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27 June 2009

Subic Freeport reinvents itself amidst global recession

May de los Santos used to make laptops and mobile phones at a high-tech Taiwanese electronics factory in Subic Bay free port, near Manila.

She joined the ranks of the laid off as the global financial crisis kicked in, but the 31-year-old has since been training to work as a chambermaid in a local hotel.

"I don't mind going to these classes. I am used to hard work and the hotel industry is the one with demand for workers," she told AFP.

She is one of an army of laid-off workers who are being retrained to meet the demands of the free port, said Severo Pastor, an official of the Subic Bay Metropolitan Authority, the government agency that oversees the enclave.

And these days, he said, that demand is coming from tourism.

Like de los Santos, the port is adapting to the times--transforming from a light industrial zone to a tourism zone and regional logistics hub.

Free port administrator Armand Arreza says Subic's manufacturing future had been in question even before the crisis hit its electronics companies.

For years, low-wage competition from China and Vietnam has been luring companies away and a recent upgrade of Clark, just 75 kilometres (47 miles) from here rendered many of Subic's facilities redundant.

Both Subic and Clark were once US military bases that employed thousands of Filipinos. But a 1992 US military pullout left the Philippines scrambling to find alternative uses for the facilities and jobs for the locals.

Amazingly, Subic adapted swiftly and efficiently, transforming from a naval base into a 13,600-hectare (33,600-acre) free port with an international airport and factories that turned out electronics, garments, shoes, armoured vehicles and medical equipment.

Special "techno-parks" were set up for Taiwanese and Japanese manufacturers.

Federal Express (FedEx) established its Asian courier hub in 1996, using the former base's military airport while South Korea's Hanjin Heavy Industries built a shipyard in 2006 that is now the world's fourth largest.

This year however low-wage rivals abroad and the economic crisis have forced Subic factories to retrench more than 4,000 workers or place them on "forced leave," said Arreza.

FedEx shut its Subic hub in February, moving to China with its larger market and attractive perks.

Arreza said the situation is improving and some workers may be re-hired but he doubts that Subic will ever return to the days of the 1990s.

"Low-cost manufacturing is not the area where Subic is competitive," he said. "Most of our land area is protected forests and protected seas. We don't have any space to accommodate large industrial parks."

Only 4,000 hectares of Subic can be developed compared to 30,000 hectares in nearby Clark.

The future lies in tourism, medical care, ship building and logistics, using the ample space still available for warehouses especially around the largely unused Subic airport, said Arreza.

Hanjin is staying put and companies that require skilled labour may also find it more economical to remain in Subic, he said.

For displaced workers, the government is offering re-training for positions in Subic's tourism industry or even abroad.

Its well-preserved forests, wide seafront and recreational facilities and hotels have always made it popular with tourists and a new highway has made the area even more accessible to day-trippers.

There are no figures on Subic tourist arrivals but Arreza notes that between 8,000 and 10,000 cars of non-free port workers enter Subic everyday, presumably many of them carrying tourists.

Zenaida Pineda, 40, a former electronics worker here, said she now earns as much working as a chambermaid in a Subic hotel as she did at her factory job.

"I like housekeeping more because you can move around, not just stay at your work station. Besides, working on electronics hurt my eyes," she said.

Danny Piano, president of the local chamber of commerce, said, "Subic manufacturers can survive. The Philippines has the capability to do good high-end work," due to workers' better education, communication and English skills.

Subic exported $977.8 million worth of goods last year.

"There needs to be a balance between industry and tourism. After all, this is a free port," Piano said. (Mynardo Macaraig, AFP)

PHOTO: Armand Arreza, administrator of the Subic Bay free port, points to a photo of the Bay and explains his plans to convert the sprawling enclave from a light industrial zone into a tourism and logistics hub. Photo courtesy: AFP.

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