The Philippines as a Shipbuilding Country: 7 Important Things to Know

The many people occupying the islands that would later be called the Philippines have had significant shipbuilding expertise for millennia, thanks to the necessity of inter-island travel. Even the smallest government unit of the present-day, the barangay, was named for the wooden balangay, long boats of old that were large enough to accommodate entire extended family groups or villages.

What a lot of Filipinos may not realize is that major shipbuilding activities are still alive and kicking throughout the country, with a lot of it taking place in special economic zones like the West Cebu Industrial Park, a joint venture between Aboitiz Group and Tsuneishi Holdings of Japan which has been dubbed as the Shipbuilding Capital of the Philippines.

A DTI policy brief titled The Philippines in the Shipbuilding Global Value Chain has some surprising insights about the local shipbuilding industry that might surprise you. Below are a few things you should know about this vital industry.

1.) There are over 100 shipyards in the Philippines

As of 2017, the Philippine Department of Trade and Industry counted 17 large and medium-sized shipyards and over 90 small licensed shipyards located throughout the country. Collectively, these shipyards employ an estimated 50,000 full-time workers and are major drivers of the local economy wherever they are situated.

2.) The Philippines is a major global ship producer

The Philippines is also the fifth largest producer of ships, by exported tonnage, and fourth by gross tonnage. Major export markets for Philippine-made ships include Japan, Germany, Chinese Taipei, Liberia, and French Polynesia.

3.) The industry is expected to grow after COVID-19

Though the industry experienced a shock due to the pandemic, it is expected that it will continue to grow at a more modest pace soon. With the industry continuing to show signs of long-term growth, shipbuilding for the domestic and export markets may soon be a major source of revenue for the country. Additionally, the Philippine Navy, which has historically imported most of its vessels from overseas, may soon be a lucrative source of domestic orders.

4.) The Philippines builds some of the world’s most advanced commercial vessels

Austal, a major international shipbuilder and defense contractor that has built some of the most advanced warships for the US Navy, also has operations in the Philippines. The bulk of its commercial shipbuilding activities takes place in its state-of-the-art shipyard in Balamban, Cebu, at the Aboitiz InfraCapital-developed West Cebu Industrial Park.

5.) 90 percent of domestic Philippine shipyard revenue is in repairs

According to the DTI brief, only a comparatively small amount of income generated by shipyards is in actual shipbuilding. Most of the revenue of shipyards is centered around the repair and maintenance of existing vessels. Currently, the upgrading and refurbishing of vessels is being explored as another revenue stream, as this requires similar skill sets to repairs.

6.) The local workforce is considered to be internationally competitive

Filipino workers have been praised in every industry they have entered, and workers in the shipbuilding sector are no different. Unfortunately, this has led to many of the most skilled workers seeking higher-paying employment overseas, making it difficult for locally based shipyards to find and retain top talents. Aboitiz InfraCapital is helping remedy this situation by building world-class shipbuilding facilities where local talents can build their careers.

7.) The lack of local suppliers is a major challenge

A good amount of the necessary inputs needed to build, repair, and maintain ships has to be imported from overseas, particularly from Japan, Korea, and China. Even with some of the world’s best workers, this lack of local suppliers creates gaps in the ability to construct and service vessels, which bring down the competitiveness of local shipyards. However, this also creates numerous opportunities for local businesses to step in and fill the unique needs of this industry. That is, if they could be certified to international standards. 

According to the DTI policy brief, a more developed local supply chain would help local shipbuilders be more competitive by reducing work stoppages, lowering material costs, and creating shorter wait times. Developing local supply chains will also help increase employment and potentially create export opportunities by itself.

Shipbuilding is part of the Filipino’s long and unique maritime heritage. It’s just that the country may have some catching up to do before the industry can make its next big breakthrough on the global market. Despite the numerous challenges involved in making this happen, Filipinos with the right expertise and experience are already working in the world’s most advanced shipyards here and abroad. Attracting the capital to make it happen may be the one thing that will create a sea of change in the local shipbuilding industry. Thanks to Aboitiz’s Economic Estates, this and others of the country’s economic aspirations may become realities within our lifetimes.