COLUMN ONE : Subic Bay: A Relic Is Reborn : Old U.S. Navy base is now a hub of enterprise and foreign investment. ‘People power’ has helped convert barracks to a casino, lured firms such as Reebok and saved the facility from looters, volcanic ash.

The big warships don’t dock here anymore. The F-18 Hornet fighters no longer roar overhead. The bar girls have migrated away, and about 40,000 civilian jobs are gone, lost to a fit of Philippine national pride that kicked the U.S. Navy out of here two years ago.

But now, in the eerie ghost town atmosphere of what used to be the Navy’s largest overseas base, something rather remarkable is happening: free enterprise.

Businesses, one of them making Reebok shoes, are starting to blossom inside the gray military buildings that line the gloomy wharves. Federal Express is planning to use the Navy airstrip. Tourists are lounging in a casino hotel converted from a barracks and playing golf on fairways salvaged from the ash fallout of Mt. Pinatubo.

Subic Bay, not long ago a Cold War relic symbolizing America’s decline in the Pacific, is being transformed into a plucky little free-port zone.

Backed by a spurt of foreign investment and an army of “people power” volunteers, Subic is an experiment in economic development that embodies the new optimism rising in the Philippines, the so-called Sick Man of Asia.

Decades of economic malaise--compounded by legendary corruption, political turmoil and a chain of natural disasters--left the Philippines lagging far behind its successful neighbors. But people say things are different now, at last.

Venal dictator Ferdinand Marcos is dead. And the days of periodic coup attempts against housewife-turned-President Corazon Aquino have been replaced by humdrum stability since President Fidel V. Ramos--the general who rebelled against Marcos and quashed the insurrections against Aquino--took office in June, 1992.

Ramos has earned mixed reviews on the economic front. He has proceeded timidly with plans to liberalize the economy and bungled an attempt at hiking an oil tax to fix a worrisome fiscal deficit. He dragged his feet, then hastily assumed emergency powers to resolve an energy crisis that caused daily blackouts in the capital.

But political peace under Ramos seems to have allowed some modest economic growth, after years of volatility and stagnation.

The Philippine economy grew 2.3% last year, and this year analysts predict gross national product will rise in real terms by more than 4%. That performance pales in comparison to the double-digit pace enjoyed by some East Asian export dynamos. But it’s not a bad start.

“I think the numbers are starting to be good for us,” Ramos said in an interview at Malacanang, the presidential palace in Manila. “The conditions for takeoff are in place.”

If the economy does take flight, the Subic Bay Freeport Zone is the kind of launch pad that will provide some of the thrust.

It’s one of 18 designated areas--including Clark Field, the former U.S. air base--where the government is trying to woo international investment with tax incentives and aggressive publicity. The strategy is to mimic the pattern of rapid industrialization that made “tigers” and “dragons” out of the Philippines’ neighbors.

After all, if the marriage of cheap labor and foreign capital works for the Indonesians, why not for English-speaking Filipinos?

“This is the best-kept secret in Asia,” said Thomas Leber, president of the American Chamber of Commerce in Manila. He maintains there isn’t a scent of genuine anti-Americanism in the Philippines today, despite the base expulsion debacle.

“There’s not a more logical place for American companies to use as their springboard into Southeast Asian markets,” said Leber, who represents New York-based American Home Products Corp. in the Philippines. “We certainly wouldn’t want to see Japanese or Taiwanese investors supplant the Americans here. That would be a travesty.”

The U.S.-Philippine relationship has been complex and emotionally intense over the past century, beginning with the Spanish-American War, which left the islands a U.S. colony for nearly 50 years.

No one personifies that legacy better than Richard J. Gordon, the cheerful chairman of the Subic Bay Metropolitan Authority, the government agency that runs the free-port zone.

During Gordon’s reign as mayor of Olongapo, a city that thrived outside Subic’s gates, he was an early proponent of gradual U.S. withdrawal and conversion of the base into a special economic zone.

The fact that Gordon now sits in the executive office once occupied by Rear Adm. Thomas A. Mercer--the last U.S. commander at Subic--is one of those ironic twists of history. His grandfather, John J. Gordon, waded ashore at Subic Bay with the New York regiment in 1898, the story goes, and later mustered out of the U.S. Army to marry a Filipina and settle nearby.

Gordon’s father served as the first elected mayor of Olongapo until he was assassinated. Gordon’s mother was elected to succeed him. Richard, a practicing lawyer, later took up the civic mantle.

Fueled by nationalistic sentiment, the Philippine Senate voted in 1991 to oust the U.S. military. Gordon pounced on the opportunity to exploit the billions of dollars in inherited military infrastructure, using all the hoopla and machinery of a political campaign.

By the autumn of 1992, Gordon had organized laid-off base workers into a skilled force of volunteers. They stepped in to maintain security in the confusion of the American withdrawal that October and November, which itself came in the wake of the catastrophic eruption of Mt. Pinatubo.

While the facilities at Clark air base were heavily damaged by volcanic ash and then trashed by looters, Subic emerged virtually unscathed. Volunteers hauled away tons of ash blanketing the golf course, kept the lawns trimmed and protected 1,876 units of family housing from scavengers.

Gordon also has used his political charisma to recruit a corps of youthful camp followers, many of them children of wealthy families with fresh degrees from U.S. universities. They work without pay for months until Gordon, who does not disclaim future presidential ambitions, offers them meager civil service wages.

“I feel it’s my duty to do something for the country,” said Felicia Ravago, 27, a Harvard Law School graduate who quit a corporate job in New York to join Gordon’s assistants. “This is really exciting work with a lot of responsibility. If it weren’t for Chairman Gordon, I think my talents would be wasted.”

Blue-collar volunteers, meanwhile, are registered by computer, and when jobs open up in the free port, they’re at the top of the hiring list. So far, Gordon said, 9,000 have gone back to work.

During the transition, Subic retains a sense of order that is at odds with the conventions of chaotic Philippine society.

The free port was swarmed by about 100,000 tourists over the Easter weekend, many driving two to three hours from Manila to swim, gamble and shop their quota at PX outlets converted into duty-free stores. Gordon’s volunteers issued 540 traffic tickets, shocking motorists who never would have imagined getting ticketed in the anarchy of Manila’s streets.

“If Subic sparks a fire here, we’ll be a model that changes the nation’s attitudes about discipline and work ethic,” Gordon said. “This will give the Filipino confidence. Subic will grow and become the magnet for the Philippines. You watch.”

Subic Bay Freeport also might serve as a comparative case study for base conversion in the United States, where communities face layoffs of civilian employees and the loss of spinoff benefits to their economies.

But the business incubator at Subic wouldn’t be warming up without foreign investment and low wages--a formula that doesn’t apply to the area around El Toro Marine Corps Air Station or other U.S. sites affected by the closure list.

The Taiwan government has been a conspicuously enthusiastic patron at Subic, putting up $100 million in loans for Taiwanese companies planning to invest here. Already, as many as 1,000 of the new jobs have been created by a single Taiwanese-owned factory, Subic Star, which makes soccer shoes under contract for Reebok International of Stoughton, Mass.

“We’re pretty impressed with the level of workmanship here. It’s exceptional,” said Steve Brown, a Reebok executive from Hong Kong.

“It’s partly because communication with the front-line labor is all in English,” said Brown, interviewed at a restaurant in the Malaysian-owned Subic Bay Resort and Casino, formerly a barracks. “That helps us meet our technical requirements.”

Memphis, Tenn.-based Federal Express Corp. is planning to use the Cubi Airfield at Subic as its regional hub starting in January, once equipment is installed that will convert it to a commercial airport. Chairman Frederick W. Smith recalled visiting the base when he was a Navy pilot during the Vietnam War. But that didn’t influence the decision to invest here, a company spokeswoman said.

Gordon is counting on the convenience of a major express cargo carrier to lure more light manufacturers. He has applied to the World Bank for a $36-million loan to upgrade the airport for Federal Express; daily commuter flights to Manila are on the horizon.

Aside from the military infrastructure, the U.S. Navy also left behind one of the last remaining virgin rain forests in the Philippines, intact with its rare mahogany and teak stands, monkeys and wild boar. Indigenous Aeta tribesmen were given sanctuary and employment here.

Boots Litsay, who trained civilian employees in the Navy’s personnel office and now heads Subic’s tourism division, said “eco-tours” are catching on; the truly adventurous can hire unemployed Aeta men who trained Navy pilots in jungle survival.

Another unusual attraction is a vast forest of ammunition bunkers--286 concrete “igloos” with foot-thick walls, steel doors and sod-covered roofs. When the base was turned over, the volunteers inspected these igloos with Geiger counters.

“We wanted to have something interesting to show the tourists,” said Litsay, a third-generation U.S. military employee. “There were a lot of stories over the past 30 years about there being a dungeon out there for nuclear weapons. Unluckily, we haven’t found one.”

Meanwhile, Gordon says the industrial side of the free port is reaching critical mass, with commitments for as much as $400 million in investment from foreign and domestic sources involving more than 50 projects.

“To me, Subic brings forth the idea that there’s a world that will leave us behind unless we take action. Subic is the idea of the global economic village,” said Gordon. “You are looking at a resurgent Philippines. We’re just now reawakening.”

Yet the nation has some serious hurdles to cross before it can apply the lessons of Subic Bay on a wider scale. The most urgent task is to get its macroeconomic house in order.

President Ramos, a graduate of West Point, must charge ahead with economic reforms before growth can be sustained, his critics say. He’s under pressure to hold down inflation, broaden the tax base, liberalize financial markets, increase the domestic savings rate and reschedule the country’s $34-billion foreign debt.

The challenge to the president is focused in pending negotiations with the International Monetary Fund, which has laid down stringent conditions before it grants a so-called “Good Housekeeping label” to the government’s economic policies.

Once a final agreement is hammered out, the IMF will lend the Philippines up to $650 million over three years in a program of fiscal restructuring. The IMF program is an endorsement that will open the door to financing from other sources of international capital.

“The IMF (program) is very important. But if we’re playing baseball, we’re on third base,” Ramos said. “That Good Housekeeping label, I’m quite optimistic on that in 1994.”

Fiscal policies aside, one of the most daunting tasks Ramos faces is following through on promises he made early in his administration to break up the cartels and monopolies that keep a chokehold on the nation’s economic life.

He’s had some success with the phone company, but tremendous economic power remains concentrated in the hands of an elite group of business families, some tracing their lineage to the Spanish colonial era, others powerful vestiges of Marcos cronyism.

Gen. Jose T. Almonte, the president’s national security adviser and one of his closest aides, has been a vociferous trust-busting ideologue, denouncing “East Asia’s most powerful oligarchy” as an enduring social evil.

“Over the generations, there has been a pattern of behavior that has acquired its own life and influenced our national ethos,” Almonte said in an interview. “It has a character that has no capacity to serve the common good, only its own self-interest.”

Ramos, the son of a civil servant, is by nature a populist and cites the importance of advancing Filipino “people power” from the political to the economic sphere. But he has been cautious in his pursuit of economic justice, leaving the impression that he and Almonte have honed a good-cop, bad-cop routine.

“This business of leveling the playing fields and abolishing the monopolies and cartels is just one aspect, just a part of it,” Ramos said about his reform program. “Although it’s a significant aspect.”

Having neutralized a long-festering Communist insurgency, Ramos perhaps is able to move slowly and calmly in his attack on entrenched economic interests. This is no revolution.

“These are reforms being undertaken, not a military blitz,” said Alex Magno, a political science professor at the University of the Philippines. “They come in bit by bit. But it’s a solid edifice of policies.”

Meanwhile, national confidence is building under the relatively steady hand--by Philippine standards--of the Ramos administration. The Subic experiment is a case in point, suggesting that the country soon may shed the inferiority complex it developed watching the dazzling economic success of its neighbors.

“Later this year, Ramos will move away from the catching-up rhetoric,” Magno said, “to the rhetoric of overtaking our rivals.”

New Life for an Old Base

Less than two years after the U.S. Navy pulled out of its base at Subic Bay, the Philippines has turned the site into a thriving free port that embodies the nation’s newfound economic optimism.