Potential Disastrous Effects of SBMA’s Common Use Service Area Fee (CUSA)

The Subic Chamber recently wrote President Aquino to intervene in the SBMA's proposed CUSA fee and at the same time recommended that the national government should temporarily subsidize the SBMA's loan repayments since the national treasury is getting billions of pesos from the BoC and BIR collections from the Subic Freeport anyway.

Here's the letter:

Dear President Aquino,

The Subic Bay Freeport Chamber of Commerce (SBFCC) writes your good office because of the potentially ruinous effects, not only to locators but also to the government and even to the ordinary working man, of the Common Use Service Area Fee (CUSA) to be soon implemented by the Subic Bay Metropolitan Authority (SBMA). We have already written SBMA about our opposition to the CUSA (see Attachment 1) but still need your help and intervention.

The CUSA, in brief, intends to charge locators and residents of the Freeport for basic municipal services including law enforcement, firefighting, street cleaning, and street lighting. These same basic municipal services are normally provided by the national government, the local government units, and government agencies from taxes. The CUSA is attempting to charge fees that are already being paid by locators, residents, and workers through mandated taxes.

The main rationale by the SBMA for the CUSA is to increase its revenues to cut its losses. But its being financially in the red is not new. In fact, the SBMA, under several different administrations, never had any considerable net income since its inception in 1992. It is expected that SBMA will only start to generate a lot more income when long-term leases start to expire and the properties get turned over back to SBMA for re-leasing at higher rates.

The Subic Bay Freeport itself, through the Bureau of Customs (BoC) and Bureau of Internal Revenue (BIR), remits billions of pesos to the national government annually (P25 billion total from 2008 to 2011). However, the SBMA does not get any share from such taxes and thus is now mired in debt and can barely sustain its operations from its own income from leases, port operations, regulatory fees, and other revenues.

While some members of the SBFCC are keen on helping the SBMA resolve its financial problems, they find the CUSA rates outrageously high, amounting to millions of pesos a month for some locators (see Attachment 2). The SBMA is looking at generating P354.76 million yearly from CUSA revenue which it will charge additionally to locators and residents on top of rent charges. This massive additional burden is beyond the capacity of a number of locators to pay. Some have already intimated that they are seriously considering closing down or transferring somewhere else. This will have potentially devastating effects on many workers who would be out of jobs. The national government might also be affected because of expectedly lower collection from taxes when this happens.

Further, instead of stimulating investor interest by lowering the cost of doing business, which is what a Freeport should be, the CUSA might do exactly the opposite.

We do understand the predicament of the SBMA. We feel for the administration of Chairman Garcia and the problems they inherited. It is not difficult to see the good intentions behind the proposal. We, however, think that the proposed solution to the problem might actually exacerbate instead of solve it. We think that the more feasible solution requires intervention by the national government.

The Subic Bay Freeport Chamber of Commerce proposes, therefore, that SBMA’s debts from its loans be partly subsidized temporarily by the national government through its income from BIR and BoC collections from the Subic Bay Freeport. We also propose that the implementation of the proposed CUSA be rescinded so as not to scare off investors. We hope that by doing these, the Freeport will continue to flourish and eventually provide increased income to the government in the long run.

On our part, we will continue to work with SBMA in streamlining processes that can save money; we will continue to help in eliminating graft and corruption using your battle cry of daang matuwid; and we will help in encouraging more investments to come in.

We hope that you can give our request due consideration.

Yours truly,

SBFCC Board of Directors

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The information on the aforementioned attachments are available to SBFCC members at our SBFCC Online Forum.