ABSTRACT
The last decade of the twentieth century ushered in major international and domestic upheavals in the Philippines, both politically and economically. The fall of the Marcos dictatorship gave birth to a new democracy and new Philippine Constitution. This event helped ignite a spark of dissent against dictators and oppressive regimes around the world that inflamed the global uprisings against oppressive regimes. With glory comes burden. In the succeeding years, the Philippines suffered
the pains of nurturing a democracy. The series of bloody coup attempts by rightist military rebels threatened the gains of the people. With the rise in nationalistic fervour, the Philippine government terminated its military bases agreement with the United States (USA). This compelled the US military 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 the inevitable dislocation of thousands of Filipino workers in those major US bases. Such fear was compounded by two major natural disasters. First came the 1990 earthquake which devastated Northern Luzon. Second, in 1991 the wrath of the Mount Pinatubo eruption buried thousands of hectares of agricultural, commercial and residential land under millions of tons of ash and murderous lahar. The Philippines, in the midst of a fast-changing globalized world, was hit by major natural and manmade disasters that brought it to the brink of economic collapse. Globally, a new economic order was taking shape with the fall of protec-
tionist barriers to trade and the opening of global markets. The privatization of government assets and the liberalization and deregulation of industries that used to be monopolies happened at a fast pace as the private sector assumed roles that governments used to perform. Competition for foreign direct investment (FDI) ensued among developing countries such as the Philippines, Malaysia, Thailand, Vietnam, China and others. In the face of these challenges, the Aquino presidency in its last year (1992)
looked at the opportunities that the former bases could offer. At the same time, businesses were going around the world looking for countries that could
provide the best environment for investment. The bases conversion and development programme was therefore drafted by the Philippine legislative and executive offices to meet the challenges of a globalized world and put the former military camps to their best use. This chapter explains the rationale behind the creation of the SEZs and
freeports under the bases conversion programme embodied in Republic Act no. 7227 as amended, and evaluates the roles that they played in the national economic development and security of the Philippines. A further aim of this chapter is to identify challenges that have been faced by the government in these zones which have led to economic losses. In particular these challenges have included the effects of the abuse of incentives and privileges; corruption and smuggling; ambiguity in the legal framework governing the zones; and other factors that have hindered their full potential as catalysts for national development. While the chapter also discusses policy issues, the perspective of discussion
is primarily from an operational and management perspective.
