New mission for former U.S. bases

New mission for former U.S. bases
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Joaquin L Gonzalez III looks at the transformation of Subic Bay
and Clark Air Base to hubs of economic activity
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As growth among the countries in the Asia-Pacific cools down,
an alternative phenomenon to watch in the region these days is
the transformation of two former U.S. military installations in
the Philippines. In the four years since the U.S. armed forces'
departure, due to the expiration of the 1947 Military Bases
Agreement (MBA), Subic Bay Naval Base and Clark Air Base have
gradually transformed from bases of US strategic interests to
bases of Philippine economic stability and growth. A new mission
in a new era of international relations.

Under the umbrella of the Philippines' Bases Conversion
Development Authority (BaseCon), these past staging areas for
U.S. military operations in the Pacific have been hailed by
President Fidel Ramos as critical growth centers pushing the
country's economy forward through much-needed trade, tourism
and investments -- a fact that is quite evident in the "invasion"
of major domestic and foreign companies trying to establish
beachheads in a growing economy.

In the past, military analysts argued that the security
significance of the bases to the Philippines, the United States and
its regional allies could never be taken for granted. Subic Bay Naval
Base and Clark Air Base were some of the strongest pillars of
America's defense posture in the Pacific, being the largest U.S.
navy and air force facilities outside the U.S itself. To imply
further its domestic significance, former Defense Secretary Dick
Cheney predicted that an American withdrawal from these bases
would be "a real tragedy for the Philippines".

Subic Bay was home to the Seventh Fleet's carrier strike
force, Task Force 77, and nine other major commands and smaller
units which included SEAL commandos, Marines and Navy Seabees.
Clark Air Base was the headquarters and launching point for the
13th Air Force, comprising the Third Tactical Fighter Wing, the
90th Tactical Fighter Squadron, the 26th Aggressor Squadron, and
other training and airlift groups. Geographically, these two
important military facilities had the task of underpinning stability
in South-east Asia and part of the Indian Ocean.

One of their main strategic missions was to effectively
neutralize the growing Soviet military power in South-east Asia.
This became more compelling after the Soviets took over former
U.S. naval and air facilities at Cam Ranh Bay, Vietnam, some 700
nautical miles, or one hour's flying time, west of the Philippines.

The Soviet presence in Vietnam was considered a serious
security threat to countries in the region. As part of their
defense objectives, Subic and Clark were also used as important
logistics, training and support centers for U.S. military
operations during the Korean and Vietnam wars and, more recently,
the Gulf War.

The Philippines relied heavily on the security these bases
provided as part and parcel of the country's external defense.
Furthermore, the bases played a significant economic role in the
country. According to U.S. Defense Department officials, the
military spent about US$507 million every year to maintain the
day-to-day operations of these facilities. Approximately 68,000
Filipinos were employed on the bases. This made the U.S. armed
forces the second largest employer next to the Philippines' national
government. About $100 million went to pay the annual salaries of
Filipino workers. Much-needed jobs were also created outside the
bases.

All of this, however, came to an end in September 1991 when
the Philippine Senate rejected a proposed Philippines-U.S. Treaty
of Friendship, Peace and Cooperation and the new Military Bases
Agreement, which would have extended the American stay for 10
more years. After this rejection, former President Corazon Aquino
signed the Bases Conversion and Development Act, initiating the
free ports and special economic zones under the Subic Bay
Management Authority and the Clark Development Corporation in
March 1992. By November 1992, the last warship, the amphibious
assault ship USS Belleau Wood, left Subic Bay, ending more than
400 years of foreign military presence in the Philippines.

Since the start of their conversion in 1992, international
investment consultants and trade analysts, especially from around
the Asian region, have predicted a sustained business influx into
the two former military bases. This was definitely good news for
Philippine economic planners, who for many years had been trying
unsuccessfully to spark off much-needed domestic market activity.
The Philippine economy clearly needed the boost it could get from
these economic zones, which are integral parts of the
Subic-Clark-Manila Buffer Growth Triangle. Many business ventures
are attracted to Subic and Clark because of their inherent
advantages over other local and foreign alternatives, such as
location, a committed leadership, quality labor and established
infrastructure.

Strategically located in one of the most economically active
regions in the world, Subic Bay Freeport Zone in Olongapo City and
Clark Special Economic Zone in Angeles City both boast a liberal
trade and investment package that has been tantalizing global
entrepreneurs, who seek to maximize East Asia's consumer boom,
emerging markets and regional linkages. The lucrative investment
possibilities seem endless, ranging from manufacturing to tourism
and even agriculture. Just like any freeport or special economic
zone in the world, these two hubs offer prospective investors tax
incentive packages. This means tax-free and duty-free importation
of capital equipment, raw materials, and finished goods.

The administration and operation of these special economic
zones are backed by President Ramos and policy-makers in Manila.
Leadership-wise, Subic Bay Freeport Zone and Clark Special
Economic Zone are led by visionary and action-oriented managers
with proven track records in both the public and private sectors.
A highly-skilled, English-speaking labor pool is readily
available, many of whom were formerly base workers already
familiar with both Asian and Western-style management practices.

The national government, Subic Bay Management Authority and
Clark Development Corporation administrators and the private
sector are united in the belief that these former U.S. military
bases are the much-awaited locomotives that will pull the
Philippines towards newly industrializing country (NIC) status by
the year 2000.

Aside from tax incentives and managerial expertise, many
potential investors are impressed by the world-class infrastructure
left behind by the U.S. Armed Forces. U.S. defense planners and
their corps of engineers had endowed the bases with some of the
best ancillary infrastructure in the world. For instance, the
bases have extensive road networks, power generation and water
filtration assets; hotel, housing and office facilities;
recreational, shipping and port facilities; an international
airport, warehouse, petroleum storage and modern
telecommunications. In the case of Subic Bay Freeport, the
facilities left behind by the U.S. military would have cost the
Philippine government an estimated $8 billion if it had to build
these on its own.

Interestingly, many American companies are leading the
investment foray into the former military bases. Federal Express,
which made Subic Bay Freeport its Asian hub, now flies delivery
sorties into skies previously covered by US tactical fighters. Enron
Power Corporation and Coastal Petroleum -- two U.S. business
giants -- run Subic Bay's power and depot facilities, while
telecommunications are managed by a joint venture between the
Philippine Long Distance Telephone Company (PLDT) and AT&T.

It is, however, not only the Americans who have come to these
trading havens. Asian and European investors such as Universal
Lighting (a Russian-American joint venture), Keller Insurance
(UK), Acer Computers (Taiwan), Metroplex (Malaysia), Wartsila
Diesel (Singapore), Thompson Audio (France), Royal Cargo
(Germany), Vision Fashion (Australia) and Nisshin Corporation
(Japan) have joined the trade and investment foray. In both Subic
and Clark, strong support has also been committed by more than
100 Filipino-owned companies.

Currently, the officials of Bay Management Authority expect
more than $1 billion worth of projects from some 204 local and
foreign companies. All types of business partnerships are being
worked out. To boost Subic Bay Freeport's capacity to achieve
these objectives, the World Bank provided a US$40 million loan
package to help convert many of the military facilities to
commercial use.

Meanwhile in bustling Angeles City, the Clark Development
Corporation has already approved proposals from 142 foreign and
local companies D 63 industrial projects, 49 commercial
undertakings, 12 in the service industry, eight in aviation, four
in housing, three in utility and three in tourism. As of May
1996, signed lease agreements with Clark Development Corporation
have already reached 110 projects valued at close to $200
million. In retrospect, American military rental payments could
not have equaled these current and anticipated trade and
investment revenues.

A significant number of the jobs lost as a result of the
military base closures have already been recovered as part of the
bases' transformation. According to officials in these two
special economic zones, approximately half of the jobs lost have
already been replaced by the new companies. And the World Bank
estimates that by the year 2003 more than 80,000 new jobs will
have been generated -- more jobs than the U.S. military was able
to create.

The Philippines will have the opportunity to showcase the
mission accomplishments of these former U.S. military facilities
when the Asia-Pacific Economic Cooperation (APEC) heads of
government meeting is held in Subic Bay before the end of this
year. Through these bases, world leaders will be able to see at
first hand the dividends of peace and harmony in the region.

However, aside from trade and investment dialogues, there is
an important strategic matter that should also be kept in mind
beyond APEC: how to maintain and strengthen the tranquil
economic ambience in the Asia-Pacific. The recent spats between
the Philippines and China in Mischief Reef, and China and Taiwan
across the Taiwan Strait, have exposed the delicate side of the
region. These episodes emphasize that regional security and
economic security have to go hand in hand.

Dr. Joaquin L. Gonzalez III is a Fellow with the Department of
Political Science, National University of Singapore.