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Navy makes strategic move to Subic shipyard facing WPS

/ 05:30 AM May 26, 2022
BRP Antonio Luna FF-151 docks at former Hanjin Shipyard in Subic. STORY: Navy makes strategic move to Subic shipyard facing WPS

FOR CAPITAL SHIPS | The Philippine Navy on Tuesday formally took over part of a strategic shipyard facing the West Philippine Sea as its newest ship BRP Antonio Luna (FF-151) made a symbolic docking at the former Hanjin Heavy Industries shipyard in Subic Bay, Zambales. (Photo from the Philippine Navy)

MANILA, Philippines — The Philippine Navy now has a home for its biggest ships after docking its vessels in commercial shipyards for so long.

The Navy on Tuesday formally took over part of a strategic shipyard facing the West Philippine Sea as its newest ship BRP Antonio Luna (FF-151) made a symbolic docking at the former facility of South Korea’s Hanjin Heavy Industries in Subic Bay, Zambales.

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It will occupy 100 hectares of the northern portion of the 300-hectare shipyard, now called Agila Subic, for a lease of around P1 billion a year.

The activation and subsequent operation of a naval operating base Subic is in line with the Navy’s scaled-up maritime operations to support the needed base services of the deep draft vessels such as Jose Rizal class frigates, Del Pilar class patrol ships and Tarlac class landing docks, the Navy said in a statement.

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“We have been buying capital ships but we don’t have a place to park them. They’re at South Harbor, squatting there. But recently, the Navy got the northern part of Hanjin. The Navy is happy because they have a place of their own where they can park their capital ships,” Defense Secretary Delfin Lorenzana said at the Philippine Navy anniversary last Friday. Capital ships are the Navy’s most important warships and are generally larger compared to other members of a fleet.

‘Shorter reaction time’

The Navy will also transform its stake in the shipyard as the future headquarters of the Philippine Fleet, Naval Sea Systems Command, Offshore Combat Force and Sealift Amphibious Force, which are all currently stationed in Sangley Point, Cavite City.

Retired Navy chief Giovanni Carlo Bacordo, who was part of the negotiations for the deal, said the shipyard was in a strategic location due to its proximity to the West Philippine Sea and it has “a shorter reaction time going to the Philippine Rise.”

Subic Bay, a former US military base until it closed in 1992, is located about 260 kilometers from the Chinese-controlled Panatag (Scarborough) Shoal in the West Philippine Sea. It is also the safest and nearest port facing the disputed waterway.

Aside from its ideal location, Bacordo said the shipyard has a deep harbor facility for their big ships, which their naval bases lacked.

“Since we acquired our big ships, it’s always in Subic, Cebu, Zamboanga City pier, but never in a Navy base. Now, we can accommodate our large vessels and future submarines,” he told the Inquirer.

He added, “It’s a well-protected harbor—from the sea, the weather disturbances, because of the mountains and Grande Island covering the entrance of Subic Bay.”

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Aside from the Navy, US defense contractor Vectrus Inc., which provides facility and base operations, logistics and other services to the US military, will occupy the shipyard, according to the Subic Bay Metropolitan Authority (SBMA).

The SBMA said some former Hanjin workers would be rehired by Vectrus.

Subic Mayor Rolen Paulino Jr. said the city government planned to provide training to its residents as he expected a rise in employment in the ship-repair industry in the area.

Strategic play

The commercial shipyard operated by South Korea’s Hanjin stopped operations in 2019 after defaulting on $1.3 billion in loans, including $400 million due to Philippine banks and $900 million from South Korean lenders.

The shipyard, which at the height of its operations employed about 30,000 workers, went into court insolvency proceedings.

Two Chinese companies reportedly showed interest to invest in the facility, but this raised concerns in the defense department over its strategic implications.

American company Cerberus Capital Management acquired the shipyard in April this year in a $300-million, 50-year lease deal after Hanjin sought out white knights.

The move to sell to an American investor was a strategic play to ward off a potential Chinese takeover, a security official told the Inquirer.

“Working with the United States on this project will help ensure that we are able to protect our interests not only for our country but the whole region,” Philippine Ambassador to the United States Jose Manuel Romualdez said after the deal signing on April 19 in Washington.

“The completion of the Subic Bay shipyard will redound to benefits for the country, bring jobs to the local communities, increase economic activity, and at the same fortify our strategic security measures,” he added.

‘Perfect opportunity’

In June 2019, retired US Navy Capt. Brian Buzzell wrote in the US Naval Institute’s magazine that Hanjin’s financial problems represented “a perfect opportunity to return to Subic Bay” for the Americans.

“It also would send a strong message to Beijing that, despite its efforts, the alliance between the United States and the Philippines is strong and unbreakable,” he wrote.

He had proposed that the Indo-Pacific Command initiate a study to analyze the impact on operational readiness of more repair capacity in the western Pacific, including the impact on current workloads at Ship Repair Facility Yokosuka, Japan, and the Guam Shipyard Division.

He added that the Philippine government needed to indicate it was willing to enter into a public-private partnership with the United States.

Cerberus will spend P17 billion in what it calls Project Agila to redevelop and operate the shipyard. The scope of work will include upgrading buildings at the site to modern operational and safety standards such as adequate facilities and procedures to manage ship waste and ballast water and response capabilities for potential spills of hazardous materials. It is also planning a wide range of infrastructure improvements at the yard facilities.

The interagency, Cabinet-level Fiscal Incentives Review Board has already approved tax-free perks for the P17-billion project. “The project was granted special corporate income tax, value-added tax (VAT) exemption from importation, VAT zero-rating on local purchases, and duty exemption on importation,” according to the Department of Finance.

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