New mission for former U.S. bases

New mission for former U.S. bases ______________________________________________________________________

Joaquin L Gonzalez III looks at the transformation of Subic Bay and Clark Air Base to hubs of economic activity _____________________________________________________________________

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.