Peer Review of the Philippines’ Shipbuilding Industry

1. Assessment and recommendations

Abstract

This chapter summarises the report’s key findings and presents the main conclusions and recommendations across four core areas: modernisation of the shipbuilding and ship repair (SBSR) industry, labour and technology development, safety, decarbonisation and digitalisation, as well as targeted policy guidance for the proposed SBSR Development Bill of 2025. It also includes two comprehensive summary tables outlining recommendations for MARINA and other government and industry stakeholders.

1.1. Introduction

In 2012, the OECD Shipbuilding Committee introduced a Peer Review process focused on support measures provided by governments to their shipbuilding sectors. Under this process, each economy participating in the Shipbuilding Committee undergoes an in-depth study of its shipbuilding industry and related government measures. Non-Shipbuilding Committee countries may join the process and can also be the subject of a Shipbuilding Committee review.

The main goal of the Peer Review process is to strengthen the identification of government policies, practices and measures affecting the shipbuilding sector and to support the discussion of these measures within the Shipbuilding Committee. The analysis of the support measures is accompanied by contextual details of the industry to enable a discussion of shipbuilding policies and their impact. A key element of the process is the active debate and discussion of peer review drafts by Shipbuilding Committee participants, with a view to promoting transparency and sharing experiences.

The Philippines is subject to an ad hoc Shipbuilding Committee Peer Review in 2024, following the reviews of Japan (2012), Portugal (2013), Korea (2014), Germany (2015), Norway (2016), Finland (2017), the Netherlands (2019), Türkiye (2021), as well as Croatia, Denmark Italy, Poland and Romania (2023). In 2018, the Shipbuilding Committee decided to conduct an ad hoc review of the shipbuilding sectors in selected non-Shipbuilding Committee countries, including China, Indonesia, Malaysia, the Philippines, Singapore, Chinese Taipei and Viet Nam. In 2020, the Secretariat also prepared a report on China’s shipbuilding industry and policies affecting it.

The information in this report is based on publicly available information, statistical series available to the Secretariat, the Philippines’ response to the Peer Review questionnaire, and discussions with government officials and stakeholders during the Secretariat’s fact-finding mission to the Philippines (21-25 October 2024).

1.2. Peer review of the Philippines’ SBSR sector

The report provides a comprehensive peer Review of the shipbuilding and ship repair industry in the Philippines. While focusing primarily on the shipbuilding and marine equipment sectors, it also includes insights into repair and conversion facilities, making it a holistic analysis of the maritime industry. The report is divided into three substantive parts: a global perspective, a detailed analysis of the structure and trends of the Philippine SBSR industry, and an assessment of policies influencing the sector along with actionable recommendations.

The market and industry analysis explores the scope and dynamics of the shipbuilding and marine equipment industry, examining its scale, economic contribution, and evolution. It discusses shipbuilding and related maritime markets, highlighting key trends and challenges facing the sector and outlines industry developments, including metrics on exports, imports, workforce trends and infrastructure capacity, providing a detailed picture of the industry’s position in the global market. This is complemented by a critical evaluation of the industry's competitiveness, focusing on productivity, technology adoption, supply chain vulnerabilities and the impact of existing policies, to identify strengths and areas for growth and development.

The in-depth policy analysis of the report assesses existing policies and frameworks, focusing on support measures, regulatory strategies, and long-term plans for industry growth. An analysis of sector-specific support initiatives, including incentives for foreign direct investment, is presented to understand how they influence industry performance. This subsection evaluates the effectiveness of current government strategies and policy measures, in particular the Maritime Industry Development Plan (MIDP) 2028 and ‘SBSR Development Bill of 2025’ Bill, offering targeted recommendations for best policy and practice.

This chapter synthesises the key findings of the review, identifying critical challenges and opportunities, and presents policy recommendations to support the sustainable growth of the sector. The discussion of key insights and recommendations is organised into four overarching themes:

• SBSR industry modernisation.

• labour and technology development.

• decarbonisation, digitalisation, and safety.

• recommendations for the SBSR Development Bill of 2025.

1.3. SBSR industry modernisation

1.3.1. Key insights

The OECD Shipbuilding Committee Peer Review of the Philippines’ SBSR industry provides an in-depth analysis of the sector, focusing on domestic industry structures, market developments, and national shipbuilding strategies. Analysis and recommendations on SBSR industry modernisation are organised into four overarching themes:

Global position and growth potential: The Philippines is a significant global player, ranking as the fourth-largest shipbuilding nation in 2022, driven largely by construction and repair activity by foreign shipbuilders, like Tsuneishi and Seatrium. However, production has declined since peaking in 2014-2015, with bulk carriers dominating the portfolio. Opportunities exist for diversification and recovery through market adaptation and innovation.

Export-oriented production challenges: Export-oriented shipbuilding, primarily driven by foreign-owned shipyards, faces diminishing global market share. While exports peaked in 2014-2015, they have since declined, and vessel imports surged post-2021. Enhancing local marine equipment production and achieving economies of scale could improve competitiveness.

Lack of ancillary industries: The absence of a domestic steel industry and limited manufacturing capacity for marine equipment create cost inefficiencies and expose the sector to supply chain vulnerabilities. Developing local capabilities or incentivising international manufacturers to establish operations could reduce dependency on imports and strengthen the SBSR industry.

Focus on ship repairs: Domestic shipyards largely focus on repair activities, with 95% of operations dedicated to maintenance rather than new builds. Domestic shipyards account for 64% of the local repair market and are also well positioned on the foreign market, with 53% of foreign demand for yards in the Philippines. The ship repair industry is strategically positioned to serve Southeast Asia, with East Asia and Europe as primary markets. However, 66% of the 186 shipyards require rehabilitation and infrastructure upgrades are essential to ensure efficiency and sustained growth.

1.3.2. Policy recommendations

Modernise and develop the SBSR sector by fostering investment in advanced technologies, strengthening domestic supply chains, and positioning the Philippines as a competitive hub for shipbuilding and repair in the region.

• Leverage instruments of the Strategic Investment Priority Plan (SIPP): The Department of Trade and Industry (DTI) and Board of Investments (BOI), in co-ordination with MARINA, could promote shipbuilding projects under the Green Lanes initiative to streamline administrative processes and reduce bureaucratic delays. Further, investments in the SBSR sector that integrate green technologies and address industrial value-chain gaps, particularly in steel and ancillary marine equipment production, could be incentivised under Tier II Classifications of SIPP.

• Maximise the benefits of economic zones for the maritime sector: Industrial economic zones, such as the Cebu Economic Zone, managed by the Philippine Economic Zone Authority (PEZA), hold significant potential for advancing the country’s maritime sector. Policies could be adapted to provide equitable market opportunities for both PEZA and non-PEZA shipyards. Targeted PEZA provisions could be introduced, enabling shipyards to better leverage market opportunities. For instance, provisions could focus on incentivising repair activities for advanced vessels, which are presently being undertaken by shipyards outside the Philippines, thereby strengthening position of economic zones as a hub for maritime innovation and growth.

• Enhance collaboration with Local Government Units (LGUs): MARINA is encouraged to strengthen collaboration with regional government entities, including LGUs, and facilitate the timely and accurate implementation of central initiatives across regions in alignment with the Maritime Industry Development Plan 2019–2028 (MIDP), the Ease of Doing Business Act, and other national strategies. Further, MARINA could actively promote increased communication, systematic data sharing, and co-ordinated efforts with LGUs to optimise the execution of national strategies and improve overall implementation outcomes.

1.4. Labour and technology development

1.4.1. Key insights

Research and Development (R&D) efforts amid infrastructure gaps: Ongoing R&D efforts in the Philippines are supporting modernisation of the maritime sector, with a focus on digitalisation, energy efficiency and cost-effective technologies. Collaborative partnerships between MARINA and the Department of Science and Technology (DOST) support technology development, but inadequate infrastructure, such as the lack of large towing tanks, limits the industry’s capacity for R&D and innovation.

Need for human resource skills development: While 82% of the workforce is classified as skilled or semi-skilled in the Philippine SBSR sector, it faces significant challenges, including high dropout rates in maritime education, outdated facilities and workforce emigration. Domestic shipyards lag behind international standards in training and safety compliance, highlighting a gap between training programmes and industry needs. These risks limiting the domestic SBSR yards’ absorptive capacity for technology transfer and to utilise and develop advanced technologies.

Potential for further collaborative efforts: MARINA’s collaboration with the Technical Education and Skills Development Authority (TESDA), the University of the Philippines, and other institutions provide a foundation for workforce skill development, but they need to be expanded and better aligned with the demands of emerging technologies and global best practices. Strengthening partnerships with private industry stakeholders, international training centres and global shipbuilders can accelerate knowledge transfer and ensure training programmes address industry-specific needs.

1.4.2. Policy recommendations

Build a competitive and future-ready workforce by expanding skills in advanced and green shipbuilding technologies, promoting international training exchanges with structured repatriation, modernising testing and simulation facilities, and strengthening collaboration between academia, government, and industry.

• Strengthen education and training policies: MARINA could expand partnerships with SONAME (Society of Naval Architects and Marine Engineers), TESDA, and academic institutions to develop training programmes for domestic shipyards and thereby support skills development to seize market opportunities in new technologies, including digital and low/zero-emission fuel solutions. In academic institutions, focus on engineering, naval architecture and management skills could be encouraged to reduce the technological gap between local and foreign firms. Scholarships tied to industry service commitments could be introduced to reduce dropout rates and address workforce emigration.

• Leverage international exchange and labour turnover for skills enhancements: Facilitate the temporary migration of Filipino nationals to other maritime nations for education and work and develop repatriation programmes for returnees, including grants for local research, startups, or employment in shipyards. MARINA could encourage partnerships between domestic and other countries’ research institutes to create advanced training centres, elevating Filipino workers’ global competitiveness, and support partnerships with multinational enterprises to promote labour turnover, allowing skilled workers to move from foreign firms to domestic shipyards, fostering technology diffusion.

• Modernise testing and simulation facilities: Invest in essential infrastructure such as towing tanks, testing centres, and simulation facilities to support advanced R&D and shipbuilding techniques. Here, MARINA could support further collaboration between universities, DOST, and the maritime industry to transfer knowledge and jointly develop innovative solutions.

1.5. Safety, decarbonisation and digitalisation

1.5.1. Key insights

Emerging importance of environmental sustainability: SBSR industry efforts to support decarbonisation and environmental sustainability are growing, with 25% of vessels to be completed in 2026 being alternative fuel capable. However, these technologies are largely concentrated in foreign-owned shipyards and designed for export, leaving domestic shipyards with limited integration of green technologies and practices.

Need for improved safety standards compliance: Domestic shipyards and shipping operations often do not comprehensively meet international safety standards, with gaps in worker protection, occupational safety protocols, and adherence to global regulatory frameworks. Some areas of shipping lag in compliance with modern safety protocols, raising concerns about accident prevention and the reliability of the Philippine fleet.

Increased focus on digitalisation and operational efficiency: Digitalisation is emerging as a critical area of focus, with MARINA’s initiatives, such as MARINA BEST, and the Philippine Ports Authority’s 2024 Blueprint for Resilient and Efficient Ports, emphasising investments in technology. While these efforts aim to modernise operations, data collection and analytics systems remain underdeveloped, limiting decision-making and safety improvements.

Data limitations continue to constrain analysis of the SBSR sector’s economic contribution. Discussions with MARINA and data collection efforts for this report revealed gaps in available data. Most industry data are manually compiled, with no integrated digital collection system in place—including for statistical reporting. Currently, there is no disaggregated data on the specific contribution of shipbuilding, ship repair, or shipping to national GDP. A forthcoming study by the Development Academy of the Philippines (DAP) aims to address this by providing a detailed breakdown of maritime-related sectors. In the meantime, partial data are available from the Philippine Statistics Authority (PSA) through the Ocean Economy Satellite Accounts, primarily under ocean-based manufacturing and sea-based transport.

1.5.2. Policy recommendations

Strengthen the competitiveness and resilience of the SBSR sector by enhancing safety standards in shipyards and the domestic fleet, accelerating decarbonisation and digitalisation efforts, and improving data collection to support evidence-based policymaking and industry development.

• Enhance safety standards and compliance: MARINA could encourage SBSR yards to expand training programmes focusing on workplace safety and emergency response, particularly for shipyard workers. Domestic shipyards could be incentivised to adopt best safety practices through certifications or government support tied to safety compliance. MARINA could further support the modernisation and enforcement of shipping safety standards for Philippine-flagged vessels, addressing accident prevention, fleet reliability, and compliance with international shipping protocols.

• Promote green shipyards and decarbonisation: Launch a “Green Shipyard Award” to showcase best practices in energy efficiency, waste management, and alternative fuel adoption, to encourage best practice sharing and incentivise the uptake of alternative fuel technologies and the capability of domestic facilities for energy efficient and low-carbon vessel production and retrofitting. Building on successful practices identified through the award, MARINA could introduce a “Green Shipyard Certification” programme tied to tax incentives and/or access to government-funded projects, driving long-term improvements in yard sustainability and competitiveness.

• Develop digital infrastructure: Invest in data collection and analytics systems for improved monitoring of safety, environmental compliance, and operational efficiency across shipyards and ports. MARINA could support the adoption of digital safety technologies, such as automated monitoring systems and predictive maintenance tools, in shipyards and Philippine-owned vessels. MARINA could encourage tax incentives and government support for shipyards transitioning to digitally integrated operations, ensuring better co-ordination and oversight.

• Enhance data availability on SBSR activities: The economic contribution of SBSR activities is a key indicator for tracking industry growth and impact. MARINA could work with the Philippine Statistics Authority (PSA) to further refine the Philippine Ocean Economy Satellite Accounts (POSEA), developing a clearer disaggregation of SBSR activities from other ocean economy sectors. This would provide more precise data for policymaking, investment planning, and international benchmarking, enabling better visibility of the SBSR industry’s role within the broader maritime economy.

1.6. Recommendations for the SBSR Development Bill of 2025

1.6.1. Key insights

The Philippine government is drafting the SBSR Development Bill of 2025, a legal instrument directly targeted at the SBSR sector. The Bill will shape the future policy approach for the industry, with filing expected in July 2025. Through the SBSR Development Bill of 2025, the role of the SBSR industry is formally recognised as a vital component of the maritime sector and a driver national economic growth. This legislation establishes the state’s policy to develop and enhance the quality and capacity of domestic shipbuilding, with a particular focus on expanding and modernising the domestic fleet. The New Development Bill outline five key objectives:

1. Building ships that adhere to safety standards established by the Philippine Ship Registry.

2. Creating a competitive business climate to attract investment and boost capital.

3. Providing capital incentives for long-term, sustainable growth.

4. Enhancing labour skills to facilitate adaptation to new technologies and emerging trends.

5. Promoting the industry’s green transition.

The ship recycling industry is also included within the scope of the New Development Bill.

1.6.2. Recommendations

Legal stability and administrative efficiency

Ensure the SBSR Development Bill strengthens investor confidence by tying incentives to clear outcomes, providing long-term legal certainty, and streamlining approvals to accelerate industry growth.

• Link financial incentives to measurable outcomes: The SBSR Development Bill of 2025 includes several financial incentives to promote investment in the shipbuilding and ship repair (SBSR) industry. However, these incentives could be more effective if tied to measurable outcomes and concrete targets on such as job creation, environmental compliance, and capital investment. For example, the Income Tax Holidays (ITH) is already conditioned on job creation and facility upgrades, and similar performance metrics could apply to other incentives.

• Ensure legal stability and guarantee tax incentives for the full lease duration: The SBSR Development Bill could further specify the conditions for Foreshore Lease Agreement renewals after the initial 50-year period, ensuring that tax incentives continue throughout the full lease term, with automatic extensions upon renewal, to eliminate legal uncertainties. The Bill could also include periodic reviews of the lease and incentives to ensure they align with industry needs and global trends, while safeguarding against any reduction or revocation of incentives.

• Streamline the approval process: The provisions could stress that MARINA's approval processes—such as for importing capital equipment, granting tax exemptions, and issuing safety certifications—be as efficient as possible. Introducing a centralised digital platform could simplify these processes, reducing administrative burdens and speeding up approvals for facility expansions and new SBSR entities, thus improving overall industry efficiency.

Decarbonisation and innovation

Position the Philippines to develop maritime technologies by embedding international environmental standards, supporting green R&D, and developing a robust, certified ship recycling industry.

• Strengthen green initiatives: The Bill promotes green shipyards, ships, and jobs, but these initiatives can be further strengthened by aligning them with international environmental standards. Integrating provisions that reflect the International Maritime Organization’s (IMO) MARPOL Annexes and the Energy Efficiency Existing Ship Index (EEXI) will ensure compliance with global regulations and boost the marketability of Philippine-registered ships. Additionally, Executive Order No. 159, which establishes the Inter-agency Coordinating Committee for maritime conventions, could be referenced to ensure co-ordinated action on international commitments.

• R&D for green technologies and practices: A key improvement is prioritising green R&D within the shipbuilding sector. The Bill could direct funding mechanisms, to focus on green projects. Strengthening collaboration with international green technology initiatives would allow the Philippines to leverage expertise and resources, positioning the country as a leader in sustainable maritime technologies and attracting global investment in green innovations.

• Developing a sustainable ship recycling industry: In anticipation of the Philippines’ adherence to the Hong Kong International Convention for the Safe and Environmentally Sound Recycling of Ships, the country could issue national guidelines requiring Ship Recycling Plans (SRPs) for all vessels prior to dismantling, in line with MEPC.210(63) guidelines. These plans could outline step-by-step dismantling processes, hazardous waste management, and worker safety protocols. Additionally, establishing a certification process would promote alignment of Ship Recycling Facilities (SRFs) with international standards, and offering incentives such as partial cost reimbursements for ship recycling practices would encourage shipowners to retire old vessels through certified SRFs, promoting both sustainability and economic growth.

Co-ordination

Enhance the Bill’s effectiveness through stronger inter-agency co-ordination and monitoring, ensuring responsive implementation and alignment with evolving industry needs and global best practices.

• Strengthening institutional co-ordination: The Bill outlines clear agency roles, but improved co-ordination could help support effective implementation. A Joint Monitoring Mechanism could enhance collaboration, track progress, and facilitate adjustments. Regular inter-agency assessments would ensure ongoing oversight and timely updates, supporting the Bill’s long-term success.

Table ‎1.1. Summary of recommendations for the SBSR sector

Policy area	Recommendation	Responsible authority
Opportunity 1: Modernise and develop the SBSR sector by fostering investment in advanced technologies, strengthening domestic supply chains, and positioning the Philippines as a competitive hub in the region
SBSR industry modernisation	Leverage instruments of the Strategic Investment Priority Plan (SIPP): Promote shipbuilding projects under the Green Lanes initiative, incentivise investments in the SBSR sector that integrate green technologies and address industrial value-chain gaps, particularly in steel and marine equipment production, under Tier II Classifications.	MARINA, Board of Investments (BOI)
	Maximise the benefits of economic zones for the maritime sector: Maximise economic zones for maritime growth: Adapt PEZA policies in key zones such as the Cebu Economic Zone and Subic Bay Freeport to create equitable opportunities for all shipyards and introduce targeted incentives to attract advanced vessel repair activities, further positioning these zones as hubs for maritime growth and innovation.	MARINA, PEZA, Subic Bay Metropolitan Authority
	Enhance collaboration with Local Government Units (LGUs): Strengthen collaboration with regional government entities, including LGUs, and facilitate the timely and accurate implementation of central initiatives across regions; promote increased communication, systematic data sharing, and co-ordinated efforts with LGUs to optimise.	MARINA, Local Government Units (LGUs)
Opportunity 2: Build a competitive and future-ready workforce by expanding skills in advanced and green shipbuilding technologies, promoting international training exchanges with structured repatriation, modernising testing and simulation facilities, and strengthening collaboration between academia, government, and industry
Labour and technology development	Strengthen education and training policies: Expand partnerships with SONAME, TESDA, and academic institutions to develop shipyard-focused training in digital and green technologies, encourage engineering and management skills development, and introduce scholarships linked to industry service to retain talent.	MARINA, TESDA, SONAME
	Leverage international exchange and labour turnover for skills enhancements: Facilitate temporary worker mobility, repatriation programmes, and partnerships with foreign institutes and multinational firms to enhance skills, promote technology transfer, and strengthen domestic shipbuilding capacity.	MARINA, University of the Philippines (UP)
	Modernise testing and simulation facilities: Invest in essential infrastructure such as towing tanks, testing centres, and simulation facilities to support advanced R&D and shipbuilding techniques. Support collaboration between universities, DOST, and the maritime industry to transfer knowledge and jointly develop innovative solutions.	MARINA, DOST
Opportunity 3: Strengthen the competitiveness and resilience of the SBSR sector by enhancing safety standards in shipyards and the domestic fleet, accelerating decarbonisation and digitalisation efforts, and improving data collection to support evidence-based policymaking and industry development
Decarbonisation, digitalisation, and safety	Enhance safety standards and compliance: Encourage expanded safety training in SBSR yards, incentivise adoption of best practices through certifications, and support modernising and enforcing safety standards for Philippine-flagged vessels to improve accident prevention and international compliance.	MARINA
	Promote green shipyards and decarbonisation: Launch a Green Shipyard Award to recognise best practices by yards in energy efficiency, waste management, and alternative fuel adoption, building on this a Green Shipyard Certification programme can be developed, with certification tied to government programme support.	MARINA
	Develop digital infrastructure: Invest in data and analytics systems, promote adoption of digital safety and monitoring tools in shipyards, and encourage government support for shipyards transitioning to integrated digital operations.	MARINA
	Enhance data availability on SBSR activities: Build on the Philippine Ocean Economy Satellite Accounts (POSEA) by PSA by developing more detailed breakdowns to separately track the economic contribution and growth of SBSR activities.	MARINA, PSA

Table ‎1.2. Summary of recommendations for the SBSR Development Bill

Policy area	Recommendation	Responsible authority
Opportunity 1: Ensure the SBSR Development Bill strengthens investor confidence by tying incentives to clear outcomes, providing long-term legal certainty, and streamlining approvals to accelerate industry growth
Legal stability, and administrative efficiency	Link incentives to outcomes: Ensure that financial incentives under the SBSR Development Bill, such as Income Tax Holidays (ITH) and tax exemptions, are tied to measurable targets including job creation, environmental compliance, and capital investment. Expanding these performance-based conditions across all incentives will help maximise their impact and align industry growth with national development goals.	MARINA
	Ensure legal stability: Clarify provisions for Foreshore Lease Agreement renewals beyond the initial 50-year period, guaranteeing that tax incentives remain valid throughout the entire lease term with automatic extensions. Introduce periodic reviews to ensure that lease terms and incentives remain aligned with evolving industry needs and global competitiveness, reducing legal uncertainties for investors.	MARINA, LGUs
	Streamline approvals: Strengthen MARINA’s approval processes for imports, tax exemptions, and certifications by introducing a centralised digital platform. This would reduce processing times, improve transparency, and support quicker expansions and new market entries for SBSR facilities, enabling more responsive industry growth.	MARINA
Opportunity 2: Position the Philippines to develop maritime technologies by embedding international environmental standards, supporting green R&D, and developing a robust, certified ship recycling industry
Decarbonisation and innovation	Strengthen green initiatives: Expand the Bill’s green shipyard and vessel provisions by aligning them with international environmental standards such as IMO MARPOL Annexes and the Energy Efficiency Existing Ship Index (EEXI). Reference Executive Order No. 159 to ensure co-ordinated inter-agency action on international maritime commitments and improve the global marketability of Philippine-built ships.	MARINA
	Prioritise green R&D: Direct funding under the Bill toward research and development of green technologies and practices. Encourage collaboration with international green technology programmes to access expertise, enhance innovation capacity, and position the Philippines as a competitive hub for sustainable maritime solutions.	MARINA, DOST, universities
	Promote sustainable ship recycling: Prepare for adherence to the Hong Kong Convention by developing national guidelines that require Ship Recycling Plans (SRPs) aligned with MEPC.210(63). Establish certification processes for Ship Recycling Facilities (SRFs), and offer incentives, such as partial cost reimbursements, to encourage responsible dismantling of vessels in certified facilities, supporting both environmental and economic objectives.	MARINA
Opportunity 3: Enhance the ’s effectiveness through stronger inter-agency co-ordination and monitoring, ensuring responsive implementation and alignment with evolving industry needs and global best practices
Co-ordination	Enhance institutional co-ordination: Establish a Joint Monitoring Mechanism to support co-ordination between agencies involved in implementing the Act. Regular inter-agency reviews and progress assessments will ensure timely adjustments and continuous alignment with strategic objectives.	MARINA, DOTR, DTI, DOST