Subic Bay Thrives in Post-US Era

Asia Enterprise

Five years after the eviction of American troops from their largest base in Asia, Subic Bay is dramatically transformed and ambitiously planning to reinvent itself as the region's next Hong Kong.

The bustling site, now sprouting new industrial developments, is almost unrecognizable as the base through which 4.1 million servicemen passed at the height of the Vietnam War.

At the time of the base closing in 1991, most predicted the area would fall into disuse. Instead, thanks to the vision and charisma of one Filipino, Richard Gordon, the grandson of an American sailor, Subic has risen from the ashes to become a thriving international free port.

Through sheer conviction, Mr. Gordon mobilized 8,000 local people left jobless by the American troop withdrawal to work without pay - some of them for up to two years - to maintain and protect the base while he lured in foreign investors.

Within five years, the Subic Bay Metropolitan Authority (SBMA), benefiting from political stability and economic growth created by the administration of President Fidel Ramos, has attracted hundreds of foreign companies. These include the Asian headquarters of Federal Express and Acer computers of Taiwan. So far, total exports for 1997 have reached almost $3 billion.

Subic was also the venue for the 1996 APEC summit attended by President Clinton, and has been visited and praised by international figures from Margaret Thatcher to Iran's former President Hashemi Rafsanjani.

Encouraged by such success, Gordon has now produced a "Hong Kong Strategy," aiming to cash in on the handover to China of the former British colony. He hopes to entice at least 50 of Hong Kong's 400 banks to Subic and develop it as an offshore financial center.

"Subic has an ideal central location in Asia in a stable and English-speaking country, and has tremendous space advantages over Hong Kong," Gordon says, "We also have a dedicated local work force of people who have shown they are prepared to work, unpaid, to secure their future."

The 45,000-acre site also benefits from abandoned US Navy infrastructure worth $8 billion, including docks, an airport, warehouses, and a state-of-the-art generator to protect businesses from the perennial power cuts that continue to plague the Philippines. There is even a 30,000-acre virgin rain forest, one of the largest in the country, which was protected from illegal loggers by the US military presence and is now being touted along with Subic's beaches as a tourist attraction.

On paper, Subic's rags-to-riches story is undoubtedly inspiring. But many feel the SBMA chairman's continued expansion plans are unrealistic.

"If Richard Gordon thinks he can make this place another Hong Kong, he's making a huge mistake." says Brian Johnson, the managing director of an Australian wet suit manufacturer, Subic Surf Corporation. "My three years here have been terrible, and I'm hoping to get out as soon as I can."

Officials cause gridlock

Among an array of problems facing investors, Mr. Johnson blames bureaucracy, high rents that offset the benefits of tax incentives, and constant battles with corrupt customs officials. Denied traditional hefty bribes, Johnson says, these officials cause continual gridlock by deliberately delaying the clearance of imported raw materials.

Other investors criticize Gordon's refusal to create a committee of investors, which would give them an input in planning Subic's future, and many resent that they are expected to recruit their work forces from Gordon's band of Subic volunteers.

Johnson also cites what he calls Gordon's "dictatorial" tactics as an impediment to doing business at Subic.

Gordon's executive staff consists of a group of hand-picked, mainly US-educated, enthusiastic twenty-somethings who display absolute and unquestioning devotion to "the chairman."

The imposition of an almost military discipline extends to the security guards, who salute as Gordon approaches and recite a 12-point pledge of professionalism upon command.

Parking violations and other misdemeanors are strictly punished, and rumors have even circulated about the phones of "unfriendly investors" being tapped.

This, in an environment of perfectly manicured lawns, gleaming offices, and buses running to a clockwork schedule, gives Subic a surreal atmosphere quite at odds with the regular Philippine pollution and chaos just outside its gates.

Most investors very pleased

Of course other thriving trade centers like Hong Kong and Singapore are not democracies either. And not all of the Subic investors are grumbling.

Fed-Ex Asia delivers 2.8 million packages daily from its Subic hub. In the courier company's opinion, Hong Kong was never an option as the airport is not open 24 hours - an absolute necessity.

Spokeswoman Lira Labore says: "Asia is becoming the most exciting trade center in the world, and Fed-Ex felt it was right to have our presence here."

Jeremy Simpson, president of Cambium International Inc., British manufacturers of high-quality humidors, relocated to Subic from Hong Kong in 1994.

"What we were promised, we have got," he says. While he admits there are "certain irritations," he says a duty- and tax-free port like Subic needs stiff rules to protect it, especially in a country where corruption is rife.

"Compared with other places I have worked in Asia, this is heaven on earth," says Mr. Simpson. "People speak English, the environment is great, and there is law and order."

Politics, petty rivalries a drawback

However, Simpson doubts whether Subic has what it takes to fulfill Gordon's dream of turning it into an international banking center like Hong Kong. "However successful Subic itself might seem, I think there is too much corruption and political squabbling in the country as a whole," he says. "This is a manufacturing and not an economic base, and I can't see any reason why Hong Kong's international banks would move here."

Perhaps most important, many politicians 75 miles away in what Gordon dubs "imperial Manila" are jealous of his single-handed successes and "go-for-it" attitude in a country where economic development is still largely hampered by stifling bureaucracy and corruption.

Without the concerted backing and support of the national government, these petty rivalries alone could keep Subic off the world map at a time which could make or break its future.

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