19jan15-Hanjin: Balancing security, economy

POSTSCRIPT / January 15, 2019 / Tuesday

Hanjin: Balancing security, economy

By FEDERICO D. PASCUAL JR.

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THE POSSIBLE takeover by Chinese investors of the troubled Hanjin shipbuilding/shipyard facility in Subic Bay is fraught with security implications that the administration must weigh together with political and economic considerations.

Some Chinese shipbuilding firms, one of them state-owned, have shown interest in Hanjin Heavy Industries and Construction Corp. now weighed down by unpaid debts reported at $412 million owed to five local banks, aside from $900 million due South Korean creditors.

Having filed for bankruptcy this month, Hanjin is ripe for picking, especially with the government not wanting to see a major foreign investor sink at great cost to the economy and the country’s prestige.

A statement from Subic Bay Metropolitan Authority said Hanjin has invested $2.3 billion in its facility. Since 2008, it has delivered 123 vessels to clients across the globe, putting the Philippines on the map as the world’s fourth largest shipbuilder based on gross tonnage.

But last month, Hanjin laid off over 7,000 of its 30,000 employees (total at its peak). It plans to terminate another 3,000 early this year, and keep just about 300 local workers and as few as seven Korean supervisors until March for facility maintenance.

Many quarters have warned against rushing approval of rescue proposals, hoping Malacañang will draw a broad consensus to balance national security and economic considerations, particularly in light of the reported Chinese keen interest to take over.

Considering China’s unfriendly acts of building up and militarizing features in Philippine maritime areas and its luring the administration into massive borrowing that experts have warned could be debt traps, a red cautionary light has been flashing.

Former Navy chief Vice Admiral Alexander Pama (2011-2012), for one, warned Saturday in a Facebook post: “This Hanjin shipyard issue is not just about business, financial and other economic issues. This is a very significant national security issue!”

Pama added: “Ownership of Hanjin shipyard in Subic Bay will give the owners unlimited access to one of our most strategic geographic naval and maritime assets. Although it is a commercial shipyard, nothing can prevent the owners from making it into a de-facto naval base and a maritime facility for other security purposes.”

Then national security adviser Roilo Golez, among others, also had warned about Beijing’s building a strategic triangle that will include Panatag (Scarborough) shoal close to Subic. He said: “If the Chinese can complete this triangle, they will have full control of the South China Sea.”

The triangle, which he described as a game changer, starts with the Paracel islands which China controls. The second point is the area of the Kagitingan (Fiery Cross) reef, Zamora (Subi) reef and Panganiban (Mischief) reef), which are all within the Philippines’ EEZ.

Citing surveillance data, Golez said Fiery Cross, Subi and Mischief appear to already have three-kilometer-long runways that can accommodate all types of aircraft in the inventory of China’s air force.

The third point in the triangle is Panatag, off Zambales and close to Subic Bay, which although within the Philippine EEZ and a traditional fishing ground of Filipinos, is under effective Chinese control.

Aside from the sites already encroached, China has established a friendly foothold in the Davao area, Duterte’s home base, and is reportedly eyeing strategic points in Palawan near the Spratly islands where it has been upgrading its military facilities

When the Americans left Subic Bay after the expiration in 1991 of the PH-US military bases agreement, the base was transformed into an industrial hub under the leadership of former Olongapo mayor (now senator) Richard Gordon who had rallied volunteers.

The biggest Philippine Navy ships take shelter at Subic. Ships of various foreign navies, including those of the major powers, conduct port calls there and take provisions from time to time. Pama expressed fears that if China gains control of the shipyard, this could change.

He said: “Baka pag nagpa-patrol ang Chinese Coast Guard sa Scarborough, dyan na sila nagpapahinga, mag-re-repair at mag reprovision. xxx Nag-aagawan tayo ng mga lugar tapos ibibigay natin yung shipyard sa Subic.”

He appealed: “Let us all be aware and wary of the serious security and other strategic implications of this issue! I urge our patriotic business community and the government not to allow Hanjin Shipyard to fall into the wrong hands.”

• What it takes to rehab Hanjin

TRADE Secretary Ramon Lopez said the Department of Trade is linking possible strategic investors with Hanjin. “Our first objective is to replace (Hanjin) with another shipbuilder that will take over.”

The Bangko Sentral ng Pilipinas said that the exposed banks — Rizal Commercial Banking Corp., Land Bank of the Philippines, Metropolitan Bank and Trust Co., Bank of the Philippine Islands, and Banco de Oro Universal Bank — are taking “collective” action to cover Hanjin’s default. The lenders are also reportedly considering talking to strategic investors.

Ceferino Rodolfo, managing head of the Board of Investments, said Hanjin has asked the government for help in searching for an investor. He said two Chinese firms, one of them state-owned, were interested.

He said officials of one firm will come come to Manila this month, while representatives of the other will take a look at the situation in February.

To take over, he said a company only has to pay off Hanjin’s local debts, adding that the company needs to normalize its cash flow to be able to handle its backlog of orders, including several big ships still to be made.

Whoever takes over will probably need $12 million in working capital a month, assuming the firm make six to eight vessels each year, he said.

 

(First published in the Philippine STAR of January 15, 2019. Follow the author on Twitter as @FDPascual.

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