Portuguese firm, other investors set eyes on PH defense industry

This photo taken on February 16, 2024 shows Chinese coast guard personnel aboard their rigid hull inflatable boat (left) closely trailing another vessel (right) operated by the Philippine Bureau of Fisheries and Aquatic Resources (BFAR) personnel from the BRP Datu Tamblot trying to enter the China-controlled Scarborough Shoal, as a larger Chinese vessel (background) is seen in disputed waters of the South China Sea. The Philippines on February 17 accused Chinese coast guard vessels of “dangerous” maneuvers for attempting to block a Filipino vessel dropping supplies to fishermen at a reef off the Southeast Asian nation’s coast. —photo by Ted Aljibe/Agence France-Presse

MANILA, Philippines — The increasingly brazen incursions of Chinese vessels in the West Philippine Sea have drawn international attention to the Philippines—particularly stoking investor interest in the country’s burgeoning defense and security sector.

For example, EID, one of the leading high technology and innovation companies in Portugal, is looking into the possibility of setting up a local manufacturing facility for its line of tactical communications and military messaging equipment in cooperation with a local private-sector partner.

READ: China Coast Guard seizes PH supplies for Ayungin

Gregory Flippes, EID marketing and sales director, said the company’s goal was to “develop our footprint” in the Philippines, which it considers one of its key markets because of the budget set aside for military modernization.

“We are exploring all kinds of industry participation,” Flippes said during the recent Defense Services Asia Exhibition in Kuala Lumpur, Malaysia.

He said EID is also looking forward to the signing of a cooperation agreement between Portugal and the Philippines that should usher in more investments from Portuguese companies.

READ: Marcos slams China Coast Guard detention threat

Local repairs, manufacture

Jeruel Sanchez, president and chief executive officer of Asia Defense and Firepower Corp. (ADFC), said other foreign companies have expressed interest in the Philippines’ defense industry, adding that talks of localization are “so advanced” that commercial offers to supply military hardware and software were already submitted last year to the Department of National Defense and the Armed Forces of the Philippines (AFP).

He said a Spanish shipbuilder, which he declined to name for now, had offered to build a facility in Bataan province, where warship guns as well as navy warships can be built locally in a modern shipyard, to replicate the warship building capabilities of Australia.

“Australia did not have warship building capability two decades ago, but now the Australia Navy is poised to become the strongest navy in the region,” Sanchez said, adding that the Philippines can replicate that success.

“Traditionally, our modern warships had to travel to overseas shipyards for their maintenance and repairs because no local shipyards can maintain and repair modern warships, which means our modern warships spend a lot of time overseas instead of protecting our territorial waters,” he said.

But with the facility in the Philippines, repairs can be done locally and the vessels can therefore patrol the country’s vast territory for a longer time instead of being sent for extended periods abroad for repairs and maintenance.

Pending priority measure

There is also a British technology company proposing to build a state-of-the-art vehicle workshop that can repair and upgrade the AFP’s fleet of aging 30-year-old Army trucks, which could add another 30 years to their service life at a fraction of the cost.

For ADFC, one of the leading suppliers of various military equipment to the AFP, the idea is to move toward the local assembly of armored personnel carriers in Bataan through technology transfer.

A German firm has also offered to build a propellant powder factory in Luzon, which should secure the AFP’s requirements for this major component in the manufacture of ammunition.

These commercial offers, however, are “languishing” in desks—as decision-makers await the passage of the Philippine Defense Industry Development Act (PDIDA), to guide the concerned government agencies on what proposals will meet the standards to be embodied by the long-pending measure.

The proposed law, also called the Self-Reliant Defense Posture Act, seeks to develop the country’s defense industry and enhance its locally produced advanced weaponry and equipment for the AFP.

Although still pending, the measure is among the legislative priorities of the Marcos administration.

Sanchez urged Congress to immediately pass the PDIDA so that private companies such as ADFC and other potential foreign investors can invest in big-ticket projects such as munitions manufacturing under a clear state policy of defense self-reliance.

“Reviving the nation’s self-reliant defense posture program and maximizing the capabilities of the defense industry is essential, particularly as security threats loom large and evolve rapidly,” he said.

‘Self-reliant defense program’

Among the key provisions of that measure is the preference for locally produced materiel or military equipment for the country’s defense forces. Importation will only be resorted to if the requirements cannot be produced locally—and with the ultimate objective of securing the technology so that production can eventually be done in the country.

Another provision is for the Board of Investments to adopt special procedures that will hasten the registration of enterprises keen on taking part in the defense industry.

The measure had already passed the House and is being pushed in the Senate by Sen. Juan Miguel Zubiri, who called it a “key measure” to support ongoing efforts to enhance the country’s defense and security capabilities.

“While we value our defense cooperation with other foreign allies, we cannot rely on them entirely,” he said, adding that “overreliance on our allies leaves us on the back foot—always waiting, and always dependent on what they will supply us with.”

The Philippines, Zubiri said, is among the top importers of arms among members of the Association of Southeast Asian Nations, spending $338 million in arms imports in 2021—next to Singapore and Myanmar.

Compared to these countries, he said the Philippines could manufacture its own with the help of foreign partners.

“We need to be able to produce our own needs, on our own time. We have the resources. We have the manpower and the skills. And I am quite hopeful that we also now have the political will to push this through. That is why PDIDA should come in, as a vital move toward a truly self-reliant defense program,” Zubiri said.