After 20 years, Subic is a letdown

It was not the best of times to go to Subic last Friday with the uncertain weather. But we had paid for our reservation in Lighthouse Hotel and my son who was visiting from Singapore only had a day to spare. So we drove anyway for a rare moment of family bonding, thinking that we would at least have Subic to ourselves.

Indeed we did. Not just Subic but SCTEX as well. I don’t think I saw more than a dozen cars on SCTEX that morning. I wondered how Metro Pacific expects to make money with such a low traffic count. Then I remembered that P-Noy has yet to sign the management contract so that the loss is really government’s to bear, specifically BCDA.

It was raining on and off when we got to Subic and the first impression I got was that of a town that had seen a lot of better days. It looked rather forlorn. Legenda Hotel was boarded up. The Acer factory had been abandoned. There were a number of fenced off real estate with nothing going on and weather beaten signs of what project was supposed to have come up there. So much deterioration since I was last in Subic 10 years ago.

We checked in at our hotel, a relatively new one and supposedly among the best right now. It too looks like it had not been well maintained. The veranda of our room had soaked cigarette butts. But the staff had this sunshine smile and a friendly disposition to be of help to their guests.

At over $200 a night, the Lighthouse is overpriced. But that is typical of our small hotels anywhere in the country. With less than 40 rooms, it must be tough to make a buck with all that overhead and loan amortizations.

We went off for lunch at Harbor Point, a brand new Ayala mall. It is apparently the only thing new in Subic and it is clear the Ayalas are still bullish on the free port to have invested what they must have on this mall. Harbor Point could compare with the medium sized malls in Metro Manila, even exceed in quality of construction and tenants.

I made arrangements to drive around the free port in the afternoon and it was all the same story: promise not just unfulfilled but quashed. The container port looks like a lonely white elephant… as is the airport. Crown Peak Hotel looked devastated with much of the buildings disheveled and falling apart.

I didn’t visit the Binictican golf course anymore. I took the word of people there that it is in horrible shape. A succession of Taiwanese and Korean developers simply mismanaged their mandate and left with a half usable golf course. That is of course just unpardonable for Subic because golf used to be one of its prime attractions.

The yacht club marina looks crowded with refugees from the floating garbage at the stinky waters of the Manila Yacht Club. I think I saw more pleasure boats in Subic than at Roxas Boulevard. More than that, I was told that mega yachts of the rich and famous, like Mexico’s Carlos Slim, routinely go to Subic for provisions and maintenance. That seems to be the only bit of good news I got that afternoon about Subic.

I talked to SBMA chairman Roberto Garcia who just assumed office a year ago and he confirmed the enormity of the free port’s problems. He sent me a copy of his powerpoint presentation on how he plans to transform Subic in a way that would bring back hopes and dreams we had on it 20 years ago.

I don’t think the present SBMA officials could be blamed for the horrible state of the freeport today. I put the blame totally on past administrators, specially those who followed Dick Gordon.

SBMA’s story is really sad. I was looking at a chart showing its income and loss through the years and it seems that with the exception of a few years, SBMA has been incurring net losses annually since it was founded in 1992. As of end-2011, SBMA’s cumulative losses have reached a total of P7 billion. Last year alone, SBMA incurred a loss of around P1.1 billion.

The airport modernization and new container terminal were financed by loans from the World Bank and JBIC. Both projects are not generating the cash flows necessary to pay off the loans. SBMA has to scrounge for funds to meet the loan amortizations.

With a rather heavy debt burden, it is obvious SBMA does not have the money to maintain major roads, piers and wharves, office buildings and other facilities. I wouldn’t be surprised if it would soon not have enough money to pay its workers.

The worse parts of the Subic story are the many abandoned projects whose proponents have defaulted on their obligations to SBMA. There are those who have failed to meet their development commitments yet refuse to give up their contracts. 

Past SBMA administrations leased out large tracts of land and buildings in the Freeport to locators at very low rates supposedly to attract investments. But we now see that they made very bad decisions.

The problem is, many of these contracts are 50-year leases whose payments were front-loaded, so that now, SBMA hardly earns any revenues from these long-term leases. Unfortunately, those leases are so structured as to make it difficult for the freeport to wiggle out of them.

I asked about the under-utilized container terminal, which has a total capacity to handle 600,000 TEUs a year. It has only averaged less than 25,000 TEUs annually since 2007, or only four percent of its total capacity. The present administration wants to do something about it but is faced with a chicken and egg situation.

The major shippers from central and northern Luzon do not ship thru Subic because of the lack of ship calls. The shipping lines, on the other hand, do not call on Subic because of the lack of economic volumes. Bridgestone tires in Clark, for instance, would rather brave the traffic congestion in Manila to ship out because there are more vessels there.

SBMA chairman Garcia told me he needs the support and intervention of DOTC Secretary Mar Roxas in pushing Subic (as well as Batangas) as diversionary ports for container cargo from the Port of Manila. Good luck to Mr. Garcia on getting Sec. Roxas to do anything.

But chairman Garcia is hopeful. He insists that it is to DOTC’s interest to effectively decongest the Port of Manila as well as ease the traffic congestion there which results in millions of pesos in additional logistical costs that in the end increases the prices of products and commodities. He thinks it is possible to build container volume to a critical mass by matching the business interests of major Luzon shippers and shipping lines.

Mr. Garcia said that they don’t really have any more land for new investors.  Less than six percent or only 3,259 hectares of its total land area of 67,452 hectares can be developed and only 300 hectares of this are still available for new investors.

He now wants to shift from landlord to developer. SBMA has over the past 20 years confined itself to merely leasing lands and buildings. By becoming a developer, Garcia hopes SBMA can open up new and additional revenue streams, maximize the value and use of its remaining assets, and develop idle properties.

But Mr. Garcia emphasized they intend to preserve the ecological nature of Subic, protecting its forests and its marine resources. This limits the kind of development they will allow in Subic but he thinks it is all for the best.

This probably means that coal fired power plant is dead. Aboitiz and Meralco might just as well look for another location because as Garcia told me, the local community will simply not allow them in Subic. Not even assurances of “clean coal technology” will sway the community. They have so much of Mother Nature to protect and they won’t risk it. A coal plant in Subic will be the final nail in its coffin.

Garcia sees Subic as a tourist haven and we will see soon enough if he and his new board can pull that through. Right now, this 20 year old dream is a nightmare of lost hope. It looks nowhere near that model of Subic looking like Hong Kong which I saw at Dick Gordon’s office 20 years ago. The Ombudsman must find a way to make past administrators account for this mess.

Moral support

Pagkatapos bindisyunan ng pari ang preso sa silya elektrika

Pari : Mayroon ka bang huling hiling?

Preso: Mayroon po.

Pari: Ano yun?

Preso: Natatakot ako… hawakan nyo naman kamay ko… pang moral support !!!

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco