The arrival of foreign shipbuilders has propelled the growth of ships made in the Philippines in the international market. According to Invest Philippines, the country’s industry is now poised to take on the traditional shipbuilding nations and become one of the world’s largest shipbuilding nations in the in the next five to ten years.
The country’s shipyards are now building more ships of larger tonnage capacities like bulk carriers, container ships and big passenger ferries. The construction at the Subic Bay Freeport of a US$68 million Turkish-owned commercial ship by Hanjin Heavy Industries shows that the Philippines can build world-class ocean-going vessels.
Shipyards in neighbouring countries are often fully booked for new orders, and foreign shipbuilders are expanding their operations in neighbouring countries in response to increasing demand for vessels. Shipyards in the Philippines already have ship orders lined up to be delivered in European countries such as Greece and Germany. Hanjin’s productivity in its Subic shipyard, with more than 19,750 workers, is fast catching up with its shipyard in South Korea. With the dominance of global shipbuilding continuing to shift towards Asia, the shipbuilding industry in the Philippines is currently going through a time of great opportunity.
The country is laying the ground to ensure adequate supplies of skilled manpower for shipbuilding and ship repair. With increasing number of workers required by the shipyards, the Maritime Industry Authority (MARINA) has laid out a manpower development plan for the sector in co-ordination with the Technical Skills Development Authority (TESDA). To date, TESDA has about 63,000 certified welders in its registry. In 2009 more than 50,000 students graduated in engineering and architectural courses valuable to the industry.
The Philippines can also offer an increasingly wide range of locations suitable as shipbuilding bases. The shipyard at the Phividec Industrial Estate’s Maritime Industrial Park in Misamis Oriental recent opened. Now, the 540-square kilometres business hub in Port Irene in the Cagayan Economic Zone (CEZ) is being primed to become the country’s next world-class shipyard, with upgrades underway including the lengthening of the pier to accommodate 20,000DWT vessels.
With the liberalisation in 1989 of importation of major raw materials, companies can get good quality raw material inputs at favourable prices. In addition, shipbuilders located in economic zones enjoy tax and duty exemptions. Relevant laws and policies support the development of the industry and the capabilities of local manpower. Shipbuilding is not covered by limitations on foreign ownership, which means foreign investors can own their companies 100 percent.
The government offers various incentives to encourage investment and to ensure the development of a viable shipbuilding industry. Under Republic Act No. 9295 (2004), shipbuilders are exempt from value-added tax on the importation of capital equipment, machinery, spare parts, life-saving and navigational equipment, steel plates and other metal plates. The Board of Investments (BOI) grants registered projects an income tax holiday of four to six years, with additional deductions for labour expenses, duty exemption on imported capital equipment, and simplified customs procedures, among other advantages. Projects registered with the Philippine Economic Zone Authority (PEZA) also enjoy an income tax holiday for four to eight years, followed a special five percent tax rate on gross income, as well as tax and duty exemptions.