Hanjin Heavy Industries Corp.’s proposed $1 billion shipyard in Misamis Oriental has hit a snag.

Hanjin, operator of the biggest shipyard in Subic and which has invested over $1.7 billion in the past year, wants a second yard to accommodate more ship orders.

A high ranking government source said Hanjin’s plan is being derailed due to a number of issues, including cumbersome requirements from the local government and the question of incentives.

Another source privy to the ongoing negotiations said Hanjin wants to finalize talks by October and the government is exhausting everything to iron out the remaining kinks.

The area offered by government for Hanjin’s new shipbuilding facility, the state-owned Phividec Industrial Estate in Misamis Oriental, has yet to be declared as economic zone by the Philippine Economic Zone Authority for proclamation by Malacañang.

Its current status does not allow it to grant incentives to export-oriented companies, such as that of Hanjin.

The official added that Hanjin is also facing problems in the local government front which demands written assurance on the number of jobs to be generated from the project, per household.

The source said Hanjin needs 300 hectares for the yard. Phividec straddles two towns in Misamis, Valenzuela and Tagoloan, both of which are seeking firm commitment for jobs.

Hanjin would be bringing in its suppliers for the shipbuilding project that would generate further employment.

This new plan follows its ongoing $1.684-billion shipbuilding project in Subic .

In June, HHIC said it would be making an additional investment of $684 million at the Subic Bay freeport after its earlier $1-billion investment.

Since Subic no longer has space to offer, government offered Phividec.

The additional investments would fund the remaining work for the shipyard and the additional orders for vessels which altogether now stand at $3 billion worth.

The Subic shipyard will transform Subic into one of the four largest shipbuilding facilities in the world.

HHIC recently began the fabrication of its first container vessel, costing some $70 million, in its Subic Freeport shipyard.

The Korean company is also scheduled to deliver 33 medium-sized container vessels worth almost $3 billion in the next two years, and build 82 large-sized ones from 2009 to 2011.

Included in Hanjin’s production pipeline is the fabrication of a multimillion-dollar vessel, which would be the biggest ship in the world.

Hanjin’s Subic expansion itself would increase job generation five times to 15,800 in five years. Hanjin directly employs almost 3,000 employees for its shipbuilding operations.

Hanjin was the country’s biggest single foreign direct investment into the Philippines last year.