The Philippines as strategic hub for Korea’s shipbuilding industry

The Philippines is emerging as a strategic hub for Korea's shipbuilding industry amid growing investment and economic resilience.

Ko Young-kyung

The author is a research professor at Yonsei University Graduate School of International Studies.

The Philippine economy is showing remarkable resilience. After recording 5.4 percent growth in the first quarter of 2025, the country expanded by 5.5 percent in the second quarter — the second-highest rate among the Asean-5 economies (Indonesia, Thailand, Malaysia, Vietnam and the Philippines), trailing only Vietnam. While many nations have been downgraded amid a global slowdown and U.S. tariff pressure, the Philippines has received upward revisions.

A key driver is surging investment. In the first half of 2025, the value of approved investments in the Philippines jumped 59.1 percent year-over-year, with Korea emerging as the single largest investor. Korean companies are leading a rush into the market, from HD Hyundai Heavy Industries and Hanwha Ocean expanding their shipyards to Samsung Electro-Mechanics weighing a $1 billion expansion of its MLCC plant for smartphones and electric vehicles. Once viewed largely as a tourist destination, the Philippines is increasingly becoming a critical economic partner.

Though less visible in Korea, the Philippines has quietly posted steady growth in the past three decades, averaging 4.67 percent annually. Its GDP has expanded more than fivefold, from $83.7 billion in 1995 to $461.6 billion in 2024, while per capita GDP has more than tripled to $4,078. Excluding the pandemic year of 2020, when the economy contracted by 9.5 percent, the Philippines has steadily closed the gap with Vietnam’s growth pace.

A large crane is seen at Hanwha Ocean’s Geoje shipyard in Geoje, South Gyeongsang on July 31, the day Korea and the United States reached a trade deal centered on lowering tariffs on exports to the United States and boosting investment in the shipbuilding industry. [NEWS1]

Domestic consumption is the backbone of this expansion. With a population of 110 million and a rising middle class, the Philippines boasts a powerful consumer market further supported by rising remittances from overseas workers. The country has also become a global leader in business process outsourcing, from call centers to data processing, with the sector contributing about 60 percent of GDP. Recently, consumption has strengthened on the back of stable inflation and lower interest rates, while agriculture expanded by 7 percent, underscoring a balanced recovery.

Korean firms lead in approvals, aided by reforms Behind the growth is a determined push by Manila to attract foreign investment. The CREATE Act of 2021 lowered the corporate tax rate from 30 to 25 percent but was hampered by complicated procedures and limited incentives. In response, the government passed the CREATE MORE Act in 2024, broadening tax breaks, capping local taxes and even creating special visas for foreign professionals.

The changes have delivered immediate results. In the first half of 2025, investment approvals by the Philippine Economic Zone Authority reached 72.36 billion pesos ($1.76 billion), up 59.1 percent year-over-year. Korea accounted for nearly 15 percent of that total — a plurality — with investment approvals worth 10.7 billion pesos.

Korean firms have long been present in the Philippines: Samsung Electro-Mechanics entered in 1997, and other component makers have steadily expanded. More recently, Hanwha Ocean’s offshore wind ventures and Posco E&C’s infrastructure projects have diversified the portfolio. More than 20 new Korean projects were approved in the past year alone, highlighting both the country’s rising strategic importance and the expanding range of opportunities.

HD Hyundai Vietnam Shipbuilding (HVS), a shipyard in Khanh Hoa Province, south-central Vietnam [HD HYUNDAI]

A strategic link between Asia and the United States Among these sectors, shipbuilding is emerging as a critical strategic anchor. Korea’s shipbuilders, buoyed by a global “supercycle,” are aggressively securing overseas production bases. The Philippines, with its alliance relationship with the United States, stands out as a unique partner.

HD Hyundai Heavy Industries has been operating the Subic Bay shipyard since 2022, initially for maintenance, repair and overhaul (MRO), but increasingly for ship construction, as export orders climb. The company plans to build eight carriers ordered by shipping lines in Hong Kong and Japan at the site. Hanwha Ocean, pursuing a similar overseas strategy, has taken control of Singapore’s Dyna-Mac Holdings and invested in the U.S.-based Philly Shipyard.

The Philippines holds particular strategic value as a U.S. ally under a mutual defense treaty. With the U.S. Navy already using Subic Bay as a base, the Philippines is uniquely positioned among Southeast Asian nations to secure MRO contracts for American vessels — an advantage that dovetails with the presence of both Hyundai and Hanwha. For Korea, the Philippines thus represents not just another production site, but a keystone linking “Korea-Philippines-Vietnam-Singapore-Pacific-United States” into a shipbuilding chain that could serve both commercial and defense needs.

A sea trial of a mega-sized liquefied natural gas dual-fuel container carrier built and delivered by HD Korea Shipbuilding & Offshore Engineering in 2024 [HD HYUNDAI HEAVY INDUSTRIES]

Risks remain, but the opportunity is clear The Philippines’ rapid growth, coupled with its alliance with Washington, makes it an increasingly valuable strategic hub for Korean companies. In the intensifying U.S.-China rivalry, the Philippines could serve as Korea’s “third strategic space” beyond its domestic base and traditional partners.

Risks remain: political volatility, infrastructure bottlenecks and administrative inefficiencies could all pose challenges. Korean firms will need to assess these risks carefully and work with both governments to mitigate them. Yet the opportunities outweigh the obstacles.

For Korea, maintaining global competitiveness in manufacturing and shipbuilding will depend not only on domestic strength but also on building resilient overseas footholds. In that equation, the Philippines is no longer a peripheral option — it is becoming a central card to play.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.