Peer Review of the Philippines’ Shipbuilding Industry

5. Competitiveness

Abstract

This chapter assesses the competitiveness of the Philippine SBSR sector, drawing on a SWOT analysis to identify core strengths, structural challenges, emerging opportunities, and external risks. It highlights the sector’s strategic location, labour cost advantages, and potential in ship repair, while noting key constraints such as outdated infrastructure, import dependence, and skills shortages. The chapter also discusses how government policies, growing demand for specialised vessels, and increased interest in innovation and sustainability could enhance the sector’s long-term competitiveness if supported by targeted reforms.

The competitiveness of the Philippine SBSR sector is shaped by a mix of structural strengths, persistent challenges, and emerging opportunities. Table 5.1 provides a SWOT analysis of the industry, summarising insights from the report’s analysis on the wider maritime sector, the SBSR industry structure and key market trends. The main insights are the following:

1. The Philippine SBSR sector benefits from key locational, operational, and labour-related advantages. Its strategic position in Southeast Asia, combined with consistent demand for inter-island transport and the presence of major foreign-owned shipyards such as Seatrium and Tsuneishi, underpins strong activity—particularly in ship repair. These advantages are reinforced by a low-cost, readily available labour force with basic technical skills, and access to in-house training in international yards.

2. Competitiveness is undermined by outdated infrastructure, import dependence, and skills gaps. Many domestically owned shipyards lack modern facilities and rely heavily on imported marine-grade steel and machinery, limiting local value creation and raising production costs. These structural issues, combined with the absence of economies of scale, weaken price competitiveness relative to major shipbuilding nations. Workforce emigration and the limited availability of specialised education further constrain domestic capabilities.

3. Recent policy initiatives and market trends present a pathway for growth and diversification. Government programmes such as the MIDP 2028 and the proposed SBSR Development Bill aim to attract investment, upgrade skills, and support technological innovation. Liberalised investment rules and growing demand for specialised and low-emission vessels provide opportunities for local yards to move beyond basic assembly and capture higher-value segments of the market.

4. Realising this potential requires targeted reform and sustained investment in domestic capacity. Improving infrastructure, strengthening safety and environmental standards, and closing workforce gaps are critical to reduce dependence on foreign inputs and know-how. Without such reforms, the sector risks remaining a lower-tier supplier in the global value chain rather than becoming a competitive maritime manufacturing hub.

Table ‎5.1. SWOT analysis of the Philippine SBSR industry

Strengths	Weaknesses
Consistent demand for water transport due to the country’s archipelagic nature.  Strong potential in ship repair activities, and the presence of established SBSR players. Strategic location in South-East Asia, especially for ship repair activities Established shipbuilding capabilities, supported by major shipyards (Seatrium, Tsuneishi) and foreign investments. Large pool of labour supply with basic skills, low regional comparative cost of labour, and in-house training available for international yards	Many domestically-owned shipyards rely on outdated facilities Significant reliance on imported materials like marine-grade steel and machinery reduce local added value Reduced price competitiveness due to reliance on imported marine equipment and lack of economies of scale Weak implementation of safety standards, outdated facilities, workforce emigration, and a lack of domestic high-level education system for shipbuilding and ship repair employment
Opportunities	Threats
Liberal government policies allowing 100% foreign ownership and government incentives for export-focused ship construction, making it attractive to international stakeholders. Promotion of the development of the maritime industry through strategic policies by the Philippine government (e.g., The Maritime Industry Development Plan (MIDP) 2028) to encourage competitiveness, workforce and skills promotion, innovation and sustainability.   Diversification in vessel types and rising domestic demand for specialised vessels Opportunities for a growing workforce for domestic shipyards and increased government initiatives like TESDA-certified programmes. Establish ship research facility, increase R&D efforts	Lack of ancillary industries and reliance on imported materials like marine-grade steel and machinery.  Preference for imported vessels by domestic shipping companies due to the difficulties faced by local shipyards to compete with international players.  Short-term land leases discourage investors to support shipyards.  Collaboration of domestic yards with international designers for complex work often relegates domestic yards to “assembly lines” roles. Dependence on foreign shipyards and risk of foreign closures Insufficient training programmes and limited skilled workers (for domestic yards) exacerbate workforce issues. Difficulty sourcing highly skilled labour because of low regional comparative cost of labour leading to brain drain.