"What this Country needs is not a change OF men but a change IN men" March 1980

Friday, July 15, 2005

FedEx Must Stay

It PERSONALLY saddens AND PAINS me no end to have learned DIRECTLY from Federal Express officials that when their contract in Subic expires in 2007, they will move their operations to China. The loss of FedEx's investment and presence in the Philippines is another blow to our efforts to attract and keep investments in the country.

Why the personal sadness and pain? As everybody is aware of (perhaps not so much the younger generation), Subic was a major source of employment and business for Central Luzon. In 1991 the U.S. NavalBase had an employment force of 46,000 people, generating Php 350 Mil annually in taxes with a very high pass on effect on business enterprises in the region.

All this was lost when 12 senators decided not to renew the U.S. Bases agreement without really giving any alternative to the people in terms of employment and income – a case of an air force with all air. The U.S. armed forces left the country – the U.S. Navy from Subic and theU.S. Air Force from Clark. Clark was not protected and was shamefully looted for which I will not go into details.

However, in the case of Subic, I immediately asked for volunteers toprotect and maintain the facilities. Despite the problems of the Pinatubo eruption, the spirit of volunteerism and honor among the Filipino people came to the fore – the facilities in Subic were protected and the assets were maintained.

My next problem was how to use the facility in a proper, employment and income-generating manner? Clearly, the infrastructure was there –particularly, the hangars, the port and the storage facilities. It just needed investors. Thus, with the support at the time of former president Fidel V. Ramos, I promoted Subic as an ideal investment/export zone that also required air and sea capability to support locator factories in delivering their products to markets in a just in time basis.

Thus, one of the first groups I met was FedEx and Fred Smith, its President/CEO and major shareholder. I convinced Fred that thePhilippines, in general, and Subic, in particular, was a good place to invest due to its strategic location, the infrastructure, but most importantly, Fred realized that there was a government (both at the national and local levels) that was supportive of his investment. Fred also had good memories of his stay in Subic as a young U.S. marine during the Vietnam war. Even at the time, Fred was aware ofChina and I recall his asking me if China had expansionary ambitions.

I told him that China always thought of itself as being the center of the universe. When you look at its history, it does not invade or conquer but only expects recognition and respect for its culture, traditions and territory. I was delighted when Fred advised me that FedEx would locate its Asian hub in Subic. Together with my young lawyers, we faced the grizzled veterans of the New York law firms and, in less than 8 months (even shorter than the gestation period for a baby), President Ramos and I signed FedEx's investment license. Having FedEx in Subic helped in the subsequent investment drives – Subic became interesting to locators like Acer since FedEx was present to allow them to deliver their products to clients on an immediate basis. Fred was also delighted because the more locators I was able to bring into the zone, the more business for FedEx. Thus, zone management and FedEx had mutually beneficial relationship that was good for FedEx, good for thelocators and, more important, good for the country not so much in terms of investments but in terms of employment and income generation. Thus, barely two years after FedEx set shop, Subic had a total employment of 70,000, even more than during the time of the US Bases. This success was a continuous inspiration to my young volunteers.

I believe that the contributory cause to the loss of FedEx was the lack of continuity after my forced departure as administrator – my successor did not provide the continuity in supporting the locators. There was no active promotion in bringing in more investments. Even of more importance, while the Asian crisis was ongoing, there was no caring for the investors such as maintaining basic infrastructure (ex. simple painting and maintaining of buildings) including peace and order – a visit to Subic would prove my case. Thus, Thompson, BICC Cables and a lot more left and half of Acer went to China. In the meantime, my successor looked inward and focused on domestic concerns which many people are aware of.

From a business perspective, the loss of FedEx reduces the country's promotional clout while also resulting a loss of rental income and landing fees.

Again, it pains me and slices my hear to the core to remember all the efforts of the volunteers, the people who watched the houses, maintained and protected the grounds and facilities, who negotiated with veteran investors and financial wizards and protected the interests of the country while also being supportive of the investors. All this is slowly trickling away with FedEx being the best example.

However, we must move on – as senator, I shall continue to promote our country and attract other investments in place of FedEx (if we cannot convince it to stay). Even more importantly, we must continue to support the current locators – one approach I suggest is that Philippine Airlines and the government work together to provide the current locators with a capability similar to that being provided byFedEx and UPS.

While I recognize the significantly larger market of China and her and hervast potentials, we could have exerted extra efforts to convince FedExto stay in the Philippines with our inherent strategic location and hardworking highly-skilled English speaking work force --- at the very least move to the Clark Special Economic Zone --- after their lease contract expired in Subic and in consideration of the larger airfield facilities that Clark utilized by the U. S. Air Force has over Subic to accommodate and handle FedEx's growing requirements.

IN SUMMARY, We have two (2) years to convince FedEx to stay. I was told by my source that it's almost impossible to reverse their decision. But we must remain hopeful and the challenge is now on theSBMA. The administration thereat must entail the similar vigor, spirit and dynamism of the volunteers and pioneers in attracting foreign investors. Freeport incentives, infrastructure enhancement and maintenance, strict enforcement of rules and procedures that we laid out and established in the beginning must be maintained.Furthermore, corruption, smuggling and the constant changing of the rules over the past 6 years must be stopped.

15 July 2004