This chapter explores the role of the shipbuilding and ship repair (SBSR) sector in the Philippine maritime economy, emphasising its strong performance in ship repair, growing interest in specialised vessel construction, and continued reliance on foreign investment and ownership. It examines structural challenges such as limited domestic-owned manufacturing capacity, dependence on imported materials and equipment, and constrained price competitiveness. The chapter also discusses recent trends, including changes in ship production and shifts in vessel types, while highlighting persistent data limitations on the SBSR sector’s contribution to GDP and efforts to enhance statistical reporting.
Peer Review of the Philippines’ Shipbuilding Industry
Abstract
SBSR play an important role in the Philippines’ maritime economy. With a long maritime tradition, the Philippines ranked as the world’s fourth-largest shipbuilding nation in 2022. Growth in SBSR activity has been largely driven by foreign-owned shipyards—such as Tsuneishi (Japan) and Seatrium (Singapore)—as well as sustained international investment. While domestic, non-foreign-owned yards remain primarily focused on ship repair, the broader sector continues to evolve in response to changing global demand.
Economic recovery has supported maritime industries, despite structural trade challenges. Post-pandemic GDP growth reached 5.5% in 2023, contributing to a rebound in maritime sectors including shipbuilding and sea-based transport. These accounted for 15% of ocean-based value added in 2023, according to the Philippine Ocean Economy Satellite Accounts (POESA). However, the country continues to face a persistent trade deficit. Shipbuilding exports peaked in 2014–2015 but have since declined, while vessel imports have risen sharply since 2021—particularly from Singapore.
The industry has experienced cyclical growth, with recent signs of recovery. Since the early 2000s, the sector expanded significantly, especially in bulk carrier construction, reaching a peak in 2014–2015. Activity declined in subsequent years, but 2023 data indicate a potential rebound, alongside a shift in vessel types and evolving market dynamics.
Data limitations hinder precise measurement of SBSR’s economic contribution. Currently, there is no disaggregated data on the specific contribution of SBSR and shipping to national GDP. A forthcoming study by the Development Academy of the Philippines (DAP) aims to provide a more detailed breakdown of maritime-related sectors. In the interim, available figures from the PSA’s Philippine Ocean Economy Satellite Accounts offer partial insights, particularly under categories such as ocean-based manufacturing and sea-based transport.
2.1.1. Historic overview of the maritime sector
The Philippines, an archipelago of 7 641 islands stretching from southern China to northern Borneo, has long been regarded as an ideal hub for the maritime industry, particularly the shipbuilding and ship repair (SBSR) sector. The country’s seafaring tradition dates to the 15th century when Filipinos were already engaged in maritime activities, including fishing, shipping, and the construction of boats such as the balangay (or balanghai) and galleons.
In 1952, the Philippine government took a significant step toward industrialisation with the establishment of a steel production initiative in Iligan City, Mindanao. This project, managed by the National Shipyards and Steel Corporation (NASSCO), used electric arc furnaces and bar rolling mills to produce reinforcing steel bars. NASSCO also developed a shipyard in Mariveles, Bataan, which produced the country’s first steel-hulled ships: the luxury liners M/V General Roxas and M/V Governor B. Lopes. This era was bolstered by the “Filipino First” policy of the 1950s, which aimed to promote local industries and support Filipino entrepreneurs in shipbuilding and steel manufacturing.
The Philippine Shipyard and Engineering Corporation (PHILSECO) was formed in the late 1970s as a government initiative through a joint venture between the National Investment Development Corporation (NIDC) and Japan’s Kawasaki Heavy Industries. PHILSECO, later renamed Subic Shipyard and Engineering, Inc., was the country’s largest shipyard at the time, primarily focused on ship repair. The company’s ownership included a mix of local and international investors. In 1994, PHILSECO was sold to Singapore-based Keppel Corporation, becoming the Subic Keppel Shipyard, now known as Seatrium Shipyard. Today, Seatrium specialises in ship repair and the construction of offshore vessels (MARINA, 2024[1]).
Another milestone in Philippine shipbuilding was the establishment of Tsuneishi Heavy Industries in Cebu in 1994, a joint venture between Japan’s Tsuneishi Group and the Aboitiz Group. This shipyard became a key player in the industry, producing approximately 20 bulk carriers annually, with capacities ranging from 30 000 to 180 000 tonnes. It has grown into one of the country’s top shipyards, employing over 10 000 workers directly and through partner companies.
In 2006, Korea also invested in the Philippine SBSR sector, although its operations closed down in 2019. Meanwhile, local firms expanded their capabilities to support the growing demand in shipbuilding and repair, contributing to the Philippines' status as the fourth-largest shipbuilding country globally, following China, Korea, and Japan. These three nations account for 95% of the global orderbook by deadweight as of 2022. The sustained development of the SBSR sector underscores the Philippines’ strategic importance in the global maritime industry (MARINA, 2024[1]).
2.1.2. Contribution of shipping and shipbuilding to the economy
The Philippine economy has demonstrated strong resilience and momentum in recent years, bouncing back significantly from the 9.5% drop in GDP in 2020 due to the COVID-19 pandemic. GDP growth reached 5.7% in 2021, accelerating to 7.6% in 2022 as the economy rebounded from pandemic-related disruptions. In 2023, growth remained steady at 5.5%, and in the first half of 2024, the economy expanded further by 6.0%, placing the Philippines among the top-performing economies in the Southeast Asian region (World Bank, 2024[2]).
This growth has been driven by robust domestic demand, sustained public investments, and the positive effects of investment policy reforms, which have boosted private sector participation. With continued reforms and recovery, the Philippines is poised to transition from lower-middle-income to upper-middle-income status. Over the medium to long term, the government’s strategy includes significant investments in human and physical capital to support inclusive growth. These developments are expected to sustain the momentum of economic growth, though challenges remain as the country navigates global economic uncertainties (World Bank, 2024[2]).
The recent macroeconomic development is strongly impacting the Philippines maritime industry. In 2023, the ocean-based industries in the Philippines grew by 9.9%, with its gross value-added increasing to PhP 943.05 billion from PhP 857.93 billion in 2021. This sector accounted for 3.9% of the country’s GDP, underscoring its critical role in the national economy.1 Among the various ocean industries, sea-based transportation and storage contributed 15.0%, coming as a third biggest industry after ocean fishing (28.6%), and manufacture of ocean-based products (20.9%) (Philippines Statistics Authority, 2024[3]).
Note: The category “Manufacture of ocean-based products” includes ship and boat building, ship repair, and the manufacturing of marine equipment. Similarly, “Sea-based transportation and storage” represents the shipping industry, encompassing the transport of passengers and goods.
2.1.3. Export and import
Based on the Philippines Statistics Authority’s trade data, the Philippines has consistently recorded a trade deficit since 2001, with the annual value of imports exceeding that of exports (Figure 2.2). This trade imbalance has been widening in recent years, driven by the country’s growing economy, which has led to an increased demand for imported intermediate inputs for industries and primary energy sources.
The classification of product groups, based on the Philippine Standard Commodity Classification (PSCC), highlights distinct trends in the country’s import and export activities. As illustrated in Figure 2.3, electronic machinery and mineral oil-related products have been the primary contributors to the growth of imports. Electronic machinery, in particular, plays a dual role in the trade dynamic. These products are imported, processed in the Philippines, and subsequently exported to global markets, where they constitute the largest share of the country’s exports.
The export value of the Philippines' ship and boat building industry showed a steady increase from 2006, reaching its highest levels around 2014 and 2015, with values approaching USD 2 billion. During this peak period, the industry's share of total exports also reached its maximum, exceeding 2.5%. However, after 2015, the industry experienced a gradual decline in both export value and its share of total exports. By 2023, the export value had decreased to below USD 500 million, with its share of total exports reduced to around 0.5%. This trend indicates that while the shipbuilding industry remains a component of the Philippines' export profile, its relative importance compared to other export sectors has lessened over the years.
The import value of the Philippines' ship and boat building industry has shown a gradual upward trend from 2006 to 2023, with notable acceleration in recent years. Between 2006 and 2020, imports remained relatively steady, averaging under USD 200 million annually, with minor fluctuations. However, beginning in 2021, there was a sharp increase, with import values peaking at over USD 1 billion in 2022. The share of imports in relation to total imports also rose significantly during this period, climbing from around 0.2% in 2020 to approximately 0.8% in 2022. Although import values slightly declined in 2023, they remained substantially higher than pre-2021 levels. This recent surge underscores the increasing reliance on imports to support the industry’s expansion.
Japan has consistently been the dominant trade partner for the Philippines in vessel exports over the past five years, accounting for 80% to 95% of the total export value in this category from 2019 to 2023 (Figure 2.5). This large share corresponds to Tsuneishi Cebu yard’s exports to Japanese shipping companies. In 2019, exports to Japan amounted to approximately 80% of the total, valued at USD 452.24 million, and by 2023, this share had increased to nearly 95%, reaching USD 458.60 million. Beyond Japan, other key export destinations include Singapore, Korea, Denmark and Spain. Notably, Denmark and Spain emerged as significant importers in 2021, with Denmark accounting for 10% and Spain for 8% of the total vessel export value that year.
The import patterns for vessels to the Philippines have shifted notably between 2019 and 2023 (Figure 2.6). During the period from 2019 to 2021, the country primarily imported vessels from South Korea, China, and Japan, with South Korea playing a particularly dominant role. However, starting in 2022, the total import value increased more than fourfold compared to 2021, accompanied by a broader diversification of importing partner countries. Singapore emerged as a major supplier, accounting for 32% of the total import value in 2022. This trend continued in 2023, with Singapore's share growing to an impressive 70% of the total import value. China has also seen steady growth as a source of vessel imports since 2021.
An analysis of the types of vessels imported during this period reveals distinct patterns (Figure 2.7). Over half of the imports from China consisted of "other transport vessels," referring to smaller vessels used for the transport of passengers and goods, rather than tankers or cruise ships. Meanwhile, approximately 40% of the imports from Singapore were dredgers, highlighting the Philippines’ focus on expanding its maritime infrastructure and transportation capabilities.
Source: (World Bank, 2024[2])
The Philippine SBSR industry is shaped by global trends and structural dependencies. The sector remains reliant on foreign investment, imported technologies, and international demand. It is vulnerable to global economic fluctuations and has been affected by the closure of foreign-owned shipyards. These developments underscore the need for infrastructure modernisation and technology upgrades. In parallel, limited domestic capacity in marine equipment manufacturing presents long-term challenges for industry resilience.
Cost competitiveness remains a key constraint for Philippine-built vessels. Compared to major shipbuilding nations— particularly China— Philippine vessels are often less competitive in terms of price. This is largely due to the reliance on imported marine components, which increases production costs, and the absence of economies of scale. Enhancing local production of marine equipment and supporting industry consolidation could help reduce costs and improve global competitiveness.
Strategic advantages and growing demand create opportunities for sector growth. The Philippines’ geographic position, combined with ongoing government investments in workforce development and infrastructure, supports potential growth in offshore vessel construction and ship repair. Rising demand for dredgers and other specialised vessels further highlights opportunities to expand domestic capabilities and integrate more fully into regional and global maritime supply chains.
Vessel completion data compiled from Clarksons World Fleet Register and S&P indicates significant growth in the Philippine shipbuilding industry since the early 2000s. The industry experienced its peak activity between 2014 and 2015, followed by a decline in recent years, with a slight recovery observed in 2023.
In terms of vessel types, bulk carriers and container ships dominate the Philippine shipbuilding output (Figure 2.8). Bulk carriers have consistently been the primary vessel type constructed since the early 2000s, maintaining their prominence through 2023. Container ship production, however, exhibited a notable increase beginning in 2008, surpassing bulk carrier completion between 2014 and 2018. Despite this earlier growth, container ship completion has significantly declined in recent years. Other notable vessel types completed in the Philippines include oil tankers, though their contributions are less prominent.
The price competitiveness of the Philippine shipbuilding industry can be analysed through the example of bulk carriers. Figure 2.9 indicates that the size range of bulk carriers completed in the Philippines is significantly narrower compared to those produced in Japan and China. Within this limited size range, Philippine-built vessels show price disadvantages, with one example of a similar-sized vessel built in China being approximately 40% cheaper.
This disparity in price can be attributed to several factors, including the heavy reliance on imported marine equipment, which raises production costs, and the absence of economies of scale that larger shipbuilding nations like China and Japan benefit from. Addressing these challenges is crucial for enhancing the global competitiveness of the Philippine shipbuilding sector.
Source: (OECD, 2024[7])
References
[5] Clarksons World Fleet Register (2024), Clarksons World Fleet Register, https://www.clarksons.net/ (accessed on 9 November 2024).
[1] MARINA (2024), Questionnaire, Maritime Industry Authority.
[7] OECD (2024), Price and cost data by vessel type 190101-240630, unpublished.
[4] Philippine Statistics Authority (2024), Trade: International Merchandise and Domestic, https://openstat.psa.gov.ph/database.
[3] Philippines Statistics Authority (2024), Ocean-based economy, https://psa.gov.ph/content/ocean-based-industries-expand-99-percent-2023-accounted-39-percent-gdp.
[6] S&P (2024), S&P Maritime Portal, https://maritime.ihs.com/Account2/Index (accessed on 9 November 2024).
[2] World Bank (2024), The World Bank in the Philippines, https://www.worldbank.org/en/country/philippines/overview.
← 1. The category “Manufacture of ocean-based products” includes ship and boat building, ship repair, and the manufacturing of marine equipment. Similarly, “Sea-based transportation and storage” represents the shipping industry, encompassing the transport of passengers and goods (see Annex A).