Subic shipyard snags tax perks

Rehabilitation of former Hanjin hub seen to unlock economic opportunities

The Cabinet-level Fiscal Incentives Review Board (FIRB) has approved tax-free perks for the P17-billion Project Agila taking over the massive Subic facility left behind by bankrupt South Korean shipbuilding giant Hanjin.

In a recent statement, the Department of Finance (DOF) said the investment promotion agency (IPA) Subic Bay Metropolitan Authority (SBMA) earlier endorsed to the FIRB the grant of fiscal incentives to Project Agila, funded by US-based private equity firm Cerberus Capital Management, to redevelop and operate the former shipyard at Subic Bay Freeport Zone.

“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,” the DOF said.

In the statement, Finance Secretary and FIRB chair Carlos Dominguez III said “the rehabilitation of the Hanjin shipyard presents economic potential, given its strategic location near the West Philippine Sea.”

“The project will cater to both the Philippine Navy and potential export locators. It will be beneficial, specifically to the navy, as it will involve the safety and efficiency of the Philippine government ships’ performance and, consequently, strengthen national security.”

Earlier, Dominguez said that Cerberus’ takeover of the

Hanjin shipyard—which was shuttered in 2019—would generate 300 new jobs per year.

Last month, President Duterte’s chief economic manager said the US firm’s acquisition of the abandoned facility was a “win-win” proposition, especially for the Filipino people, noting it would “retain and create more jobs, further stimulate the Philippines’ robust growth, and serve the requirements of both the military and the private sector.”

“The deal will allow five of the Philippines’ largest banks to book a profit from their written-off loans with Hanjin Heavy Industries and Construction Philippines (HHICPhil), while the Subic Bay Metropolitan Authority, where the shipyard is located, will get a better tenant in Cerberus,” Dominguez said.

The Finance chief was referring to Banco de Oro Universal Bank, Bank of the Philippine Islands, Land Bank of the Philippines, Metropolitan Bank and Trust Co. and Rizal Commercial Banking Corp., which have more than $400 million in total loan exposure to HHIC-Phil.

Prepandemic woes

Bankrupted HHIC-Phil had folded up before the COVID-19 pandemic struck, laying off over 3,000 workers.

“Many of the displaced workers in the former Hanjin shipyard will also be retained, while additional jobs averaging about 300 per year from locators and subcontractors will be created, catalyzing growth in Central Luzon and the rest of the country,” Dominguez said.

“With this development beneficial to all stakeholders, we look forward to a robust shipbuilding and ship repair facility to serve not only our military and coast guard requirements but also the requirements of the private sector,” he added.

After the shipbuilding operations folded up, officials expressed confidence that the shipyard remained appealing to many investors—shipbuilder or not—due to the sprawling 300-hectare property, and HHIC-Phil’s close to $2 billion in assets that dwarfed its $411-million debt.

Under the deal between Cerberus and the Philippine government, the Philippine Navy will get a naval base within the facility, “with an ideal harbor for its rapidly expanding fleet facing the West Philippine Sea,” Dominguez said.

According to bid documents of the state-run Government Service Insurance System, which was looking for a reinsurer of the facility’s industrial risks, the navy will occupy the northern yard.

The project will cater to both the Philippine Navy and potential export locators

Department of Finance