Designed for assembly and re-export, instead
they become efficient inland transhipment points
For
months President Benigno S. Aquino III has been taking his war against
corruption – so far about the only issue on which he gets high marks – against
yet another foe, smugglers who use the country’s free trade zones as landing
bases for their illicit goods.
So far,
however, his war doesn’t seem to have had a lot of impact, at least not yet. In
August last year, he appointed Rozzano Rufino Biazon as customs commissioner
and former Army Brigadier General Danilo Lim – who was jailed for seven years
for involvement in plots to overthrow two of his predecessors – as his deputy
to clean out corruption at the Bureau of Customs and boost revenue collection.
While
the customs agency has been filing smuggling cases under its continuing
name-and-shame campaign, with the catchy name “Run After the Smugglers,” or
RATS, observers say that many of the country’s plethora of special economic
zones, which number about 200, continue to be smuggling havens.
Established
under legislation passed in 1995 as a kind of magic lantern to create jobs, the
zones have proliferated across the island country, including industrial
estates, export processing zones and free trade zones of all kinds.
Theoretically they are areas in which multinationals establish assembly plants
establishing factories for the manufacture and re-export finished goods without
the intervention of the customs authorities.
The
zones are designed to provide assembly jobs for workers, and indeed they have
done so. Subic Bay, the vast former US Navy base that was turned over to the
Philippine government along with Clark Air Base in 1991 and 1992, numbers
nearly 90,000 workers. While many such as the Mactan Export Processing Zone in
Cebu get high marks, others face problems.
The
trouble with far too many of the Philippines’ export processing zones is that
far too many of the goods that land stay in the country instead of being
reprocessed and re-exported. The zones have few or no taxes and no customs
officials, meaning smugglers can land their goods tax-free and either pay off
officials on their way out of the zones or hold them in warehouses until they
can slip them past authorities.
What
makes the zones even more popular with smugglers is that in addition, business
processes are streamlined to attract foreign direct investment and ideally have
modern infrastructure so that goods can be moved efficiently without facing the
Philippines’ crumbling and overstressed infrastructure. Incentives for the
operators include zero duty on capital equipment, spare parts and accessories,
and exemption from all taxes. They are required to pay 5 percent of their gross
income to the national government.
The
biggest of these is Subic, which featured US$1.3 billion worth of airport and
ship repair facilities – and 4 billion barrels of potential oil storage, the
largest such storage facility in the country. Consequently, witnesses say, the
Subic Clark Tarlac Expressway at night is clogged with scores of oil tankers,
some of them bearing the liveries of major corporations as well as more
nondescript tankers, filling up with fuel that can be imported free into the
duty-free zone.
The
problems at Subic and Clark began almost immediately after the bases were
handed back to the Philippine government.
“For
operators in the Clark and Subic free port zones,” according to a report by the
Manila-based country-risk firm Pacific Strategies and Investments, “a duty free
license is seen by many as a ‘license to smuggle’. Literally without exception,
the major players in the industry have all been implicated or investigated in
smuggling controversies.”
Government
officials have repeatedly gone after duty-free operators at Subic, a vast base
geographically as big as the entire country of Singapore, and largely porous to
the point where authorities are basically powerless to stop smuggling – if they
wanted to, since the customs authorities in the Philippines have come under
considerable fire for corruption.
Along
with everything from chocolates to cigarettes, vehicle smuggling has been a
major problem in Subic – although far from the only one -- with large-scale
operators buying up huge numbers of second-hand vehicles in Japan, Korea and
other countries, importing them into Subic and smuggling them out. According to
one report, “thousands of vehicles, trucks and other equipment can be seen
covering vast tracts of the free port.”
There’s
one problem, the Japanese and Koreans drive on the left side of the road,
meaning their steering wheels are on the right. The operators obtain conversion
kits to convert them to left-hand drive on Subic, then sell them on the market.
“These vehicles have figured in devastating accidents in recent years. When a
conversion fails, the vehicles often suffer simultaneous loss of brakes and
steering,” the PSA report notes.
Aquino,
in a February press conference, said oil smuggling costs the government an
estimated P40 billion (US$937 million) in annual revenues, And, he said, that’s
only an estimate. That kind of money, he said, could fund the construction of
218,000 low-cost housing units, or half of the total housing units needed for
informal settlers – and that’s just for oil. He called attention to rice
smuggling as well.
Neil
Cruz, in an op-ed article in the Philippine Daily Enquirer last December,
lamented that sugar, frozen meat, garlic, onions, carrots, broccoli and other
vegetables also are smuggled into the country at such a scale that fishermen,
hog and beef and rice and vegetable farmers are being driven out of business
and that their children are being forced to join the army of Filipino overseas
workers, which number nearly a tenth of the population.
Asia
Sentinel
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