MANILA, NOV. 24 (TUESDAY) -- The United States today formally handed over to the Philippines its last military base in Southeast Asia, lowering the American flag over an airfield attached to Subic Bay Naval Station.

The emotional ceremony, ending 94 years of American military presence in the Philippines, closed a base that U.S. Ambassador Richard Solomon hailed as "a vital link in the defense of freedom" in the world over the decades.

President Fidel Ramos, after witnessing the raising of a huge Philippine flag at the site, called for a review of the two countries' Mutual Defense Treaty "in the context of the post-Cold War era." He said U.S. ship visits and joint military exercises would continue under a 1951 treaty.

As about 800 Marines and sailors boarded the USS Belleau Wood and prepared to sail out of Subic Bay, they left behind up to $3 billion worth of facilities on one of the largest U.S. military installations overseas, as well as a wild liberty town that now faces the uncertainties of trying to transform itself into a commercial port and industrial center.

But they also were forsaking thousands of children fathered with Filipinos, many of them bar girls in Olongapo, a city of 300,000 people adjacent to Subic Bay Naval Station about 50 miles northwest of Manila.

And they departed amid controversies over alleged toxic wastes that critics say remain on the base and over plans for future access to Philippine ports and airfields.

"The Philippine government will do everything it can" to help the "throw-away children" of U.S. servicemen, Ramos said. "I will not allow them to end up in poverty, much less in street gangs." But he added, "The welfare of these young Filipino-Americans remains the joint responsibility of both countries, which does not terminate with the withdrawal of U.S. forces from the Philippines."

Ramos also called for "a new framework" to promote greater U.S.-Philippine economic cooperation and the development of the base for commercial purposes.

"Subic Bay is now open for business for the whole world," declared Olongapo Mayor Richard Gordon.

The U.S. government insists that, despite relinquishing its last military base in Southeast Asia, the United States will remain a Pacific power and continue to project its forces across the region. But there is a widespread perception that the departure from Subic Bay reflects a growing U.S. military disengagement that could unsettle confidence in the stability of the economically booming area and lead other countries, notably China and Japan, to take more active roles.

The U.S. Navy's pullout from the Philippines comes as a result of the Philippine Senate's rejection last year of a treaty that would have extended the American military presence in the country for at least another decade in return for more than $2 billion in aid.

The U.S. Air Force last year withdrew from Clark Air Base, 50 miles north of the capital, after the eruption of the nearby Mount Pinatubo volcano buried the region in ash. Manila gave the Navy until the end of this year to withdraw, which it has been doing progressively.

In an emotional farewell Friday, tens of thousands of Olongapo residents turned out to sing "Auld Lang Syne" and wave Philippine and American flags as the U.S. commander, Rear Adm. Thomas Mercer, and Gordon marched arm-in-arm at the head of a mile-long parade through the town. Bar girls and bystanders wept, elderly men saluted, and people reached out to shake Navy officers' hands or ask for their autographs as the parade heralded the end of a nearly century-old era.

In a farewell speech, Mercer underscored Subic's role in U.S. naval operations, including last year's Operation Desert Storm. He said 70 percent of U.S. naval supplies used in the Persian Gulf War had come from Subic, where the Navy maintained its largest overseas depots.

"I know this is not goodbye, but just farewell for now," Mercer said. "We hope to come back . . . as soon as we can." He expressed a desire for continued cooperation, including aircraft and ship visits.

"We're not here to celebrate the withdrawal of Americans," Gordon told the crowd. "We're celebrating friendship."

In fact, while Philippine nationalists often have decried the U.S. bases as violations of sovereignty and sources of social ills such as prostitution, AIDS and illegitimate children, the townspeople closest to them have been the facilities' staunchest defenders. In addition to billions of dollars in U.S. aid that was tied to the bases, the installations poured hundreds of millions of dollars annually into the local economies of Olongapo and Angeles, and the livelihoods of tens of thousands of people depended on them.

Except for three years during World War II, the U.S. military had maintained a presence here since 1898, when it seized the Philippines from Spain. U.S. troops then put down a nationalist revolt and helped turn the archipelago into America's only colony. Washington granted independence in 1946 but prevailed on the weak Manila government to accept U.S. bases.

Part of the U.S. legacy includes an estimated 50,000 mixed-race Filipinos of part-American descent. Among them is Mayor Gordon, whose grandfather was a U.S. Army interpreter.

But these "Amerasians" also include about 3,500 children under 18, most of them fathered by American servicemen in short-term relationships with women they met in Olongapo and Angeles.

Under a 1982 U.S. law, Amerasian children in Vietnam, Cambodia, Thailand and South Korea are allowed to move to the United States and become Americans. But the children of American servicemen in the Philippines are not eligible for U.S. citizenship unless the father acknowledges paternity and is willing to attest to it. Ostensibly, this distinction was made because Amerasian children in Korea and Indochina were subject to severe discrimination, while Philippine society is much more tolerant of racial mixtures.

Another source of controversy is alleged toxic waste and unexploded ordnance that critics of the U.S. presence claim the Navy is abandoning at Subic.

The U.S. Embassy disputes the charges, saying that the Navy has spent $5.5 million over the past few months to remove and ship to the United States for disposal all remaining hazardous wastes and comb the base's firing ranges and storage facilities for unexploded ordnance or leftover munitions.

As evidence of their environmental record, U.S. officials point to a 10,000-acre forest, including a 5,000-acre watershed, that lies within Subic's perimeter. It has been carefully protected from loggers and poachers over the years by Marine guards and is the only virgin rain forest left on the island of Luzon.