The shipyard facilities of Hanjin Heavy Industries & Construction Company Ltd. of the Philippines in the Subic Freeport are without doubt world-class. But this is not enough reason for the government to take over the beleaguered unit of Korea's Hanjin Heavy Industry Co. Ltd., which some senators consider a win-win solution.
Malacañang should immediately stop entertaining the thought of a state takeover of Hanjin's Subic shipyard. Hanjin Philippines filed a petition with a Subic court for corporate rehabilitation because of a slack in demand for ships. The world economic slowdown led to the collapse of the Hanjin's shipping unit two years ago. The mother company's woes spilled over to the Philippine unit, which is now saddled with over $400 million in outstanding loans from local banks and $900 million in debts owed to South Korea lenders.
The government may have the moral responsibility to keep the jobs of over 3,000 workers of Hanjin Philippines and may find it enticing to run the shipyard facilities in Subic. Taking over the company, however, runs counter to the government privatization policy.
The government, at best, can assist the troubled shipbuilder by looking for foreign or local investors that can assume ownership of Hanjin Philippines and make it viable again. Shipbuilding is strategic industry that the Board of Investments must promote, given the archipelagic composition of the Philippines.
The private sector is the better candidate to take over Hanjin's operations in Subic. Being accountable to the fortunes and misfortunes of the company, private companies should know which options to take to make Hanjin Philippines profitable and viable.
Handing the reins of the shipyard to the government is a bad idea—the state in the past had trouble keeping companies afloat. The government may eventually subsidize the operations of the shipyard if it continues to register losses. That would mean allotting a portion of the national budget to sustain its losing operations.
The BoI, instead, should revisit its fiscal incentive system to attract investors in the shipbuilding industry and provide relief to Hanjin Philippines. Local demand can sustain the industry given the country's growing inter-island trade and tourism boom.