The Ghost of Hanjin Past

CASTILLEJOS, Zambales—Waving placards expressing their disgust over eviction and asserting their right to lawful use of housing units at a village here, former employees at the Hanjin shipyard in the Subic Bay Freeport Zone picketed the municipal hall here on Monday, March 6, to seek help from local government officials.

The protest stemmed from an almost-forgotten agreement governing their stay at the Hanjin Village, a community purposely built by the South Korean shipbuilding firm for thousands of its workers and their families in the heyday of its ship production.

Confetti rains down from the CMA CGM Antoine de Saint Exupery during the launch of the first Subic-made 20,600 TEU-class container vessel in January 2018 in the heyday of Hanjin ship production.

A joint statement from the Samahan ng mga Manggagawa sa Hanjin (Samahan), a labor group of shipyard workers that withstood the demise of the Hanjin project in 2019, and the Hanjin Village Neighborhood Association (HVNA), an organization of residents at the Nagbunga housing site here, recalled that the Hanjin Village was built under a public-private-partnership (PPP) scheme with a P1.5-billion start-up fund from Hanjin.

The 30-hectare area where the village is located was donated by Hanjin to its workers under its corporate social responsibility program and registered under Transfer Certificate of Title 044-2013001646, the Samahan and HVNA statement said.

Meanwhile, the government’s Pag-Ibig Fund provided money to build housing units for qualified worker-members, and private developer Fiesta Communities, one of the pioneers in building low-cost housing in the country, was tapped for construction.

Since the project was inaugurated by company officials in 2013, a total of 2,775 housing units sprang up in the Hanjin Village: 1,730 units in Phase 1, and 1,045 in Phase 2. Depending on their capacity to pay and personal preference, Hanjin workers could opt for any of three housing types: one-bedroom, two-bedroom duplex, or three-bedroom single detached unit.

On top of this, Hanjin Village residents enjoyed community facilities like multipurpose hall, transport terminal, school and other function centers that were provided by the company for free.

Housing woes

THE ideal work-life situation for Hanjin workers, however, suddenly plunged into chaos in January 2019 when the South Korean investor, which had placed Subic on the map as the world’s fifth largest shipbuilder, declared bankruptcy.

Former Hanjin workers and their families assert the right to stay in housing units at a village built by the defunct shipbuilding company.

The Samahan and HVNA recalled that at this time—and because Hanjin had been laying off workers since late 2018 allegedly due to a slump in the world shipbuilding sector—only 46 homeowners out of the total 1,643 were now able to pay for the amortization of their housing units.

The immediate solution was a moratorium on Pag-Ibig payments brokered by then Labor Secretary Silvestre Bello III. This took effect in March 2019 and was understood by homeowners to continue being effective as the Covid-19 pandemic took a worldwide economic toll since that month.

However, starting October 2022, a lot of homeowners have been evicted by Fiesta Communities under its buy-back scheme, wherein those who missed payments were asked to surrender their units to Fiesta for re-sale to other parties, Samahan and HVNA said. Some residents also complained that their units were padlocked when they were out of town and couldn’t access them anymore upon return.

Hanjin workers celebrate the launch of CMA CGM Antoine de Saint Exupery, the first Subic-made 20,600 TEU-class container vessel, in January 2018.

Now the labor group and the homeowners association are asking pointed questions: What gives Fiesta Communities the right to evict them when [1] the lot where the housing units were built was donated by Hanjin to the workers, and [2] the fund used in constructing the houses came from Pag-Ibig, which is a government agency?

Hope and hype

THE housing woes besetting former Hanjin workers could be just one bitter fallout from the meteoric rise and fall of the Hanjin shipyard in the Subic Bay Freeport Zone, as well as the hype that followed when a white knight finally arrived to save the shipyard in distress.

Established by the Hanjin Heavy Industries & Construction (HHIC) of South Korea in February 2006, HHIC-Phil Inc. rose to the industry’s rockstar prominence when it conducted steel-cutting for its first vessel order just one year after breaking ground for shipyard construction and delivering the Argolikos, the first container ship to be built in the Philippines, another year thereafter.

HHIC-Phil Inc. initially pumped $1.7 billion into its 300-hectare shipyard at the Redondo Peninsula in Subic, Zambales. But putting in more facilities and equipment to increase its capacity brought the shipbuilder’s foreign direct investment in 2016 to $2.3 billion, the biggest in Subic since the free port was established in 1992.

In terms of employment, Hanjin also became the single biggest employer in the Subic Bay Freeport as of August 2015, with some 30,000 workers at its shipbuilding facility making up 36 percent of the total Subic workforce.

The Subic Bay Metropolitan Authority (SBMA), which manages the Subic Bay Freeport Zone, also credited Hanjin with being among the major growth contributors in the Subic Freeport, as the firm set out in 2015 to complete at least 17 ships worth over $1.6 billion.

Hanjin capped its achievements in January 2018 with the delivery of the CMA CGM Antoine de Saint Exupery, the first Subic-made 20,600 TEU-class container vessel, which Hanjin said, “represented a breakthrough in global shipbuilding.”

In that launching ceremony, then HHIC-Phil President Gwang Suk Chung said: “This newly built 20,600-TEU vessel proves, among others, the strength and capability of our Subic shipyard to manufacture in a timely manner mega-ships of much higher quality tonnage that are now shaping the shipping landscape around the world.”

Apparently, HHIC-Phil has become a giant in its own eyes and in the eyes of the world. And before the shipbuilder would file for bankruptcy exactly a year after making what Chung described as a historic breakthrough, Hanjin would nevertheless deliver 123 vessels from its Subic shipyard—a feat that helped place the Philippines just behind China, South Korea, Japan and Germany as top shipbuilder in terms of orderbook by August 2016.

Hero’s welcome

IT would take more than two years before a white knight would arrive to wipe away some $400 million that HHIC-Phil owed in outstanding loans from Philippine banks on top of another $900 million in debt with lenders in South Korea.

And like that for Hanjin, a hero’s welcome would accompany the arrival of the new hope—Cerberus Frontier, a private equity firm in the United States that was touted to bring in a partner to undertake actual shipbuilding work.

In a statement issued by the Department of Finance on April 24, 2022, following the signing that day of the shipyard takeover agreement, then Finance Secretary Carlos Dominguez III described the Cerberus deal as a “win-win” for all stakeholders.

He said it will: [1] allow five of the country’s biggest banks to book profit from their written-off loans with Hanjin; [2] give the SBMA a better tenant; and [3] give the Philippine Navy a naval base for its rapidly expanding fleet facing the West Philippine Sea (WPS).

The Cerberus takeover will also allow the rehiring of many displaced shipyard workers and create additional jobs averaging 300 per year, thus catalyzing growth in Central Luzon and the rest of the country, he added.

“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,” Dominguez said in cheering the Cerberus agreement.

The SBMA could not help but follow suit. Even after the original plan for Cerberus to partner with Austal, an Australian global shipbuilding firm and prime defense contractor, apparently fell through.

After SBMA Chairman and Administrator Rolen C. Paulino inspected the former Hanjin shipyard in May last year, the SBMA issued a media statement saying that the former Hanjin facility, which it said was now called Agila Subic Shipyard, will have two (major) tenants: Vectrus, which it described as a global service solutions provider to the United States government, and the Philippine Navy.

Vectrus will occupy most of the shipbuilding area, including quays, it said, while the Philippine Navy will use the former Hanjin administrative office, mess hall, and barracks.

With this, former Hanjin workers who have been skills-trained will be hired by Vectrus, “since it will require skilled workers who are adept in ship repair,” the SBMA said.

Olongapo City Mayor Lenj Paulino, the son of the SBMA CEO, was also quoted as saying that the city government plans to provide skills training to residents in face of a “boom in employment in the ship repair industry in the area.”

The SBMA also reported in May last year that the Department of Finance has approved tax incentives endorsed by the SBMA for the rehabilitation of the ageing shipyard. These perks included special corporate income tax (SCIT), value-added tax (VAT) exemption from importation, VAT zero-rating on local purchases, and duty exemption on importation.

Huge investments

As of late, four Dutch-controlled companies that now serve as affiliates under Cerberus have taken out leases in the second quarter of 2022 for the redevelopment and operation of the former Hanjin facilities in Subic, now called Agila Subic Shipyard.

These leases cover the Redondo Peninsula shipyard, a training center at the Subic Techno Park, a jetty at Cubi Point, and the Hanjin residential apartments at Subic’s naval magazine area.

The Dutch investments, which are combined under the Agila Subic banner, total P18.45 billion. The biggest of these is that of Agila South Inc., which pledged P10.74 billion for the development, operation and subleasing of the Subic shipyard.

The other Agila firms also made huge investment commitments: P6.28 billion by Agila NY Naval Inc., also for development, operation and subleasing activity; P1.11 billion by Agila Subic Compass Inc. for maintenance and management of real property; and P313.13 million by Agila Subic TC Inc. to acquire and manage subleases of housing units, among others.

As outlined in its proposal, Cerberus will lease the northern yard of Agila Subic Shipyard to the Philippine Navy; Drydock No. 5 for shipbuilding and repair; Areas A & B to Vectrus for warehousing; and Drydock No. 6 for other incoming offers.

The Cerberus commercial deal may appear more advantageous on the surface over the Hanjin arrangement.

According to the SBMA Business and Investment Group, Cerberus has made an offer of $319,000 for annual leased rate, compared to HHIC-Phil’s annual lease payment of just $170,863. It will also pay administrative and CUSA (common use service area) fees of $95,635 with 1-percent escalation per annum, compared to an average payment of $74,364 by HHIC-Phil.

In terms of potential economic opportunities, the Cerberus deal was touted to produce investments of up to $350 million from the first to fifth year, and up to $5 million annually from the sixth year onwards.

Employment, meanwhile, was projected to be up to 4,000 to 7,000 employees.

Hard truths

THE reality on the ground, however, has yet to match the optimism on paper, especially when it comes to job generation, an important contribution by HHIC-Phil to the local economy.

According to SBMA records, HHIC-Phil as of end 2015, had 21 contractor-companies that employed a total of 31,191 workers. This further increased to 35,104 in 2016.

Then, as a slump in the shipbuilding industry set in, employment figures went down to 28,784 workers for 23 contractors in 2017; 13,289 for 21 contractors in 2018; then down to two contractors and 421 employees in 2019, when Hanjin declared bankruptcy; and finally, a total of 351 among the two remaining contractors in 2020.

Still, the lowest Hanjin employment record would readily beat the current figure at the shipyard under Cerberus, former Hanjin workers noted.

According to Ed dela Cruz, coordinator of the labor group Workers and People’s Forum (WPF) based in Subic, Zambales, Cerberus has thus far employed only 43 workers since it came to town.

“These are former Hanjin workers, too, and they were hired as maintenance workers to supply things like power and water to the Philippine Navy ships that dock at the shipyard,” Dela Cruz said.

Aside from these, Cerberus also hired some 100 workers in July to December last year and some up to last January to scrap all metals left over from previous shipbuilding operations.

“Aside from these, there has been no more movement in the labor front as far as we can tell,” Dela Cruz said. He added that the WPF can monitor movements in the shipyard through the workers on site.

Jenzen Mauricio, treasurer of the Samahan ng mga Manggagawa sa Hanjin, said that they can only hope that Cerberus and its affiliates, as well as future facility locators, would hire local workers to help boost local employment.

There are still some 5,000 former Hanjin workers living at the Cawag area near the shipyard, according to him. “They are still waiting for jobs.”

Mauricio said that a lot of former Hanjin workers have already returned to their provinces since the shipyard had shut down, with only a few hundreds finding other jobs among other business locators in the Subic Bay Freeport.

He added that the Department of Labor had initiated talks with prospective companies in 2019, but these stopped soon, without much positive result for former Hanjin workers.

Dela Cruz and Mauricio also told the BusinessMirror that upon the arrival of Cerberus in Subic, the shipyard had started to be reconfigured.

“They have already removed the moving shelters and other facilities used for shipbuilding,” Mauricio pointed out. “So, our guess is that there will be a shift in operations—if ever it won’t be the heavy stuff that Hanjin used to do.”

Mauricio, who worked as pipe­fitter during the Hanjin days, explained that the moving shelters used to be where ship parts were manufactured or assembled before being installed together in a ship’s hull.

“When you reconfigure the system, it means you’ll be doing a different kind of work,” he explained.

Dela Cruz hazarded a guess: the Subic shipyard will simply be turned into a repair facility, what with the reported possibility of Hyundai coming in.

The South Korean company, which built the warships newly acquired by the Philippine Navy, had reportedly expressed interest in locating to Subic for the repair of the Navy ships that it manufactured.

“But whatever may finally be decided by the new tenant, the Subic shipyard will no longer be as we knew it,” Dela Cruz mused. “The activities, the workers, the volume of work will be different. The purpose and the situation for workers will no longer be the same.”

Image credits: Taktikom News & Features, Henry Empeño, Hanjin Village Neighborhood Association

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