Daily Management Review

Fears Of Chinese Influence Sparked In Philippines After A Bankruptcy Of A Private Shipping Yard


Fears Of Chinese Influence Sparked In Philippines After A Bankruptcy Of A Private Shipping Yard
A debate over national security has been sparked in the Philippines about whether China could get control over a port near the disputed South China Sea after an incident of a major corporate bankruptcy.
Ways to take over control for a shipyard on a former U.S. naval base – which is known as Subic Bay, is being deliberated by the Philippines government so that Chinese companies are not able to purchase it.
Concerns about Chinese presence in the area – even though the shipyard under consideration is commercial one, have been expressed by the officials of the country including the defence secretary of the country. The worries are being expressed because of the growing attempts by China to increase its influence in the South China Sea and the incidents of seizure of neighbouring islands in the area, the ownership for which have been laid by Philippines.
An industrial shipyard in Subic Bay had been operated for years by Hanjin Heavy Industries and Construction Philippines. But the company declared bankruptcy in January after it failed to serve a debt of more than $400 million owned to Philippine banks. The company is a shipbuilding unit of South Korean firm Hanjin Heavy Industries and Construction. This bankruptcy is amongst the largest in the history of the country and has put at risks thousands of jobs.
According to the official Philippine News Agency, the Manika government has been asked by the shipping company to look for companies and investments that would be interested in acquiring the shipyard and retain the employees. Outstanding loan of about $900 million from South Korean banks is also owned by the company. 
Subic Bay is an area about the size of Singapore and is situated about 100 kilometers northwest of Manila Bay. Earlier, it was home to one of the world's largest U.S. naval facilities and operated by the navies of Spain and the United States. A special economic zone was declared for it after it was handed over to the Philippine government in the early 1990s after the military based there close down.
Interest for acquiring of the shipyard from Hanjin Philippines' has been expressed by two Chinese firms. That has sparked a flurry of action from Manila officials and messages of their concerns about the possibility of Beijing taking control over the area were expressed by them.
The potential for the Philippine navy taking over the shipbuilding business was discussed between the Philippine Defence Secretary Delfin Lorenzana and President Rodrigo Duterte last week, Lorenzana said.
"The Philippine Navy suggested that, why not the Philippines take over so that we'll have a naval base there? Then we'll have shipbuilding capabilities," international media quoted Lorenzana as saying during an event at the Foreign Correspondents Association of the Philippines last week.
According to analysts, that is a realistic possibility.
"It would be consistent with political initiatives to increase domestic industrial development," said Zoe Stanley Lockman, associate research fellow specialising in defence and security at Singapore's Nanyang Technological University. According to her, if a bill which is pending at the country's Senate floor is passed, there would be greater support for the defence industry in the country – most parts of which are already owned and operated by the government.
However there were others who felt that the security issues related to China were being blown out of proportions.
"We shouldn't overstate the importance of a Chinese company operating Hanjin," said Zack Cooper, a research fellow specialising in U.S. defence strategy in Asia at the American Enterprise Institute. "Just because a Chinese company operates the port and shipyard does not mean that Chinese military vessels can dock there — the same is true with Darwin Port in Australia, which is now operated by a Chinese firm."