Special Economic Zones and Freeports : Challenges and Opportunities
The Bases Conversion Program Experience

The last decade of the 20th century ushered major international and domestic upheavals in the Philippines, both politically and economically. The fall of the Marcos dictatorship gave birth to new democracy gave thru a new Philippine Constitution. This helped spark global uprisings against oppressive regimes throughout the world that eventually led to the fall of dictatorial rules in Eastern Europe climaxing in the fall of the Berlin Wall and the eventual end of the Cold War.

In the succeeding years, the Philippines suffered the pains of nurturing a democracy as it endured the series of bloody coup attempts by rightist military rebels. With the rise in nationalistic fervor, the Philippine government allowed the 1991 termination of its military bases agreement with the US that compelled the US military bases to withdraw from the Subic Naval Base, the Clark Air Base and other smaller US military camps in the Philippines. The economic impact of such withdrawal was feared because of inevitable dislocation of thousands Filipino workers in those major US bases as it was coming on the heels of the 1990 earthquake that devastated Northern Luzon and the following wrath of the 1991 Mt. Pinatubo eruption laid waste to the entire Central Luzon. These major natural disasters coupled with the dislocation of workers and the loss of livelihood generated by the US bases as well as the political instability brought by the series of coups left the Philippines at the throes of economic collapse.

Globally, a new economic order has shaped as protectionist barriers were made to fall and global markets opened up for international trade. With globalization, the privatization of government assets and the liberalization and deregulation of industries that used to be monopolies happened at a fast pace. Competition for these foreign direct investments ensued among developing countries such as the Philippines, Malaysia, Thailand, Vietnam and China.

In this backdrop, this paper aims to describe the rationale behind the creation of the special economic zones and freeports under the bases conversion program embodied in Republic Act 7227 as amended and to evaluate the roles that these special economic zones and freeports played in national economic development and security of the Philippines. This paper also aims to identify the governance challenges that have been faced by the government in these economic zones that led to economic losses as well particularly the effects of abuse of incentives and privileges, corruption and smuggling, ambiguity in the legal framework governing these economic zones and other factors that hindered the full potential of these SEZs and freeports in contributing to national development.