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Business picks up in special economic zones

Jun 14, 2014
Credit : GMI Post


Following the withdrawal of American forces from Subic Bay Naval Base and Clark Air Base in 1992, the Philippine government converted the two sprawling military facilities into special economic zones, which would offer foreign companies tax incentives to set up operations in those areas.

The task was Herculean as the two bases had suffered huge damage from the massive eruption of neighboring Mount Pinatubo the previous year.

But with its deep-sea port and existing runway, Subic Bay Freeport soon attracted the first wave of foreign investors, which included global giants FedEx, Acer and Thomson SA. In 2008, South Korea’s Hanjin unveiled a $1.4 billion dollar shipbuilding facility, which has generated about 15,000 jobs.

Close by, Clark Freeport Zone has attracted its fair share of foreign investors. It has since caught up with the neighboring economic zone with the opening of the Diosdado Macapagal International Airport (DMIA).

“The country’s population is approaching 100 million and over 20 percent of that is clustered around one urban area. There is only one airport servicing that area so, as Manila grows, the need for a secondary airport is more urgent,” said Mark Williams, the investment director of Kuwait-based private equity firm KGL Investment Co.

The airport, once designated an alternative landing site for NASA space shuttles, is located only 50 miles from Manila and has two parallel runways with space for expansion.

To complement the new infrastructure and attract even more foreign capital, the government also constructed the Subic-Clark-Tarlac Expressway, which reduced travel time between Subic and Clark from three hours to thirty-five minutes.

The government is also building a high-speed rail link between Manila and Clark. The North Rail Line will speed up travel to DMIA and ease the transport of goods to the free zone. 

KGL Investment, with partners Peregrine Development International, has recognized the opportunities arising from the developments in Clark Freeport Zone, believing that it will grow into a major logistics hub in Southeast Asia.

Earlier this year, KGL Investment and Peregrine inaugurated Global Gateway Logistics City (GGLC), a 177-hectare property adjacent to DMIA that will be made into “a fully integrated, mixed-use, multi-disciplinary development.”

Called the Philippines’ first “aerotropolis,” GGLC will contain four million square meters of floor space when completed. The project is in line with KGL’s Port Fund mandate to invest in port and port-related businesses.

“This is larger than Metro Manila in terms of floor space. We’re excited for this development because we have rail, we have air, we have land, and we have sea,” said Williams.

GGLC will be divided into the following: a Logistics Park for warehousing, distributorships and light manufacturing; a Business Park for companies looking for offices inside Clark; an Aero Park for aviation research and development, modeling and simulation; and a Town Center with stores and restaurants. 

KGL Investment, which also has a stake in local shipping company Negros Navigation, is very satisfied with its two investments in the Philippines, according to Williams.

“What we’re trying to do is not just make an investment. We’re trying to add value. We are here to partner with business and government in a manner that will help the Philippines grow,” said Williams.

Affirming the foresight of KGL Investment and Peregrine, FDI Magazine, published by the Financial Times Business Group, has classified Clark as the “most cost effective” among 700 other economic zones worldwide and ranked it seventh in terms of “economic potential.”

Philippines 2010 was prepared for and originally printed in Foreign Affairs magazine.

PDF of the printed report

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