I-TEAM REPORT: ANTISMUGGLING DRIVE
Is there a Palace bagman in Subic?
Inquirer - MANILA, Philippines -- Subic Bay used to host the United States’ largest naval base outside the mainland. Security there used to be tight and impregnable.
But under the administration of President Gloria Macapagal-Arroyo, such things as smuggling cars -- and oil -- on a significant scale cannot even be stopped.
The activity goes on under the watch of the Bureau of Customs, the Subic Bay Metropolitan Authority, two presidential task forces, the Land Transportation Office and sundry police and military groups.
One concerned Subic official, who requested anonymity, says in a letter to the Philippine Daily Inquirer that included documents on results of official investigations:
“The glaring fact is one of Malacañang’s favorite generals earlier dispatched to Subic to check on smuggling activities ironically ended up coddling the smugglers himself.
“By virtue of his position, this ‘bagman’ of Malacañang has always been involved in the thick of the investigation whenever a smuggling case comes up, as with the gas/oil fuel smuggling and the recent luxury cars controversy.
“No matter how much effort and vigilance honest free port officials might exert, the problem of smuggling can never be solved if the culprit is one of them.”
The Subic Freeport has become known derisively as the “home of the generals.”
There, an increasing number of retired generals are appointed consultants of private companies doing business and live in luxury villas.
And there, in what can very well be a smuggler’s paradise, everyone’s dream car can be had for practically a song, if you believe customs officials based there.
Such sports car treasures as Porsches, Lamborghinis, Ferraris and BMWs have an appraised value of as ridiculously low as $1,000, according to official documents provided by investigators to the Inquirer.
Mind-boggling
In fact, a Porsche twin-turbo sells for $90,000 to $100,000 in the foreign market. Add a 100-percent tax if sold here and the money a smuggler can make is simply mind-boggling -- especially if the appraiser at Subic puts a value of $1,000 on it for tax purposes.
Each luxury car that is driven out of the sprawling port is not only depriving the treasury of badly needed tax revenues, it is slowly subverting the manufacturing sector and is helping keep the nation a poverty-stricken Third World economy.
Why is this so?
For the mass of Filipinos, access to the most visible form of wealth has been denied by the general failure of the agrarian reform program over the past two decades because of resistance of the hacienderos and plantation owners.
The one surefire way to social mobility through a good education in the era of globalization has been derailed by corruption, incompetence and ineptitude over the past three decades, academics say.
Factory or airport
For those who have acquired some skills, the way out of the rut in impoverished rural areas wracked by income inequality, violence and insurgency is the factory that businessmen say should be the focus of government attempts to industrialize, or the airport to become a worker overseas.
But it is in the manufacturing sector that a failure of governance as exemplified by rampant smuggling is increasingly being felt.
Executives at the Ford and Toyota plants in the Philippines have raised warning signals on the impact on the automotive industry of smuggling at Subic and other such free ports as those in Cebu and Davao.
Take Ford Philippines as an example. A decade ago, it set up a $200-million plant in Santa Rosa City in Laguna, hoping it will capture a profitable percentage of vehicle sales of up to 200,000 units by this year.
At that time, the industry sold around 160,000 vehicles, including 30,000 completely built units (CBUs) and 130,000 completely knocked down (CKD) cars assembled in the local plants.
Market in doldrums
But the market has been in the doldrums since -- for a host of reasons.
The financial crisis that hit Southeast Asia and also engulfed the Philippines in 1997 set back sales in the automotive industry in the region. In the Philippines, sales were down by 50 percent.
The excise tax regime changed dramatically. Luxury cars and SUVs were slapped up to 100-percent tax. The forging of a free trade agreement in the Association of Southeast Asian Nations is also providing a downbeat outlook as it will open up the local market and allow importation from neighboring countries.
But rampant smuggling has done more to inflict serious damage on the industry.
Automotive industry figures by last year showed car sales were down to around 100,000 units but smuggled cars in circulation went up to a whopping 70,000.
Industry in distress
Ford is among the major car makers hit hard. All are now operating at 20-25 percent of capacity.
“The industry is in distress,” says one executive. “Unless something is done, it will just continue to decline.”
At the rate the Philippine plants are now operating, it is too inefficient or costly to be able to compete with other producers in Southeast Asia that have overcome the financial crisis of the late 1990s and whose sales are now back to where they were before disaster struck.
There, because of economies of scale, the cost of production is lower. Here, because of “underutilization,” cost of production is higher.
Suppliers closing down
Industry sources say a number of factories supporting the car plants have either closed down or have laid off workers, particularly those that are engaged in the manufacturing of spare parts, glass, carpets and seat upholstery.
Without demand, local suppliers of assembly plants cannot sustain their own operations, which are no longer viable. Spare parts then have to be imported.
Skilled workers who cannot find jobs are forced to flee the country for jobs overseas.
It is a vicious cycle.
A sham
Smugglers are laughing at the nationally televised wrecking of 18 supposed luxury cars at the Subic Freeport on Aug. 16 that the President had ordered. They dismiss it as nothing more than a “moro moro” -- a sham.
Top officials of the Subic Freeport are finger-pointing at each other on why imported cars are being smuggled right under their very noses.
The auto executive says if the investigators will look around, the culprits should be easily identified.
“Cars are not a perishable commodity like fruits or vegetables,” he says. “There’s a paper trail. Just look at it.” (To be continued . . . . )
Inquirer - MANILA, Philippines -- Subic Bay used to host the United States’ largest naval base outside the mainland. Security there used to be tight and impregnable.
But under the administration of President Gloria Macapagal-Arroyo, such things as smuggling cars -- and oil -- on a significant scale cannot even be stopped.
The activity goes on under the watch of the Bureau of Customs, the Subic Bay Metropolitan Authority, two presidential task forces, the Land Transportation Office and sundry police and military groups.
One concerned Subic official, who requested anonymity, says in a letter to the Philippine Daily Inquirer that included documents on results of official investigations:
“The glaring fact is one of Malacañang’s favorite generals earlier dispatched to Subic to check on smuggling activities ironically ended up coddling the smugglers himself.
“By virtue of his position, this ‘bagman’ of Malacañang has always been involved in the thick of the investigation whenever a smuggling case comes up, as with the gas/oil fuel smuggling and the recent luxury cars controversy.
“No matter how much effort and vigilance honest free port officials might exert, the problem of smuggling can never be solved if the culprit is one of them.”
The Subic Freeport has become known derisively as the “home of the generals.”
There, an increasing number of retired generals are appointed consultants of private companies doing business and live in luxury villas.
And there, in what can very well be a smuggler’s paradise, everyone’s dream car can be had for practically a song, if you believe customs officials based there.
Such sports car treasures as Porsches, Lamborghinis, Ferraris and BMWs have an appraised value of as ridiculously low as $1,000, according to official documents provided by investigators to the Inquirer.
Mind-boggling
In fact, a Porsche twin-turbo sells for $90,000 to $100,000 in the foreign market. Add a 100-percent tax if sold here and the money a smuggler can make is simply mind-boggling -- especially if the appraiser at Subic puts a value of $1,000 on it for tax purposes.
Each luxury car that is driven out of the sprawling port is not only depriving the treasury of badly needed tax revenues, it is slowly subverting the manufacturing sector and is helping keep the nation a poverty-stricken Third World economy.
Why is this so?
For the mass of Filipinos, access to the most visible form of wealth has been denied by the general failure of the agrarian reform program over the past two decades because of resistance of the hacienderos and plantation owners.
The one surefire way to social mobility through a good education in the era of globalization has been derailed by corruption, incompetence and ineptitude over the past three decades, academics say.
Factory or airport
For those who have acquired some skills, the way out of the rut in impoverished rural areas wracked by income inequality, violence and insurgency is the factory that businessmen say should be the focus of government attempts to industrialize, or the airport to become a worker overseas.
But it is in the manufacturing sector that a failure of governance as exemplified by rampant smuggling is increasingly being felt.
Executives at the Ford and Toyota plants in the Philippines have raised warning signals on the impact on the automotive industry of smuggling at Subic and other such free ports as those in Cebu and Davao.
Take Ford Philippines as an example. A decade ago, it set up a $200-million plant in Santa Rosa City in Laguna, hoping it will capture a profitable percentage of vehicle sales of up to 200,000 units by this year.
At that time, the industry sold around 160,000 vehicles, including 30,000 completely built units (CBUs) and 130,000 completely knocked down (CKD) cars assembled in the local plants.
Market in doldrums
But the market has been in the doldrums since -- for a host of reasons.
The financial crisis that hit Southeast Asia and also engulfed the Philippines in 1997 set back sales in the automotive industry in the region. In the Philippines, sales were down by 50 percent.
The excise tax regime changed dramatically. Luxury cars and SUVs were slapped up to 100-percent tax. The forging of a free trade agreement in the Association of Southeast Asian Nations is also providing a downbeat outlook as it will open up the local market and allow importation from neighboring countries.
But rampant smuggling has done more to inflict serious damage on the industry.
Automotive industry figures by last year showed car sales were down to around 100,000 units but smuggled cars in circulation went up to a whopping 70,000.
Industry in distress
Ford is among the major car makers hit hard. All are now operating at 20-25 percent of capacity.
“The industry is in distress,” says one executive. “Unless something is done, it will just continue to decline.”
At the rate the Philippine plants are now operating, it is too inefficient or costly to be able to compete with other producers in Southeast Asia that have overcome the financial crisis of the late 1990s and whose sales are now back to where they were before disaster struck.
There, because of economies of scale, the cost of production is lower. Here, because of “underutilization,” cost of production is higher.
Suppliers closing down
Industry sources say a number of factories supporting the car plants have either closed down or have laid off workers, particularly those that are engaged in the manufacturing of spare parts, glass, carpets and seat upholstery.
Without demand, local suppliers of assembly plants cannot sustain their own operations, which are no longer viable. Spare parts then have to be imported.
Skilled workers who cannot find jobs are forced to flee the country for jobs overseas.
It is a vicious cycle.
A sham
Smugglers are laughing at the nationally televised wrecking of 18 supposed luxury cars at the Subic Freeport on Aug. 16 that the President had ordered. They dismiss it as nothing more than a “moro moro” -- a sham.
Top officials of the Subic Freeport are finger-pointing at each other on why imported cars are being smuggled right under their very noses.
The auto executive says if the investigators will look around, the culprits should be easily identified.
“Cars are not a perishable commodity like fruits or vegetables,” he says. “There’s a paper trail. Just look at it.” (To be continued . . . . )
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