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Going Great Guns

By LALA RIMANDO

A weapons and ammunition plant is doing good business despite the local defense industry’s poor performance over the years

ABOUT 53 KILOMETERS AWAY FROM METRO MANILA, A WEAPONS AND ammunition manufacturing plant stands on a sprawling 13-hectare property in Tanay. It does more than provide jobs. It’s hard proof that a private company can survive in the country’s fledgling defense industry, and actually thrive.

Through the years, the Philippines’ defense industry has seen rapid deterioration, especially after the Americans abandoned their Clark and Subic military bases. In the 1970s, the country used to be the premier manufacturer of defense-related products in the region. But because of corruption, political upheavals, and a general mistrust of anything military then, the industry floundered.

When the Americans were here, they used to provide the armed forces with about US$200 million worth of spare parts, weapons, ammunition, and fuel, among others. Now that the Philippine military is on its own, these supplies have ceased and, with next to nothing in the budget, the weapons, helicopters, and ships of the armed forces have been badly needing a boost

In fact, to cope, they have resorted to cannibalizing their weapons or helicopters for spare parts.

Thus, there has been renewed interest in reviving the country’s defense industry so that the needs of the Armed Forces could be met locally. Plans have been mapped out alongside efforts to modernize the military. The Floro International Corporation (FIC), which is based here, plays a big part in these efforts.

Last year, there was a recommendation for a strategic alliance between FIC and the Defense Department, with the Government Arsenal as the conduit.

FIC has long been one of the main suppliers of the military’s materiel requirements, such as smoke grenades, surface tip flares, claymore mines, among others It has done numerous research and development projects for the military, too.

The implementation of this alliance has been put on hold pending legal and administrative kinks that need to be ironed out, especially since FIC bested seven other defense manufacturers with more or less similar product lines.

Core Competency

According to a NEWSBREAK source, FIC is being encouraged to focus on medium- to large-scale weapons and ammunition. “That is their core competency and that is where they are most competitive,” the source disclosed.

The company currently manufactures 9.0 mm and 5.56 mm light machine guns, assault rifles, 40 mm grenade launchers, and 105 mm Pack howitzers, among others. It also manufactures small caliber munitions such as grenades and various bullets. Also in its inventory are high-powered munitions for large-scale warfare, such as 40 mm low and high velocity ammo, 40 mm air-bursting munition systems, and the giant 155 mm cargo round.

There are almost 160 companies identified to be manufacturing or trading supplies and equipment which the military needs. These helped them sustain the business when the industry was at its bleakest To survive, however, most of these companies have become traders who now supply the needs of the commercial market. Most of them are even reluctant to supply the military because of its reputation, as some have experienced, of being late payers. Most of them also import their raw materials since these are not available here.

Besides, the local market for military-related products is not enough to sustain the companies’ operations. “If s too small,” a source familiar with the local defense industry said. “Imagine this: the military budget for 2003 is only P65 billion. Of that amount 70 to 80 percent goes to salaries and about 20 percent goes to operating expenses. There is almost no budget left for the acquisition of new equipment and other needs.”

Market Abroad

To survive, local companies need to look for markets outside the country.

Two companies are doing just that: Arms Corporation and FIC. Arms Corporation exports handguns to the US because it is the subcontractor for the “Charles Daly” brand.

FIC, on the other hand, bagged a major deal—a joint venture with Singapore Technologies Kinetics (STK).

Singapore is known as one of the world’s best manufacturers of defense products. Thanks to our lower labor cost and the ingenuity of Filipinos, STK has outsourced the manufacture of light machine guns, assault rifles, general purpose machine guns, automatic grenade launchers, and naval guns to FIC, which in turn manufactures these in its Tanay plant

FIC’s strength in research and technology is mainly attributed to its access to foreign tchnology. STK provides the technical data packages of the products FIC manufactures for them. STK also supplied the presses, molds, dyes, and the machines to gauge the exact dimensions of products, like magazines, before these go through the hot and cold treatment facilities that harden steel and aluminum.

In the export market, it helps to be ISO 9000-certified, which FIC is.

“They are lucky they don’t have difficulty marketing their products abroad because of their Singapore connections,” remarked one source. That’s why FIC’s business is flourishing. To illustrate, Victor Floro, chairman of FIC, said that two years ago, they projected to do 100 upgrades of the 105 Automatic Grenade Launchers (AGL) within five years, each costing about $100,000 to $300,000. “In only two years, we have up to 250 upgrades already,” Floro proudly told NEWSBREAK AGLS can be installed on tanks, helicopters, and patrol boats. Most of the jobs were for the Asian market he added.

While local defense industries are encouraged to find their niche market and “compete in the world market,” others have not been as lucky. The Philippines doesn’t have the credibility as a manufacturer of defense products. Blame it on the industry’s deterioration through the decades. Meanwhile, our Asian neighbors have overtaken us.

While our lower labor costs do attract other countries to subcontract jobs to us, we can also sell our workforce’s ingenuity. For example, the weight of the huge 105 mm AGL, which is at least 17 kilos, can be reduced by about 10 kilos, Floro claimed. The scrap from the manufacture of cartridges, demonetized coins, and electrical wires are also melted in a continuous brass casting plant, the first in the country. The end-product, a cylindrical free cutting and stamping brass, is then recycled for the manufacture of new sets of cartridges. This scrap management essentially reduces their costs.

Flora’s Style

FIC’s accomplishments are largely due to the hands-on management of the Floro family members. Floro laid the groundwork and his three sons, all educated abroad with masteral degrees, have opted to come home to help out with the business.

Besides the subcontracting of products for STK, they have also started penetrating their own markets. But, as Floro admitted, “If s a cyclical industry.” Obviously, the demand is bigger when there are wars.

To keep their workers continually productive, they were trained to be flexible. In the same compound are the manufacturing plants for, brace yourself, bags. “The skills needed are the same,” Gregory, the eldest son of Floro, explained. They are also subcontractors for volume production of bags bound for the US. Designs require molding plastics that are bounded on the bags. “The machines are the same. Here, they mold plastics, in the other plant they mold metals,” Gregory said.

Having seemingly unrelated businesses is nothing new to the Floras. They are known for their photo processing and reproduction businesses under the “Florofoto” and “Floro Blue Printing” marquees set up in the 70s. They are still engaged in microfilming and digitizing documents up to now.

Small to Big

They got into the defense products industry when their principal for the optical and jewelry products closed shop. Their general manager at that time, a Swiss who was previously involved in the manufacturing of defense products in his country, suggested that they try to diversify into making products for the military. The machines and skills needed in manufacturing precision tools such as small screws for optical products are also used in small-sized parts and components with high degree of precision for the M16 gun, the manager reportedly explained. The company did, and there was no turning back since it started in 1986.

Later, FIC moved on from manufacturing small-sized guns to medium- and large-scale ammunition, weapons, and armaments. Apparently, bigger products mean more money.

FIC’s products are “not cheap, but they work” Sometimes the local armed forces cannot even afford it then. The Armed Forces, even with the modernization project, does not always buy all FIC’s, or any other companies’, products, the NEWSBREAK source said. They just purchase sample products, so that these defense companies, such as FIC, can tell their buyers that even our armed forces use it Beyond that FIC is on its own, at least for now.

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