How much would the Philippines pay to prevent China from exerting influence over and gaining a foothold on one of the country’s strategic locations — Subic Bay?
It’s P1.35 billion a year for the next 25 years.
It’s for the Philippine Navy’s lease of a 100-hectare property that Hanjin Heavy Industries and Construction (HHIC) will vacate in Subic Bay after it went bankrupt in 2019 under the weight of more than $400 million in unpaid debts to South Korean and local lenders.
The Philippine government is about to sign a 25-year deal with Cerberus Capital Management to assume Hanjin’s debts and make money by operating the facility and allowing some locators to move in, like Australian shipbuilder Austal which may be awarded a government contract to build off-shore patrol vessels (OPV) for the navy.
A Japanese logistics company and the US military may come back but on a commercial basis as a Cerberus subsidiary may operate a ship repair facility there.
The Philippine Navy will also relocate some of its operating units at Fort San Felipe in Sangley Point, Cavite to Subic as part of the deal with Cerberus.
But there’s a catch: the Philippines has to pay Cerberus P1 billion for the lease of the property and another P350 million for the maintenance of the facility.
Originally, Cerberus was asking for P700 million but the cost of the security and other items were deducted because the Navy will take charge of security for the entire facility.
It is a strange deal. The Philippines owned the property but a government agency has to cough up more than a billion pesos a year to lease the land it owns.
It is the price the Philippine Navy has to pay to block China from getting a foothold on Philippine territory. It would be a disaster if the government allowed Chinese companies to take over Hanjin. Beijing already controls Scarborough Shoal to the west.
At least three Chinese state-owned companies had expressed keen interest in paying off Hanjin’s debt and taking over a part of the old US naval base, the former home of the US Navy’s 7th Fleet in the Asia-Pacific region.
A Chinese takeover of Hanjin would allow Beijing to step one foot into the Philippines, expanding its footprint in the region and dealing a strategic blow to the United States.
In the 1990s when the Philippine Senate voted to kick out the Americans from its two large overseas bases in Clark and Subic, the Chinese started marching eastward toward Guam.
First, Beijing built a makeshift fishermen’s shelter in Mischief Reef, expanding it and transforming the half-submerged feature into an artificial island.
Mischief Reef has been transformed into a virtual carrier with a 3-kilometer long runway and a naval base for major surface ships, conventional submarines, and coast guard vessels.
It also seized control of Scarborough Shoal, just 150 nautical miles west of Zambales, a strategic area guarding the mouth of Subic Bay.
Taking over the Redondo peninsula in Subic would be seen as a major victory for China even without firing a single shot against a US warship in the region.
Only the Philippine Navy’s relocation to Subic can prevent a Chinese takeover. Cerberus would not come into Hanjin’s without the Philippine Navy.
But it would be a heavy burden for the Navy to shell out P1.35 billion every year for the next 25 years considering its meager budget and the funds it needs to upgrade its defense capabilities.
The Navy would need more than P100 billion to acquire capital ships — additional frigates, corvettes, off-shore patrol vessels and diesel-electric submarines. It is the only major Southeast Asian country that does not have a sub-surface capability.
It would also need mine-sweeping capability, coastal missile boats, and auxiliary ships to provide support to combatant surface vessels.
The national government must take the burden of paying up the Subic relocation from the Philippine Navy by creating a trust fund, similar to the military’s modernization program, which gets an annual budget of P5 billion.
Congress can also agree to increase the modernization fund allocation to factor in the Subic relocation plan for the Navy.
Otherwise, the Bases Conversion and Development Authority (BCDA) can contribute to pay the P1.35-billion annual lease.
BCDA earns from rentals or leases of property at former military bases — Fort Bonifacio and Villamor Air Base — which were privatized during the term of former president Fidel Ramos.
BCDA also controls huge properties in Subic and Clark, two former US bases that were converted into commercial and industrial estates after the US Navy and US Air Force left in 1992.
The P1.35-billion annual lease is a small amount to pay to prevent Chinese interests from gaining a foothold in the country.
Cerberus was supposed to sign a deal with the Philippine government. This was when Defense Secretary Delfin Lorenzana was in Washington in September for a meeting with his American counterpart, retired general Lloyd Austin.
There were delays in the signing because of some “legal” issues.
If the government does not really want to pay the P1.35-billion annual lease to Cerberus, it could cancel the deal and assume all $400 million of Hanjin’s debts.
It could probably get a restructuring from local banks and allow the Subic Bay Metropolitan Authority (SBMA) to take over Hanjin and look for locators.
The Philippine Navy would get its facilities free of charge under the SBMA management. The P1.35-billion annual lease could go to the government’s debt repayment scheme with foreign and local banks.
Besides there could be a lot of Australian, Japanese, Israeli and other allied countries willing to relocate to Subic and help block China’s march eastward to expand its influence in the region.
The country’s sovereignty is the paramount concern. Should the Philippine Navy pay some P1.35 billion annually or should the national government assume Hanjin’s more than $400 million bad loans?
Money is not an issue. Filipinos have offered their own lives to see the country free and independent. Stop China from gaining a foothold in the country.