Announcement of The World Bank's Plans to Develop the Subic Bay Freeport Area in The Philippines on June 3, 1994

FOR IMMEDIATE RELEASE World Bank 1818 H Street, N.W., Washington, D.C. 20433, U.S.A.* Telephone: (202) 477-1234 IBRD News Release No. 94/100EAP Contact: Peter Stephens (202)458-0344 External Affairs, EAPVP Philippines to Develop Subic Bay Freeport Area Washington, D.C., June 3, 1994 -- The Philippines is proceeding with plans to develop the Subic Bay into a freeport area, with competitive incentives designed to attract international investment. Investment commitments for the Subic Bay Freeport (SBF) have already reached $350 million. Development of the former U.S. Naval base is expected to create over 80,000 jobs for the local economy and generate as much as $37.6 million a year in income by 2003. A World Bank loan of $40 million is supporting the Subic Employment and Income Benefits Expected from Subic Bay Freeport Project. Bay Freeport Project According to Shilpa Patel, World 85 80.8 Bank task manager, the project is 65 designed primarily to promote 45 38 private investment and spur economic growth in the area. 25 6.4 1.3 "Beyond this, however, the 5 project will show what an -15 m "-10. -3.2 l9 3.1 investor-friendly, non- bureaucrticenvironment SBF Employment ('000s) U SBMA Net Income (USS millions) bureaucratic environment can do for the Philippines," Ms. Patel says. The SBF is expected to generate investments in light manufacturing, including clothes, shoes, toys and electrical appliances, as well as in light engineering and tourism and recreation. The project consists of three main components: * Site improvement, including improving access to the area through road and bridge work, as well as repairs and improvements to the airport and port; * Strengthening the institutional capacity of the Subic Bay Metropolitan Authority (SBMA) -- the implementing agency for the project -- to manage the freeport and implement freeport policies; and * An environmental protection effort to safeguard the area's natural resources and ensure that future infrastructure construction and economic activities conform to the highest environmental standards. Balancing the Environment and Economic Growth The SBF covers over 15,000 hectares on the island of Luzon, is directly adjacent to Olongapo City and roughly 80 kilometers northwest of Manila. It encompasses the entire former U.S. Naval base, which held one of the last undisturbed rain forest areas in Central Luzon (covering approximately 3,500 hectares). "Environmental safeguards to protect this area are critical, " Ms. Patel says, "not only for species and biological diversity preservation, but also to preserve the area's watershed" To this end, a land-use plan will only allow construction in previously developed areas and the environmental protection component will survey -- and then continuously monitor -- environmental conditions in the area. A just-established Ecology Center in the SBF will conduct this monitoring and also receive equipment and institutional support to carry out the Environmental Management Plan for the SBF. The plan is a comprehensive one, addressing everything from solid waste management, to assuring security of the forest preserve. According to Ms. Patel, "The plan is a blueprint for balancing environmental goals and economic growth." Subic Bay Background and World Bank Involvement The United States Navy established the Subic Bay base in 1947 and occupied it until November 24, 1992, when the facilities were turned over to the Government of the Philippines. At the time, it was the United States' largest overseas Naval base. The Government set up a Presidential Task Force for the Bases Conversion Program in January 1992 to carry out base conversion and redevelopment. The creation of a freeport at Subic had been advocated by local leaders and the citizens of Olongapo City since 1971. The concept was passed into law in March, 1992, with Congressional signing of the Bases Conversion and Development Act. The Philippines asked the World Bank for help in converting the base to civilian use in early 1992. Between August 1992 and January 1993, the World Bank provided PHRD-funded' technical assistance in establishing the SBMA and in physical planning for construction and use of the base. Site Improvement 36.2 nillion (67%) Institutional The total project cost is roughly up on9% $54.1 million. SBMA is providing En.ionmnta $14.1 million in project financing.2 The Protection Bank loan is extended for 20 years, 1 million (2%) including 5 years of grace, at the contingencies & B Taxes & Duties Interest Bank's standard variable interest rate, 1 million (2%) 11 million (20%) currently 7.27 percent. IPolicy & Human Resources Development Fund (Japan) financed the equivalent of 80 months of World Bank technical assistance. 2Note that money figures are expressed in US dollar equivalents. 2/.