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SCMP Reporter

SMART Hong Kong investors ought to be looking south these days - particularly in the direction of Subic Bay in the Philippines.

   That is the message that Richard Gordon, chairman of the Subic Bay Metropolitan Authority (SBMA), is hoping to drive home.

   ''It's dangerous not to spread your risk by putting all your eggs in one basket,'' he said, referring to the massive investments Hong Kong businessmen were placing in China.

   Subic Bay, 80 kilometres north of Manila, was converted into a special economic zone in November 1992, after the last American troops had pulled out of the Philippines.

   SBMA is the body charged with converting it into an industrial, commercial, financial and tourism area.

   ''The Li Ka-shings and Michael Kadoories should go south,'' Mr Gordon said.

   ''By all means go to China, but look also at the Philippines, which is a tremendous place for investment, especially as things have improved drastically in the areas of peace and order and business liberalisation.''    This is a theme Mr Gordon has preached successfully elsewhere, particularly in the United States and Taiwan, where some of Subic Bay's biggest investors have come from.

   Just over 18 months since work began to convert the 18,000-hectare naval base into an industrial park, SBMA has signed up 57 projects worth more than US$400 million.

   Seven banks have set up offices there, while another 39, including three foreign banks - two Taiwanese and one American - have applied for licences.

   With the recent liberalisation in the Philippines' banking law, more foreign banks are expected to move in.

   Besides Taiwan and the US and the Philippines itself, investors have come from Germany, Australia, Singapore, Switzerland and Canada.

   Mr Gordon stopped over in Hong Kong after visiting Taiwan to sign a $24.5 million loan deal for a joint venture to develop 120 hectares of land.

   The venture, called Subic Development and Management Corp, is jointly owned by SBMA and Taiwan's Century Development Corp.

   Mr Gordon said that from the start there had been a drive to tap Taiwanese funds because the island was the Philippines' closest neighbour and the two enjoyed good relations.

   Also, many of the Filipino-Chinese in Subic Bay speak Fukinese, which is the dialect of most Taiwanese.

   According to Mr Gordon, Taiwan, which has about $90 billion in reserves, sees Subic as the first part of its ''look south'' policy.

   He said the Taiwanese were more worried about the 1997 handover than Hong Kong people, and were looking for an alternative stepping stone to the China market.

   He urged Hong Kong people to follow the lead of the Taiwanese, stressing that ''the people of Subic Bay are no strangers to Chinese culture'', saying businessmen investing $250,000 get a permanent residency visa.

   He said there were several Chinese schools and the Taiwanese were planning to build an international Chinese school.

   Investment from Hong Kong had so far been ''very limited'', but he was confident that once Subic had re-developed its airport and secured direct flights, investment from the territory would pick up.

   Mr Gordon said he was seeking direct flights from Cathay Pacific and Dragonair, which would cut travelling time between Subic and Hong Kong to 11/2 hours.

   With its first-class recreational facilities, including an 18-hole golf course, tennis courts, swimming pools, horse-riding grounds, duty-free shopping and shooting ranges, Subic was an attractive destination for tourists from the territory.

   ''Alternatively, tourists can scuba dive where 39 wrecks from World War II lie in the waters off Subic Bay, or go hiking in the jungle and learn about survival,'' he said.

   It also has a casino which is managed by the Malaysian Genting Group, owners of the Malaysian casino resort of the same name.

   Last year, 1.2 million domestic tourists and 120,000 foreign tourists visited Subic. Because of the lack of international air links, visitors have to travel from Manila by either road or helicopter.

   SBMA last month secured a $40 million World Bank loan, which it will use to upgrade its infrastructure, including factories and a new road.

   Subic's airport is able to accommodate planes as big as 747s, but the runway and apron areas will have to be strengthened as they were designed to cater mainly for fighter jets.

   Federal Express, the world's largest express transportation company, recently decided to make Subic Bay its Asia hub.

   Mr Gordon said: ''We need to prepare [the airport runway] for the constant pounding that we expect from Federal Express planes - starting from six a day. We don't want to be doing repairs in the middle of it all.''    He said US company UPS and Cargolux of Luxembourg were also considering making Subic their distribution centre.

   The runway upgrade is expected to be completed in four to five months and the first Federal Express planes should be landing early next year.

   Before that, however, Taiwan's Fu Shing airline plans to start direct flights from Taipei by July.

   Besides its airport, Subic has a free port with an anchorage capability of 600 ships.

   It also has two power plants with a combined capacity of 150 megawatts and an international telecommunications gateway with 30,000 lines.

   Mr Gordon said 200 ships called there last year but, in the first quarter of this year alone, the same number had already arrived.

   He said investors from all over the world were flocking to Subic.

   ''[World Bank president] Lewis Preston, [Malaysian Prime Minister] Mahathir Mohamad, [Taiwanese President] Lee Teng Hui, trade ministers of practically every nationality - they have all been to Subic Bay in the first five months of the year to examine business opportunities,'' he said.



Subic Bay aims to put itself on investors' map