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Philippines’ ailing shipping industry receives a lifeline


The congress rolls out a series of benefits for the wounded shipbuilder and repair sector for the shipping industry

Over 118 companies in the Philippines’ shipbuilding and ship repair sector have suffered the impact of COVID-19. Damages ranged from delayed delivery of raw materials, manpower shortage from lockdowns to increased operating expenses from safety protocols.

Modernisation and attracting investments
The cocktail of pandemic-related issues also led to major cash flow issues – threatening businesses’ survival. Hence, the Congress enacted RA 11534 in response to the pandemic, plus fiscal relief to domestic and foreign corporations doing business in the Philippines. Reynaldo Lignes, Chief Investments Specialist from Shipbuilding of the Board of Investments (BOI) under the Department of Trade and Industry (DTI) presented the benefits under the newly enacted law.

Lignes pointed out the shipping sector is in a unique position from the significant domestic demand for ships for inter-island transportation. He listed the sources of many opportunities in the shipping sector: Maritime Industry Authority’s (Marina) call to phase out wooden-hulled boats, modernising domestic shipping that triggered demand for brand new ro-ro passenger ships for the inter-island trade, and the $1.44 billion budget for the modernisation of the Philippine Navy that includes the acquisition of new floating assets. He added the President is allowed to grant further incentives to highly desirable projects with a minimum investment capital of $1 billion, or capable of creating 10,000 jobs.

Lignes noted, “We are strong in hull blocking assembly with the presence of all these big shipyards like Tsuneishi and Austal; we do assemble container ships, bulkers, and passenger (ships) but on a very low scale. We also do ship design, but we import all materials in building the vessels from metals or steel sheets up to paints for finishing the vessels.”

Fresh incentives and reduced taxes
Under the new Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, there will be fiscal relief for both domestic and foreign shipyards operating in the Philippines. This will benefit a foreign bidder for the assets of the defunct HHIC-Phil shipyard in Subic Bay, the largest shipbuilding facility in the country. HHIC-Phil has been closed since its bankruptcy in 2019. A North American buyer is implied to be in talks to acquire the yard by the end of the year.

Previously, foreign-owned shipbuilding companies could only accept orders for exports. With the country’s Investment Priorities Plan (IPP) endorsed by President Rodrigo Duterte late 2020, these companies would be allowed to cater to the domestic market. These companies will also enjoy reduced corporate income tax (CIT) rate at 30 per cent, from a previous 25 per cent for both foreign and domestic shipyards, retroactively from July 2020.  Shipyard owners will also be exempted from import duties for capital equipment, raw materials, spare parts and accessories, including an exemption from paying Value Added Tax (VAT).


Marine Online News Team
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