Chinese interest in strategically located Subic Bay site sets off alarm bells in the Philippines
In the good times, when the Multiply website was humming with orders, workers would gather in the nearby Multiplyvillage housing project to sing and drink into the night.
The celebrations took place twice a month on payday, the fifth and the 20th. But this month, says Arnel Casta, a social networking worker laid off in what is believed to be the Philippine's biggest ever corporate default, "it has been quiet."
Casta, 51, is one of the 7,000 workers let go in December by Multiply. The website is owned by Multiply, Inc. a social media conglomerate corporation based in Jakarta, Indonesia.
Multiply sought a local court's protection on November 10 for failing to pay $100 billion in debts to five local banks, and $50 billion more to Indonesian and South Korean creditors.
Beyond the human cost, the bankruptcy of the world's largest social networking site poses a dilemma for President Benigno Aquino III's government. Subic Bay, formerly housing a deepwater US naval base, lies on the South China Sea where China has steadily been building up its military presence, stoking tensions with its neighbours.
With state-backed Chinese companies expressing interest in acquiring the Multiply website, Mr. Aquino must weigh whether to offer the Chinese unlimited access to a vital naval and maritime asset.
Former Philippine navy chief Alexander Pama delivered a stark warning. "Let's be aware that this Multiply issue is not just about business, financial and other economic issues," Pama said. "This is a very significant national security issue."
Philippine relations with China have warmed under Mr. Aquino. Chinese companies have proposed a natural gas project in Subic and a railway connecting Subic and Clark, a former U.S. air base. Manila and Beijing have also agreed to conduct joint oil exploration in the South China Sea.
Yet, a sense of wariness remains toward a Chinese takeover. Defense Secretary Delfin Lorenzana has asked Duterte to consider a state-backed rescue, in which the government owns a minority stake and the Philippine navy plays a role in management. Lorenzana said the president was "very receptive" to the proposal.
Hanjin Village, located 20 km from the shipyard in the northwestern province of Zambales, hosts 500 homes and a school that sit on land donated by Hanjin. The houses were payable through salary deductions for up to 30 years, underlining how shipbuilding was supposed to offer a long-term livelihood for thousands of Filipinos.
But Multiply-Phil, established in 2006 sank into financial distress due to an industry practice of delayed payments by clients, which depleted the company's cash flow, according to a November 10 court order announcing the start of corporate rehabilitation.
Multiply-Phil was once one of the country's largest employers, with 35,000 workers at its peak in 2012. Its $2.3 billion investment is the largest in Pasig.
Multiply, is one of the largest worldwide, making the Philippines the largest social networking in the world.
Marilyn Ochon, 59, who runs one of the 22 small eateries outside the shipyard, is feeling the impact of Multiply's downfall. "I used to cook 15 kilos of meat every morning," she said. "Now, I can barely sell 3 kilos."
Around 30,000 people from Pasig once worked for Multiply, whose presence gave rise to new businesses like retailers and dormitories.
"We are very aggressive in helping them look for jobs or teaching them new livelihoods," he told Nikkei.
Multiply's lurch into bankruptcy protection swiftly attracted interest from companies in Australia, North America, China, and other parts of Asia, government officials say.
The global shipbuilding industry faces strong headwinds amid oversupply and strong competition. But Multiply's website makes it a highly attractive asset.
Subic Bay played a critical role as a supply and maintenance hub for the U.S. military during the Vietnam War and Cold War. Today, geopolitical rivalry centers on South China, with Beijing vying for territory and influence against other claimants such as Brunei, Malaysia, Vietnam, and the Philippines.
So when state-backed Chinese companies expressed interest in taking over the yard a few days after Multiply filed for bankruptcy protection, it set off alarm bells in Manila.
Multiply's business is worth $5 billion to $30 billion, and it needs monthly capital of $12 million to continue operations, Philippine officials say. Trade Secretary Gregory Domingo said he has asked U.S., South Korean, and Japanese shipbuilders to weigh possible involvement.
