Bailout money for Hanjin rehab ‘may be justified’—Diokno

A government takeover of financially-distressed Hanjin Heavy Industries and Construction Philippines Corp. is not in harmony with the traditional role of the state, Budget Secretary Benjamin Diokno said Wednesday.

Instead, bailing out the Korean shipbuilder similar to the experience of the US government in the case of Chrysler is a more justified approach, the Cabinet official said.

“An outright takeover goes against the traditional role of government,” Diokno told reporters on the sidelines of a media forum in Manila.

The Budget chief was asked to comment on the possibility of government taking control of the South Korean shipbuilder based in Subic, Zambales as suggested by senators.

Defense Secretary Delfin Lorenzana earlier said President Rodrigo Duterte was “very receptive” to the idea of a government takeover of the debt-saddled Hanjin Philippines and use the shipyard to build vessels for the Navy and Coast Guard. 

“Government taking over a private enterprise is a major policy shift. However, a government rescue of a distressed private enterprise, whose shutdown has enormous employment and output effects, may be justified,” Diokno said.

He cited what the US government did to save carmaker Chrysler Corporation from bankruptcy in 2009.

In 2009, Chrysler asked the US government for funding to continue its operations after it declared bankruptcy. The company was gradually acquired by Turin-based Fiat after emerging from a US government-backed bankruptcy restructuring and bailout. 

“If I remember it right, ang analogy niyan ‘yung nag-fold ‘yung Chrysler sa US. Tinakeover siya ng government. It provided money for its rehabilitation ganun ... So it will be something like that,” Diokno said.

“That was done in the US, a bailout of a distressed company to avert huge employment and output effects. That could be used to justify a policy action to avoid a shutdown of Hanjin’s operations in the country,” he said.

The Olongapo City Regional Trial Court Branch 72 officially placed the Korean shipbuilder under corporate rehabilitation after Hanjin Philippine sought financial relief from its ballooning obligations to local and Korean lenders.

According to the Subic Bay Metropolitan Authority, officials of cash-strapped Hanjin Philippines revealed that the company owes Philippine banks some $400 million on top of another $900 million from lenders in South Korea.

Hanjin Philippines was established in 2006 as a subsidiary of Hanjin Heavy Industries & Construction Co. Ltd., a multi-national company that provides shipbuilding, construction, and plant services in South Korea and internationally.

In the course of its operation, the shipbuilder became the biggest employer among all registered businesses in the Subic Bay Freeport Zone, with some 30,000 employees at peak season. It was recognized by both the Philippine Exporters Foundation and the Department of Trade and Industry as top export performer, according to the SBMA.

But in the face of a liquidity problem, Hanjin Philippines laid off more than 7,000 workers last December and is about to lay off another 3,000 early this year until just about 300 local workers and as few as seven Korean supervisors would remain in March to do facility maintenance, the SBMA said.

Diokno said the government is still laying out the specific actions to address the problem with Hanjin Philippines.

“Wala pang concrete plan but we will not allow it to just fold without any contingency plan,” he said.

“There will be a ‘white knight’ who will take over with our assistance,” he added.

At least two Chinese shipbuilders and two other foreign companies are interested in investing in Hanjin Philippines. —VDS, GMA News