US Navy Returns To Subic In Commercial Deal

The Americans are back in their former naval base in Subic.

Under a commercial deal signed between the Philippine government, through the Subic Bay Metropolitan Authority (SBMA), and US-based Cerberus Capital Management, the US Navy can come back to an old shipyard abandoned by Hanjin Heavy Industries and Construction-Philippines after it went bankrupt in 2019.

Sources familiar with the deal said the US Navy will come in only as a customer to the facility because the former Hanjin shipyard has “an excellent” facility for ship repairs.

“This is not going to be a US base,” the source familiar with the deal said. “The facilities are run by contractors. They are the locators, not the US military which are the clients of these private contractors. I have not seen any plans there for a permanent US force positioned on a permanent basis beyond liaison personnel.”

Another source from the military said the US Army is also interested in setting up a logistics hub to preposition supplies and equipment to be used in annual military exercises which are increasing after President Duterte took back a letter informing Washington it intends to terminate the Visiting Forces Agreement in 2020.

“I know the US Army had sent some personnel to scout Subic and identify an area where it intends to put up warehouses for supplies and equipment,” a flag officer who refused to be named because he was not authorized to speak to the press said.

The second source said it would take some time before any US military unit can move into the Hanjin area as operational details need to be sorted out. “The warehouse contract is for disaster relief supplies as well as military supplies but the actual work is completely under civilian contractors.”

Cerberus will have to look for other locators to the Hanjin facility. A separate deal will be made with the Philippine Navy to move units in a 100 hectare area inside Hanjin.

A Navy commander said several units from its silted base in Sangley Point, Cavite will be transferred to Subic, like the ship repair and sea systems command.

Cerberus wanted the Philippine Navy to pay 1.8 billion pesos a year for relocating to the Subic area but this was brought down to 1.3 billion pesos, the navy commander said.

“We have the money for the deal,” the navy commander said, adding the president has authorized in2021 to transfer the amount from his own contingency budget for the project. “There’s also an additional budget in the 2022 general appropriations act for the Hanjin area,” he added.

An Australian shipbuilder and a Japanese logistics company have also expressed interests to relocate to the former South Korean shipyard.

The Cerberus deal was a 25 year contract which could generate tens of thousands of jobs in Subic to replace the workforce displaced by the closure of Hanjin.

The deal was officially announced by Philippine ambassador to the United States, Jose Manuel Romualdez, who hosted a reception on Tuesday to celebrate the robust bilateral ties with Washington.

“The completion of the Subic Bay shipyard will redound to benefits for the country, bring jobs to the local communities, increase economic activity, and at the same fortify our strategic security measures,” he said in a press statement.

“Working with the United States on this project will help ensure that we are able to protect our interests not only for our country but the whole region.”

For his part, Foreign Affairs Secretary Teodoro Locsin Jr. said: “With less than two months left to the Duterte administration, there is no better finale to all the work done to strengthen our ties with the United States than to see the ink on the paper of the biggest public-private partnership in the 75-year history of Philippine-US relations.”

Defense Secretary Delfin Lorenzana and Finance Secretary Carlos Dominguez witnessed the signing of the deal with SBMA.

Related reading: US Navy Eyes Return To Subic Bay In A Commercial Deal