Chinese Shipbuilders Consider Buying Giant Yard in Subic Bay

Two Chinese shipbuilders have expressed interest in buying the Hanjin Heavy Industries and Construction Phillipines shipyard, prompting concern from policy and defense analysts. 

HHIC Phil began building out its giant new yard on Luzon's Redondo Peninsula in 2006, and over the past decade it has set new records for Phillipine shipbuilding. With 23,000 workers and $1.6 billion in capital value, it is among the largest businesses in the area. In 2017 it delivered its first 300,000 dwt VLCC, the first vessel of her type - and possibly the largest vessel of any time - ever made in the Philippines.

However, the yard has faced financial headwinds in recent months. Last year it began seeking a buyer, and in December it laid off 7,000 workers. It is now in default: HHIC Phil owes $900 million to South Korean lenders and $400 million to five Philippine banks, making it the largest corporate bankruptcy in the Philippines' history. 

The shipbuilder has filed for court protection and submitted a rehabilitation plan, and with the government's help it is seeking new investors. According to Board of Investments (BOI) director Ceferino Rodolfo, two Chinese companies - including a state-owned enterprise - have expressed interest in taking over the yard. 

The news has raised concerns among security experts like former Philippine Navy chief Alexander Pama, who warned in a Facebook post that a takeover by a Chinese company would have significant implications. "Let’s be aware that this Hanjin shipyard issue is not just about business, financial and other economic issues. This is a very significant national security issue," he wrote. "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."

For its part, the government of president Rodrigo Duterte appears unconcerned. "If it’s a Chinese company we used to deal with, then there’s no issue with that. If not, we have to vet," said spokesman Salvador Panelo in a press conference Monday. "For now, these are all speculations."