Beating all odds: Subic, Clark top country’s economic zones

By Rey Garcia

SUBIC and Clark’s self-sustaining business environment has resulted in surprising yet modest growth tallies for the first half of the year for the two economic zones as both continue to display resiliency and further beating the odds.

Citing a recently released study on the ongoing impact of the global financial crisis on foreign direct investments (FDIs) in Asia, particularly in the Philippines, the Nomura Research Institute (NRI) of Japan disclosed that Subic has topped all other investment-promotion agencies throughout the country by posting a 13.6- percent increase in committed investments based on year-on-year figures for the first quarter of 2009.

On the other end of Central Luzon’s “New economic corridor,” its counterpart, state-owned Clark Development Corp. (CDC), likewise displayed strong performance in the area of FDI as it has lured both local and foreign firms to put in 36 new projects with P1.05 billion worth of fresh investments in the first six months of the year.

According to the first version of the NRI study, FDI commitments secured by the SBMA for the first quarter amounted to P1.5 billion. On the other hand, all of the other Philippine investment promotion agencies (IPAs) reported a year-on-year decrease in commitments for the same period, the NRI said.

A noted economist told NewsCentral that despite the modest growth displayed by both ecozones (Subic and Clark), “it’s still growth no matter how one puts it.”

He said compared with other neighboring Asian countries which continue to reel from the global economic slump, Subic and Clark remain as the Philippines’ “best bet” in terms of luring more foreign investments for the country.

With its air, sea and land transport facilities, which are now rapidly shaping up as world-class infrastructure developments, the vision of making Central Luzon as the premier investment and economic destination for the country has remained “very much achievable,” he said.

Seaport
Revenue collections by the seaport department of the SBMA in the first seven months have already exceeded the agency’s target for the entire 2009.

SBMA deputy administrator for operations Ferdinand Hernandez said collections from vessel lay-ups in Subic Bay, as well as wharfage fees on imported products, boosted seaport revenue to a total of P319.73 million, or P3.43 million more than the revenue target for this year.

The amount also represented a 15.7-percent growth over 2008 figures, Hernandez pointed out.

Airport

The Diosdado Macapagal International Airport (DMIA) continues to attract more passengers as the airport posted a 21-percent increase in international passenger volume in the first five months of 2009 despite the global downturn in the aviation industry caused by the economic slowdown.

Clark International Airport Corp. (CIAC) president and CEO Victor Jose I. Luciano said the DMIA posted a 21-percent increase in international passenger volume from the period January to May this year compared with the figures posted in the same period in 2008.

Based on a report by the CIAC Corporate Planning Department, 251,719 international passengers passed through the DMIA from January to May this year compared with 208,858 in the same period in 2008, or a difference of 42,861 passengers.

Investments
The NRI, which prepared a presentation for the Japan International Cooperation Agency (JICA), observed that the Philippines, like other Asian countries, is reeling from a decrease in FDI commitments due to the economic slowdown.

However, the NRI noted that the Subic free port, which is being managed by the Subic Bay Metropolitan Authority (SBMA), posted a 13.6-percent increase in committed investments based on year-on-year figures for the first quarter of 2009.

This made the SBMA the only IPA in the country that turned out a positive
figure.

According to the first version of the NRI study, FDI commitments secured by the SBMA for the first quarter amounted to P1.5 billion.

According to SBMA Administrator Armand Arreza, the agency signed up a total of 30 new projects worth P1.5 billion for the first quarter of this year, bringing to 966 the total number of registered investors here. The new projects, meanwhile, are expected to generate some 580 new jobs.

Subic’s investment generation this year was recently boosted further by new investment pledges by South Korean shipbuilder Hanjin, which bared new capital infusions worth a total of $86 million.

Hanjin officials said the new investments would be for the production of ship components at the Subic facility and would be committed in two parts: $29 million starting September this year, and $57 million next year and onward.

Arreza said the growth in investments here was made possible by a self-sustaining business environment created in Subic over the years by the SBMA that was directed toward various industries that require less dependence on foreign markets.

He added that among the industries that kept the local economy afloat was tourism, which has become a major economic driver for Subic Bay, and which has also created various downstream businesses that benefited communities in the Subic Bay area.

The figures on FDI commitments in the Philippines formed part of a study by the NRI for the proposed development of the Philippine Investments Promotion Plan (PIPP).

The PIPP seeks, among others, the creation of an interagency body “to oversee the implementation and monitoring of all programs, activities and projects to improve investment climate” in the country.

The network of IPAs, including the SBMA, “is tasked with formulating and developing strategies to position the Philippines as among the prime investment destinations in Asia,” the NRI said.

The same study pointed to the negative impact on FDI generation in other Asian countries. These included Thailand, which posted a 26-percent decrease in capital commitments; Vietnam, with a 67-percent decrease in capital realization; India, with a 28-percent decrease in FDI realization; and even China, which suffered a 21-percent decrease in FDI realization.

Compared with its Southeast Asian neighbors, however, the Philippines “has attracted far less FDI than the peer Asean countries,” the NRI study found out.

“Really, there’s good news in Clark amid the crisis…and we are even preparing for the economic upturn,” CDC president Benigno Ricafort said.

At least 15 of these are in the services sector, seven each in information technology (IT) and commerce, three in industrial, one each in aviation and housing, and the rest provide institutional support.

“Clark free port was making a strong showing as an investment destination,” Ricafort said.

Texas Instruments poured in $1 billion. It has completed its $300-million building, targeting to hire at least 3,000 workers once it hits full operations.

Singapore Airlines Engineering Co. and Cebu Pacific pooled $10 million for an aircraft-maintenance facility at the Clark Civil Aviation Complex.

With the Global Clark Gateway Logistics, valued at $1.2 billion, and the Clark International Airport Corp. Terminal, valued at $1.3 billion, the free port’s main zone has only 300 hectares left for industrial and commercial development.

“These are signs of steady growth,” Ricafort said.

At least 22 projects are expected to be back on track with the lifting in July of the height restrictions on buildings constructed in the western part of the free port.

Revenues
In terms of revenues, the 417 Clark locators here remitted P1.84 billion in income taxes of employees, customs duties and business taxes to the Bureau of Internal Revenue and the Bureau of Customs (BOC) in 2008.

Subic Bay Free Port has remained one of the top revenue-earning free port and economic zones in the country with a P2.2-billion tax collection during the first six months, up by 21 percent year-on-year.

Arreza disclosed that based on the revenue-collection reports of the BOC, the total cash collections derived from payment of customs duties and taxes significantly went up by 21.84 percent higher compared with last year’s P1.8 billion.

Arreza said the revenue collection from January to June this year increased by over P395 million.

New growth area
The CDC has also turned to the Sacobia subzone to be the new growth area.

Called the Next Frontier (Clark Special Economic Zone), this spans a total of 10,000 hectares, 2,477 hectares of which will be used for ecotourism projects, agro-industrial projects, light industries and community-development projects.