Recently, Philippine President Ferdinand Marcos Jr. praised a partnership between South Korea’s HD Hyundai Heavy Industries and the US firm Cerberus Capital Management. This partnership is expected to mark a new era for the Philippine shipbuilding industry. Shipbuilding has long been a key driver of economic growth for many countries, including South Korea, Japan, and China, which are now the world’s largest shipbuilders. The Philippines, aiming for similar success, sees this partnership as a crucial step forward.
As of 2022, the Philippines is the world’s seventh-largest shipbuilder, contributing around 400,000 gross tons of new ships. However, the country was once ranked fourth globally, just behind the three East Asian giants. Despite this previous success, the Philippines has fallen behind. But with this new investment, the country hopes to reclaim its position and reap significant economic benefits.
Understanding the importance of this partnership requires a look back at the history of shipbuilding in the Philippines. The Philippines, an archipelago with over 7,000 islands, has always relied on ships for trade, transportation, and connecting its people. Initially, small domestic shipyards built and repaired vessels, with medium and large yards emerging in the 1970s. Most ships at that time were imported from countries like Japan.
Before the 1990s, the Philippines focused mainly on ship repairs, not building. But from 1994 to 2006, foreign investors began targeting the Philippine shipbuilding industry, leading to significant growth. By the 2010s, the industry had expanded massively, with over 117 builders and repair companies employing more than 48,000 people. In 2010, the Philippines was recognized as the world’s fourth-largest shipbuilder, and by 2015, the industry’s export value had exceeded $1.5 billion.
The industry’s growth was largely driven by two major companies: Hanjin Heavy Industries from South Korea and Tsuneishi Heavy Industries from Japan. Hanjin, one of the largest foreign investors in the Philippines, employed over 33,000 people and invested more than $2.3 billion in the country. Tsuneishi, though smaller, also made significant contributions, particularly in Cebu, where they have continually invested in expanding their operations.
However, in 2019, Hanjin Philippines filed for bankruptcy, marking the largest corporate bankruptcy in Philippine history. The company had debts totaling over $1.3 billion and the livelihoods of more than 20,000 workers were at risk. The bankruptcy caused significant damage to the Philippine shipbuilding industry, including the loss of an expected $2 billion investment in a new shipyard in Mindanao.
The shipbuilding industry in the Philippines seemed to be in decline until Cerberus Capital Management stepped in. Cerberus acquired the former Hanjin shipyard in Subic, renaming it Agila Subic Shipyard. This move was seen as a rescue of the Philippine shipbuilding industry. By early 2023, Cerberus had invested millions to revive operations, and soon after, Hyundai Heavy Industries expressed interest in using part of the shipyard for its shipbuilding operations.
Hyundai Heavy Industries is the world’s number one shipbuilding company, controlling over 10% of the global market. This potential investment in the Philippines is significant, with local officials estimating that it could create 5,000 to 15,000 jobs. This is why President Marcos Jr. is optimistic about a new era in Philippine shipbuilding.
In addition to Hyundai, other entities, including the Philippine Navy and Cerberus’ portfolio company Subcom, are also leasing parts of the Subic shipyard. Subcom uses the facility as its Asia hub for submarine cable services.