SOFA 2011

STATE OF THE FREEPORT(PART 1)By RADM Feliciano G. Salonga, PCGASBMA Chairman / Head of Agency

2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

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Key Performance Indicators (2010 vs. 2009)

CUMULATIVE INVESTMENTS(1992 - 2010)

Year Committed Investments(Cumulative)

2010 7,167.88 B

2009 5,958.01 B

Up by20%

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Key Performance Indicators (2009 vs. 2010)

INVESTMENT PROJECTS

Year

No. ofApproved Projects

for the Year

Cumulative No. of Approved

Projects (1992 – 2010)

2010 115 1,463

2009 201 1,348

Down by

43%

Up by

8.5%

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Key Performance Indicators (2010 vs. 2009)

COMMITTED INVESTMENTS FROM NEW PROJECTS

Year Committed Investments

2010 US$1.210 B

2009 US$0.206 B

Up by486%

METROPOLITAN AUTHORITYSUBIC BAY

Rank Company Committed Investments (US$)

Country of Origin

1 MCastle Philippines 1,000,000,000.00 KOREA

2 Sunnew-Subic Investments Ltd. 75,000,000.00 CHINA

3 Subic Bay Town Center Inc. 36,425,969.57 PHILIPPINES

4Alubat Aviation Composites Philippines 15,000,000.00 GERMANY / UK

Vapco International Corporation 15,000,000.00 JORDAN / PHILIPPINES

5 Sands of Triboa Resorts 14,379,363.79 PHILIPPINES

6 Subic Bay Brands & Lifestyles Retails Concept, Inc. 5,946,291.56 PHILIPPINES

7 Fertuna Holdings Corp. 5,356,760.23 PHILIPPINES

8 Holy Land Subic Foundation, Inc. 5,339,598.46 PHILIPPINES

9 Udenna Management & Resources Corp. 3,220,000.00 PHILIPPINES

10 San Bernardino Shores Beach Resort Corp. 2,210,480.91 PHILIPPINES

TOTAL $ 1,177,878,464.53

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2010 Over-all Top 10 New Investments METROPOLITAN AUTHORITYSUBIC BAY

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2010 Foreign and Local Investments

LOCAL66 New Projects

(57%)

FDIs49 New Projects(43 %)

Approved Projects

Local$87.99(7%)

FDIs$1,121.88

(93%)

Committed InvestmentsIn US$ Million

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2010 Top 10 FDIs

RANK COMPANY COMMITTED INVESTMENT (US$) COUNTRY OF ORIGIN

1 MCastle Philippines 1,000,000,000.00 Korean

2 Sunnew-Subic Investments Ltd. 75,000,000.00 China

3Alubat Aviation Composites Philippines 15,000,000.00 Germany / UK

Vapco International Corporation 15,000,000.00 Jordan / Philippines

4 Safehull Marine Technologies, Inc. 2,131,287.30 Taiwan / Philippines

5 Advance Subic Screw Inc. 1,500,000.00 Taiwan6 Chinmei Metal Mfg. Inc. 1,450,000.00 Taiwan7 Aviation Concepts Holdings 1,100,000.00 USA / Canada

8Misung Subic, Inc. 1,000,000.00 China 60% / Canada

20% / Philippines 20%International Armoring Corporation Asia 1,000,000.00 USA

9 Nova Freeport Resources, Inc. 879,101.30 Korea

10 Mcom Subic Corporation 867,000.00 Taiwan

TOTAL US$ 1,114,927,388.60

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2010 Top 10 Local Investments

Rank COMPANY COMMITTED INVESTMENT (US$)

1 Subic Bay Town Center Inc. 36,425,969.57

2 Sands of Triboa Resorts 14,379,363.79

3 Subic Bay Brands & Lifestyles Retails Concept, Inc. 5,946,291.56

4 Fertuna Holdings Corp. 5,356,760.235 Holy Land Subic Foundation, Inc. 5,339,598.46

6 Udenna Management and Resources Corp. 3,220,000.00

7 San Bernardino Shores Beach Resort Corp. 2,210,480.91

8 Carworld Subic, Inc. 1,895,000.00

9 Palm Horizon Gateway Subic, Inc. 1,601,879.54

10 CW-Subic Bay Dev’t ., Inc. 1,499,892.86

TOTAL US$ 77,875,236.93

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Employment (2010 vs. 2009)

Projected Employment from New Projects

Year No. of Workers

2010 8,050

2009 7,202

Up by11.77%

Total Active Workforce

Year No. of Workers

2010 88,450

2009 87,226

e p o r t A

Up by1.40%

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2010 Total Active Workforce by Sector

SERVICES40,308(45%)

SHIPBUILDING/MARINE RELATED

SERVICES25,722(29%)

MANUFACTURING15,037(17%)

CONSTRUCTION6,837(8%)

DOMESTIC HELPERS/

CARETAKERS546(1%)

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HHIC-Phil Manpower Plan

MANPOWER PLANTOTAL

25,000

20,000

15,000

10,00016,000

17,000

20,000

24,00025,000

YEAR2008 2009 2010 2011 2012

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2010 Top 10 Employers

Rank Company No. of Workers % Share

1 Greenbeach Powertech, Inc. (KCTech, Inc.) 2,954 3.34%

2 Nidec Subic Phils. Corp. 2,279 2.58%3 Sanyo Denki Philippines, Inc. 2,252 2.55%4 Metrobay Corporation 1,603 1.81%5 Freeport I-Tech Corporation 1,567 1.77%6 Binictican I-Tech Corporation 1,517 1.72%7 Subic Shipbuilder Corporation 1,494 1.69%8 Redondo I-Tech Corporation 1,485 1.68%9 Kalayaan I-Tech Corporation 1,454 1.64%

10 Redondo Baytech Corporation 1,296 1.47%

TOTAL 17,901 20.24%

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2010 Ten Outstanding Freeport Workers

Name Company

AQUINO, LARRY F. SBMA (HUMAN RESOURCE MGT. DEPT.)

CASTRO, JEAN V. NICERA PHILS., INC.

CATIIS, NEDELYN Q. SBMA (HUMAN RESOURCE MGT. DEPT.)

LABADAN, BENAMOR O. SUBIC BAY MARINE EXPLORATORIUM

MALLEN, JESUS VENER M. PHIL. COASTAL STORAGE & PIPELINE CORP.

MULLIS, ELVIRA R. SBDMC, INC.

ROBERTO, FRANCISCO P. SUBIC BAY MARINE EXPLORATORIUM

SADORA, ALFREDO T. PHIL. COASTAL STORAGE & PIPELINE CORP.

SAN GABRIEL, MARK F. SUBIC WATER & SEWERAGE CO., INC.

TAMAYO, MARISSA C. NIDEC PHILS., INC.

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Human Resource Development

Since 2007, 22,000 workers(welders, painters, pipe fitters, electricians, machinists,outfitters etc.) have been trained in this Center.

A continuing advocacy for needed adjustments in school curricula to produce graduates with skill sets that match the current demand of employers

Annual Labor Bulletins on training programs extended by NGOs and GOs, as well as certain training programs, as requested and proposed by proponents

A continuing advocacy fadjustments in school cuproduce graduates withthat match the current deemployers

Annual Labor Bulletins onprograms extended by NGOs, as well as certain trprograms, as requested andproposed by proponents

HHIC’s Skills Development Center

Labor Matching Congress Training Program Announcements

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2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

Exports and Imports (2010 vs. 2009)

2010 2009 Variance

US$ 1.345 B US$ 1.079 B US$ 0.265 B

Export FOB Value

2010 2009 Variance

US$ 3.482 B US$ 2.243 B US$ 1.239 B

Import FOB Value

Up by25%

Up by55%

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2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

2010 Top 10 Exporters

Rank Exporters FOB Value (US$)

1 HHIC-Phil 725,835,150.24

2 Sanyo Denki 103,201,977.72

3 Wistron Infocomm (Phils.) 75,321,518.40

4 Hitachi Terminals Mech.Phils.Corp. 57,703,481.04

5 Tong Lung (Phils.) Metal Industry 53,079,492.70

6 Juken Sangyo Phils. 53,020,334.27

7 Tapu Corporation 27,757,940.24

8 Nicera Philippines, Inc. 22,217,042.05

9 Cano Subic Corp. 20,845,931.17

10 Nidec Subic Philippines Corporation 18,077,718.94

TOTAL 1,157,060,586.77

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2010 Top 10 Importers

Rank Importers FOB Value (US$)

1 Sanyo Denki Philippines, Inc. 606,479,796.92

2 PTT Philippines Trading Corporation 424,554,637.60

3 HHIC-Phil., Inc. 381,383,155.57

4 Koryo Subic, Inc. 368,841,159.19

5 Nicera Phils., Inc. 240,847,884.37

6 Nidec Subic Philippines Corporation 224,247,107.35

7 Koushin Mfg. Phils., Inc. 183,333,375.84

8 Wistron Inforcom ((Phils.) Corp. 156,956,668.63

9 Micro Dragon Petroleum,Inc. 138,230,251.00

10 Challenger Aero Air Corporation 67,618,350.92

TOTAL 2,792,492,387.39

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Seaport Performance (2010 vs. 2009)

2010 2009 Variance

PhP 414,538,132.99 PhP 472,855,618.27 PhP 58,317,485.28

Revenues

2010 2009 Variance

PhP414,538,132.99 PhP469,282,229.49 PhP 54,744,096.50

Revenues vs. Forecast

Downby

12%

Downby

12%

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Seaport Performance (2010 vs. 2009)

Origin 2010 2009 Variance

Foreign 779 939 (160)

Domestic 1,313 1,136 117

TOTAL 2,092 2,075 17

Ship Calls

Gross Registered Tonnage

Origin 2010 2009 Variance

Foreign 12,262,577 13,053,002 (790,425)

Domestic 965,806 610,724 346,082

TOTAL 13,228,383 13,663,726 (435,343)

Totalup by0.8%

Totaldown by

3%

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Seaport Performance (2010 vs. 2009)

Containerized Cargo Volume (TEUs)

Year Import Export Transshipment Empty-In Empty-Out Total

2009 14,809 6,814 283 68 7,278 29,252

2010 17,496 7,772 393 115 8,543 34,318

Upby

17%

Year Bulk / Break Bulk

Heavy Equipment Lift / LO-LO / RO-RO Transshipment Total

2009 1,825,223 385,239 4,203 2,214,666

2010 1,755,397 488,338 1,165 2,244,899

Non-containerized Cargo Volume (MTs)

Upby

1.4%

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2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

2010 Tourism Performance (2010 vs. 2009)

Arrivals 2010 2009 Variance

Foreign 38,032 46,291 (8,259)

Local 5,435,103 4,054,017 1,381,086

Total 5,473,135 4,100,308 1,372,827

FOREIGN & LOCAL ARRIVALS

Totalupby

33%

F r e e p o r t At a t e o f t h e2 0 1 1 S d d r e s s

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2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

2010 Tourism Performance (2010 vs. 2009)

NO. OF EVENTS AND EVENT PARTICIPANTS

2010 2009 Variance

Tourism events 389 249 140 56%

Event participants 92,749 174,841 (82,092) (47%)

Hotel Occupancy Rates

Year Average Occupancy Rate

2009 86

2010 88.70

Upby

3%

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Revenue Generation (2010 vs. 2009)

Combined BIR & BOC Cash Revenue Collections

CollectingAgency 2010 2009 Variance

BIR PhP1,706,288,635.14 PhP 1,313,066,316.05 PhP 393,222,319.09 29.95%

BOC PhP 4,973,793,844.44 PhP 4,288,574,667.95 PhP 685,219,176.49 15.98%

TOTAL PhP6,680,082,479.58 PhP5,601,640,984.00 PhP1,078,441,495.58 19.25%

a t e o f t h e F r e e p o r t A d

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2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s

Other Major Highlights of 2010

ü Dormancy of entire operations of the Freeport ServiceCorporation for lack of sufficient and regular revenuestreams to sustain its operation and provide security oftenure to its employees

ü Dissolution of Task Force Subic in October 2010

ü Collection of PhP30 million in receivables through successfulnegotiated litigation

ü Collection of more than PhP12 million and US$1 million inreceivables through negotiated payment schemes

ü Implementation of new tax collection scheme of 2% of 5%corporate tax paid by SBF locators last August, resulting inrelease of PhP59.9 million to contiguous and affected LGUsas revenue share in February 2011

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END OF THESTATE OF THE FREEPORT ADDRESS(PART 1)

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STATE OF THE FREEPORT(PART 2)Administrator Armand C. Arreza

February 15, 2011

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Daylight

28

The way forward is to move, together, in the broad light of day, where everything we do and how we do it is clear, honest, and transparent.

Daylight.

Infrastructure Philippines 2010: Investing and Financing in Public-Private Projects

Marriot Hotel, Manila, November 18, 2010

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The Philippines has failed to sustain growth

29

Nominal Annual GDP Growth, Philippines1960s – 1970s 5-6%1980s >2%1990s 3%2000s 4.4%

GDP and GNP Growth, Philippines 1981-2009

From Arankada 2010METROPOLITAN AUTHORITYSUBIC BAY

Indonesia and Vietnam are set to overtake the Philippines

30

GDP per Capita, PPP, ASEAN-6From Arankada 2010

METROPOLITAN AUTHORITYSUBIC BAY

Even worse, poverty has lingered in the Philippines

31

Poverty Incidence, ASEAN-5

From Arankada 2010METROPOLITAN AUTHORITYSUBIC BAY

Foreign Direct Investment Trends

32

FDI Accumulation, 5-year intervalUS$ Billion

Average Annual FDI, 5-year intervalUS$ Billion

From Arankada 2010METROPOLITAN AUTHORITYSUBIC BAY

Corruption remains the main concern for Investors

33

Areas of dissatisfaction for investors, %age of respondents, Philippines

From Arankada 2010METROPOLITAN AUTHORITYSUBIC BAY

Transparent and Effective Customer Service

34

Promote efficient, effective and transparent business processes

n Complete updated Investors and Residents Guides

n Streamline business registration (CRTE) process

n Complete automation of Admission and Gatepass systems

n Roll-out web-based permitting system and collaborationsystem

n Initiate construction of new Customs Control Area in Tipo

n Enter MOU with DENR for ECC Issuance

METROPOLITAN AUTHORITYSUBIC BAY

Organizational Development

35

RationalizeSBMA

OrganizationalStructure

ReviewBusiness

Processes andSystems

Utilize IT Solutionsto enhance

OrganizationalPerformance

SBMA OrganizationalDevelopment

� Establish the formal organizational design � Develop job qualifications; set and

evaluate job standards and ladders (Position Charters)

• Build a performance management system to cover objective setting, and performance appraisals & improvement

• Plan and implement a compensation system

� Rationalize subsidiaries (FSC, SBDMC, SBITC, STEP) and affiliates

� Map out current business processes and identify key areas of improvement

� Benchmark current systemsSet forth policies and procedures that will guide each of the units in implementing the new systems to be established

� Design a measurement system that will help assess the success rate of this business reengineering.

� Deploy productivity enhancement tools across organization

� Automate key processes

METROPOLITAN AUTHORITYSUBIC BAY

Boost Economic Activity

36

§ Push for issuance of “Open Skies” Executive Order

§ Conclude negotiations with leading budget carrierto hub at SBIA

§ Promote expansion of business aviation throughexpansion of Aviation Concepts and Eurocopter

Revive Commercial Flights to Subic Bay International Airport (SBIA)

METROPOLITAN AUTHORITYSUBIC BAY

Boost Economic Activity

37

§ Complete privatization of New Container Terminal 2 andNaval Supply Depot (Break Bulk and General Cargo)

§ Expansion of oil depots (Coastal Petroleum – 1 millionbarrels, Pure Petroleum – 0.5 million barrels)

§ Expansion of Grain Terminal

§ Develop floating logistics center for iron ore to China

§ Invite Tiger Lines to make regular calls on Subic

§ Push for cap on container cargo in Metro Manila topromote spill over to Subic Bay and Batangas (e.g. 1m TEUcap that Port Authority of Thailand has imposed in Bangkok)

Promote Port of Subic Bay as a Logistics Hub

METROPOLITAN AUTHORITYSUBIC BAY

Key Projects

38

Privatization of NCT2(Q1 2011)

Upgrading and CapacityExpansion of POL Depot(2010-2011)

Privatization of NSD(Q1 2011)

Redevelopment of Boton Wharf (2009 – 2011)

METROPOLITAN AUTHORITYSUBIC BAY

Boost Economic Activity

39

Ensure reliability and competitiveness of Power Supply while harnessing

renewable sources

§ Renegotiate supply agreement for SBFZ– Current supply agreement of US$0.07/kwh only until June 2011

– Demand has grown from 32MW in 2005 to 95MW in 2010

§ Finalize privatization of existing 110MW Bunker Diesel plant– Evaluate need to connect plant to SBMA Grid

§ Complete 300MW clean coal plant in Redondo by late 2013– SBFZ energy self sufficiency

– Eliminate transmission charges

§ Tap and develop renewable sources of power– Generation cost likely to exceed US$0.15/kwh

METROPOLITAN AUTHORITYSUBIC BAY

Power Projects in Subic Bay

40

Bunker Diesel (110MW)Peaking and Back-up

Clean Coal (300MW)Base Load - 2014

Wind (50-100MW)Reserve - 2015

Solar (200MW)Reserve - 2015

METROPOLITAN AUTHORITYSUBIC BAY

Boost Economic Activity

§ Push redevelopment of Central Tourist District

§ Re-zone Subic Bay Gateway Park for commercial and mixed useddevelopment

§ Convert 16ha Marshalling Yard into Gateway Business District

§ Attract anchor educational institution (Paradise lot)

§ Build maritime industrial complex/cluster around HHIC-Philippines

§ Develop integrated resorts in Cawag and Minanga

§ Resolve Subic Bay Golf Course development issues

§ Encourage Zone Expansion

41

Expedite development of priority investment zones

METROPOLITAN AUTHORITYSUBIC BAY

Central Tourist District

42

Harbor Point Mall

Regional Bus Terminal

Subic Bay Yacht Club

Times Square

SRF Yacht Building Cluster

Ampelos Tower

Hotel and Restaurant Row

Historical District

Cruise Ship Terminal

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Kalaklan Bridge Development

43

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New Magsaysay Bridge

44

METROPOLITAN AUTHORITYSUBIC BAY

SBDMC Commercial Redevelopment

45

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Gateway Business District

46

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Anchor Educational Institution

47

METROPOLITAN AUTHORITYSUBIC BAY

Before Construction (March 2006)

HHIC-Philippines

November 2008

During Construction (January 2007)

Economic Impact

Employment: 18,000+

Capacity (2012): 600,000 DWT

Annual Payroll: Php 3.25 billion

Annual Exports: US$1 billion (2009 est)

Investment (Phase 1): US$1.9 billion

18 ships delivered; 38 ships in pipeline including largest container ships

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Delivery Status

2010

2009

2008

2011※ COT : Crude Oil Tanker

10

7

11

1

4,300 TEUContainer

4,300 TEUContainer

4,300/3,600 TEUContainer114K COT

175K Bulker180K Bulker

HHIC-Phil Business PerformanceMETROPOLITAN AUTHORITYSUBIC BAY

HHIC-Phil Business Performance

Container

3,600 TEU 4

3,800 TEU 2

12,800 TEU 8

Bulk Carrier

DWT 175K 7

DWT 180K 18

DWT 205K 11

Tanker

320K VLCC 2

160K COT 4

Order Book

Container 14Bulk Carrier 36

Tanker 6

Total 56

(Value : $ 4.8 Bil)

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Minanga Bay Concept

51

Beach Resort5 Star Resort Hotel with Beach Club, M.I.C.E Convention Centre & Water Fun Theme Park forming the tourist core of the area

Golf CommunityGolf Course Real Estate & Holiday Houses complement the whole golf resort development

METROPOLITAN AUTHORITYSUBIC BAY

Pursue Outward Expansion

52

Olo

ngap

oCi

ty •Commercial Development along Magsaysay and Rizal Drive (Ayala Masterplan)

•Housing Development

•Resort Development in Barrio Barreto

Zam

bale

s •Utilities development (Water, Power Generation)

•Shipbuilding expansion in Redondo

•Housing Development

•Resort Development in Cawag (Neocove)

Bata

an • Industrial Estate Development along the Subic-Clark corridor

•Resort Development in Morong (MCastle)

•Reforestation activities

•Preservation of Indigenous Peoples’ Domains

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END OF THESTATE OF THE FREEPORT ADDRESS(PART 2)

2 0 1 1 S t a t e o f t h e F r e e p o r t A d d r e s s