and expand due to the quality of the workforce.

But as efforts get underway to elevate the quality of the local workforce through the teaching of new skills demanded by the ever-evolving workplace, the Marcos administration can also review the policy recommendations made back in 2017 to increase the revenues of the local shipbuilding industry.

Ideal location

It was noted then that 90 percent of the revenues of the local shipbuilding sector revolves around ship repair and maintenance, which means, therefore, that only 10 percent comes from actually building ships.

Additional revenue channels must be explored and options include positioning the Philippines as an ideal location for “breaking” or scrapping ships from Japan and Europe that may want to replace their aging ships with newer and more “green” vessels, and the local production of smaller vessels such as the roll-on and roll-off vessels used for interisland travel.

Opportunities are indeed opening up and potential investors’ eyes are surely trained on the Philippines now following HD Hyundai’s decision to set up shop in the Philippines.

It will now be up to the Marcos administration to grab them through provision of investment incentives, consistent enforcement of policies and reforms in education, and skills improvement so that the Philippines’ longstanding tradition of shipbuilding can be brought far into the future.