Shipbuilding Surge

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Major investments from two regional companies have created a shipbuilding boom in the Philippines and have resulted in the creation of hundreds of new jobs, with more to come.

Tsuneishi Heavy Industries Cebu Incorporated (THICI), a joint venture between locally based Aboitiz & Company and Japanese shipbuilder Tsuneishi Group, recently announced plans to expand its operations at the West Cebu Industrial Park, a special economic zone in Balamban, in the Cebu province. The potential investment is estimated to be over $300m.

Jon Aboitiz, president and CEO of Aboitiz, told OBG there were several reasons for the expansion project, including, "the growing worldwide demand for ships, coupled with the need to have facilities to build larger ships up to 180,000 deadweight tonnes (dwt). Our present slipway is capable of up to only 75,000dwt and is fully booked for the next few years."

Aboitiz gave much of the credit to the government for the large investments made by foreign companies such as Hanjin and Tsuneishi, saying, "The government has made it so friendly and easy. You can get permits, tax incentives and PEZA [Philippine Economic Zone Authority] rules without any hassles and bureaucracy."

He said the Philippine people have also helped entice foreign investors, saying, "The trainability of people and the issue of language has been a major factor. It is much easier for direction and understanding."

Aboitiz said the company expects to employ as many as 10,000 workers at the Cebu site.

Since 1995, THICI has been building 58,000 dwt bulk carriers. Under the expansion plans, the company would add another 86 hectares to its current work area of 40 hectares. The expansion would enable THICI to build bulk carriers as big as 180,000 dwt and double its production capacity to 24 ships a year. Construction is already underway and scheduled for completion in 2010. The company recently completed the civil works and a big block fabrication facility for car carriers as part of its expansion programme.

Along with the major expansion in Cebu, Hanjin Heavy Industries and Construction (HHIC), the fifth-largest shipbuilding company in South Korea, made a commitment to invest $1bn to establish a ship component fabrication facility at the Subic Free Port Zone in March 2006 under the name HHIC-Phil. The shipyard complex was built on 480 hectares of land on the Redondo Peninsula.

HHIC later announced plans to expand its Subic operations by investing a further $684m. Currently, the company directly employs 5315 shipbuilders and an average of 5000 construction workers. However, those numbers are expected to increase to over 15,000 by 2011.

Only 14 months after announcing its initial investment in the Philippines, HHIC has begun producing its first orders. The company has signed contracts to construct at least nine container ships, which are being built in the company's shipyard in Subic. The value of these contracts is estimated at over $950m.

The total investment by HHIC is projected to generate as many as 30,000 direct and indirect jobs and will be the largest shipbuilding operation in the Philippines. According to the department of trade and industry, the facility is expected to bring the export industries' growth close to $2-3.5bn

To meet the demand for skilled workers, HHIC recently opened a state-of-the-art training facility. It has three classrooms, 70 welding booths, one pipefitting room, four painting rooms and a large work area that can accommodate up to 200 trainees and instructors.

Myung Goo Kwon, HHIC Philippines' managing director, shared Aboitiz's outlook regarding the trainability of the Philippine workforce.

"Equipped with the most modern training facilities and qualified Korean instructors, the training centre will be the cornerstone in developing and honing the skills of the Filipino trainees. It will transform regular, ordinary workers into qualified, skilled workers eligible to work in our shipyard," Kwon told local media.

Tsuneishi's third slipway and Hanjin's sizeable investment in Subic will easily make the Philippines the world's fourth-largest shipbuilder, after Korea, Japan and China.

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