Filipino shipbuilders seek bigger role to confront aggressive China

The Philippines is now in Horizon 3 stage of its ongoing military modernization program. It means the Armed Forces of the Philippines (AFP), with one of Asia’s weakest military capabilities, will acquire more assets, including naval vessels and patrol boats. 

The need to improve capability is becoming more pressing as Chinese vessels repeatedly harass Filipino fishermen and even military vessels on waters within the Philippines’ exclusive economic zone (EEZ). 

However, although having the fifth largest shipbuilding industry in the world, Filipino shipbuilders are not fining it easy to have a chance to build vessels to help protect the country’s territory as they are restricted from participating fully. 

For Meneleo Carlos III, president of the Shipyard Association of the Philippines (ShAP), it is never a question of the capability of Filipinos shipyard workers. 

“Why else would these multinational companies be here if Filipinos are incapable of building (vessels)?… If you were to go to foreign shipyards, you would often find Filipinos working there,” he told the Maritime Fairtrade. 

The hindrance, he said, to full local participation in the government’s acquisition of new vessels is the country’s law on procurement, which requires bidding for all government agencies and there are certain requirements for bidders to fulfil. 

The Maritime Industry Authority (MARINA), the country’s maritime regulator, said local shipyards must comply with “pre-requisites” before they can bid for government vessels. One requirement is having a “good track record”.

“Unfortunately, there is a lack of local shipyards which (have) the capacity and capability to meet the said minimum track record,” MARINA told Maritime Fairtrade in an email response. 

“It’s like a chicken and egg situation for local shipyards,” explained Carlos. “If you are not given the chance to build it, how will you be able to have track record? If you have no track record, then you are not able to qualify.”

Since the law is a hindrance, Carlos believed it would be better to amend the procurement law. He said it should include a provision that would “make it more amenable” for local shipyards to participate in the naval acquisition of the government by specifying mandatory local content.

Mandating more local content in the new ships allow Filipino shipbuilders to start building up their track records, know-how and ability to innovate, noted Carlos.

Jose Custodio, a defense analyst, said it is feasible for Filipino shipbuilders to manufacture the hulls of smaller patrol vessels, which are used for fisheries protection and maritime anti-piracy. 

Bigger naval vessels are more complex and sophisticated to build, and require more production costs upfront, which some Filipino shipbuilders may find hard to sustain economically. 

“Perhaps, studies and arrangements can be made so that other countries’ designs may be built in Philippine shipyards under license, to generate employment and for future indigenous self-defense reliance industrial purposes,” he said. 

Since the Philippines lacks the technological and industrial capability to manufacture its own sophisticated weapons and combat systems, Custodio noted that such vessels could be fitted with foreign-made components and weaponry.

The Philippines, which hosts 124 shipyards, has one of the longest coastlines in the world. The established presence of big foreign-owned shipyards has helped transfer know-how and skills to the Filipino workers they employ, currently at more than 9,400. Two of the biggest shipyards are foreign-owned, Japan’s Tsuneishi Heavy Industries (Cebu), and Australia’s Austal Philippines, which builds both commercial and military vessels. 

South Korea’s Hanjin Heavy Industries operated in the Philippines for more than 12 years after its collapse in 2019. The massive South Korean shipyard, located in a former U.S. naval base in Luzon Island, was bought by American equity firm Cerberus Capital. It is now a multi-use facility, a portion of which houses the operations of the Philippine Navy. Aside from shipbuilding, it supports logistics and other businesses, such as telecommunications. 

Last year, the country recorded the highest number of ships built in the past five years at 411. 21 ships were for export, while the rest was for domestic use. 

To enhance external defense capability

Historically, the Philippines’ security policy focused on internal defense or suppressing domestic threats like local insurgencies. President Ferdinand Marcos Jr. shifted to territorial or external defense when he became president. However, the Philippines’ military capability remains weak, especially in external defense. 

For instance, the Philippine Navy currently has 59 active vessels, with 42 offshore patrol vessels (OPV) and 2 frigates, according to the World Directory of Modern Military Warships. Most of them were American-made, with only one Filipino-made vessel. In contrast, Thailand has 86 vessels, with ten of 12 amphibious assault vessels and eight of 51 OPV Thailand-made. 

Chinese Navy, on the other hand, has 425 vessels. 

The Philippines’ 15-year modernization program, which started in 2012, requires the government to purchase more naval assets. One of the goals under its third phase, Horizon 3, is to acquire the capability to patrol its borders. 

The Philippine Coast Guard (PCG), in charge of regularly patrolling the country’s maritime borders, is similarly constrained. Early this year, a PCG official said they only have three patrol vessels capable of patrolling long distances and would need at least 20 more to sustain its presence in the West Philippine Sea (South China Sea). 

PCG often experiences harassment by Chinese Coast Guard vessels, especially when it does resupply missions to the Philippines’ only outpost in the Ayungin Shoal, a contested area in the South China Sea. 

Carlos of ShAP believed the number of Filipino vessels on regular patrol is crucial. 

“What you need to do is to be there more often. You need to assign vessels not in singles but in pairs or small squadrons so that they are there to offer mutual support,” he argued.

Last month, President Marcos Jr. announced the government is acquiring 40 “Philippine-made” patrol boats for the PCG. 

The Philippines has also received 12 Japan-financed ships and intends to acquire five more using Japanese loans. 

Carlos said some local shipbuilders have won contracts to build small-sized vessels for the government under the current administration. 

However, the local shipbuilding industry still faces several other challenges. One of the most pressing is the local shipyards’ outdated facilities. MARINA said most of the 186 main yard facilities in the Philippines need rehabilitation or upgrading. Shipyards with advanced or updated facilities, equipment, tools, and machinery belong to shipyards with foreign partners. 

Carlos emphasized that “plenty of other shipyards” have the ability and appropriate facilities to build vessels that could comply with the needs of the government. 

“We just have to make sure that it is a level playing field [and] fair,” he said. 

All photos credit: Philippine Coast Guard. Filipino-made Bureau of Fisheries and Aquatic Resources ships manned by Philippine Coast Guard personnel. 

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