Subic fee port

Everything is not well in freeport land called Subic. Both residents and small business groups there are up in arms against the government. They are the same people that the government lured over the past 20 years into the special economic zone with promises of tax breaks and such. They are now engaged in what may turn out to be a prolonged struggle against the top management of SBMA.

That is the Subic Bay Management Authority, the government outfit tasked by law to develop the 67,000-hectare former US military base, which is roughly some 30 times the size of the Ayala development in Makati, envisioned by law to become an investment and tourism magnet.

Head of SBMA as chair and administrator is Roberto Garcia, supposedly handpicked by our leader Benigno Simeon (aka BS), who happens to be a former executive of the battery making company Ramcar that almost went belly up in the early 2000s due to huge debts.

Garcia recently told the businesses in Subic that SBMA would impose a fee called CUSA, or the “common use service area.” The locators of course opposed the plan. Some unpleasant exchanges already ensued between the two camps. Garcia even issued a threat as his opening salvo.

Based on reports, Garcia supposedly told the locators that if they would not pay the additional CUSA, they must leave Subic—or something like that. Very diplomatic, indeed!

For the households, the Garcia scheme imposes a fee of P1,200 per housing unit that is to be included in the monthly rent, and for the business locators, the Garcia scheme is looking at rates of between P4.50 and P9.50 per square meter, supposedly for “services.”

The SBMA estimated that the “municipal services” could cost up to P388 million this year, from only P354 million last year, or an increase of almost 10 percent, which was of course way higher than the annual inflation rate.

Anyway, nobody among the locators can as yet understand the wide range of the fee, which is a difference of P5 per square meter between the lowest and the highest rates. It seems that the rates will depend on the area of the business.

And everybody thought that, at the Subic freeport, everybody should get the same, ah, “service” equally no matter where they were located. Thus it seemed to the locators that the Garcia scheme was not a well thought out plan.

As expected, anyway, the locators are against it. In a letter to the SBMA, the Subic Bay Freeport Chamber of Commerce (SBFCC) in fact called the rates “outrageously high.” The group also said that the imposition only defeats the principle of the creation of Subic freeport.

The chamber calculated that the CUSA would force the locators to cough up some P350 million a year. The amount is not peanuts, particularly to many of the locators that are still struggling to stay afloat. Compared to their rent payment to SBMA of P780 million a year (based on 2010 and 2011 figures), the CUSA actually means an increase in their rent of almost 50 percent.

Believe me, nowhere in the world could such an increase ever be deemed reasonable.

And the SBMA in effect would change the rules in the middle of the game, which was precisely the point raised by Jeff Lin, president of Subic Gateway Park, one of the developers in Subic that subleased to more than 20 locators.

Lin wrote Garcia that, when locators signed up in the freeport, the government promised them that the costs of doing business there would be competitive. And because a law—an act of Congress, and not some executive fiat—created the freeport and SBMA, the business groups were lured by government pronouncements that the rules would be stable.

Listen to Lin: “The propensity of the SBMA to change policies anytime, particularly those which are financially burdensome to locators, will seriously affect its credibility to attract future investments and capability to sustain a healthy and stable business environment in the freeport.” Amen.

There are other prices to pay for the locators. For instance, burdened by the new CUSA fee, how could they focus on their businesses? Or, as Lin indicated, the new imposition could lead to court cases, since said CUSA fee was not in their lease agreements with the SBMA.

In other words, it was just another unilateral act of SBMA. Basta!

Reportedly, the SBMA management under Garcia even tried to help developers like Lin’s Subic Gateway Park by suggesting that the company simply pass on the fee—equivalent to almost 50 percent of the rent—to their locators. Thus, to the SBMA management, developers like Lin should take the flak from their customers, shielding Garcia and company from protests. Quite clever!

Still, such a brilliant suggestion could not pass the test of legality, simply because it was nowhere said explicitly, or even just mentioned in passing, in all the lease agreements.

Timothy Desmond, president of the marine park Ocean Adventure, reportedly also hit the Garcia scheme as “unfair.” His company, according to Desmond, because of its large leased area, would be charged almost 10 percent of the entire CUSA imposition. In effect, the Garcia scheme would constitute almost a 400-percent increase in the rent of Ocean Adventure. No legitimate business would survive such a punishment.

But how did Garcia and company arrive at such a brutal figure for the CUSA anyway? Was it based on the actual costs of the services? How much of it could be due to the fat bureaucracy of SBMA, which was simply typical of any government outfit?

Besides, from what I gathered from lawyers, the government—both national and local—is supposed to get the money for municipal services out of the taxes collected from both individuals and businesses. Thus the Subic locators already brought up the idea that the CUSA fee, in effect, was nothing but double taxation. Uh-oh, I can almost see the court cases coming.

Under the Garcia scheme, the SBMA also threatened those who refuse to pay the new imposition with stiff fines. Not only that, the poor sport SBMA would in effect drive them out of the freeport, by canceling their certification of registration, tax exemption and residential lease agreement.

The sanctions would apply even to those who would be willing to pay but, unfortunately, just could not afford to, as against those who simply refuse to pay as protest. No mercy whatsoever!

Now the Garcia imposition can also kill the vehicle and heavy equipment auction sector, thriving in Subic since the 1990s, serving small businesses that could not afford costly brand-new equipment. The SBMA wants to impose a different fee on the sector—something like P5,000 per vehicle (no matter the shape or size), plus “admission fee” of P10,000 on every piece of heavy equipment like bulldozers and earth movers, before the equipment can even be sold. In short, death to the sector!

Garcia reportedly came up with the CUSA scheme to raise money for SBMA because of debts it incurred for the airport and container yard projects. He supposedly described the projects as white elephants.

And so what is the SBMA doing about it? Well, under Garcia, it is nowhere near the imposition of any sanction on their operators. Instead, SBMA wants to punish the small businesses and residents of Subic.

I am not sure that such was the intention of our leader BS when he assigned Garcia to SBMA, in the same way that he did not expect that, in no time at all, SBMA under Garcia would be linked with an attempt to smuggle 346,000 metric tons of Indian rice.