As the dispute over Subic Shipyards escalates, sources disclosed that there were at least five shipyards with foreign investors owning in excess of the 40 percent limit on foreign ownership in public utility firms.
With the promulgatioin of the Supreme Court ruling, these shipyards would immediately revert to being classified as public utilities and their foreign owners would be forced to comply with the ownership limit.
The shipyards were identified as Subic Shipyard and Engineering Inc. Keppel Philippines Marine Inc, Keppel Cebu Shipyard Inc, Tsuneishi Heavy Industries (Cebu) Inc, and FBM Aboitiz Shipyard/FBM Aboitiz Marine Inc, an equal joint venture between FBM Babock Marine Group and Aboitiz & Co.
The contested Supreme Court decision was a ruling in favor of the consortium that won the bid for the privatization of Philippine Shipyard and Engineering Corp. (Philseco). The group is composed of JG Summit, Sembawang Shipyards Ltd. of Singapore and Jurong Heavy Industries of Malaysia.
Philseco is a joint venture between Kawasaki Heavy Industries (KMI) and the state-owned National Investment Development Corp. (NDC). Government decided to privatize the facility in 1994 to raise funds.
To make this possible, the Asset Privatization Trust convinced KHI to give up its right of first refusal (ROFR) and instead exercise the right to top the winning bid when the asset was put on the auction block.
After the Gokongwei-led consortium won the public bid with an offer of P2.03 billion, KHI managed to top this bid and offered P2.13 billion for government’s 87-percent share in Philseco.
In its petition to the Supreme Court, however, JG Summit argued that government could not let KHI to own a majority shareholding in Philseco since the law classified it as a public utility.
The APT argued that another law has declassified shipyards and allowed foreign invetors to own up to 100 percent. Even if there was a 40 percent limit, the APT argued that KHI would not breach it since it would only end up directly owning less than 40 percent.
KHI’s nominee, Philyards Holdings Inc, would actually own the government shares and KHI owned only 40 percent of Philyard. The rest was owned by Magsaysay Lines, Keppel, Insular Life and the government which has a 10-percent stake.