New manufacturing incentives eyed

Published November 17, 2019, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

The Department of Trade and Industry is undertaking an assessment of the country’s overall manufacturing strategy with the aim of strengthening support to manufacturers based on their factory output so companies will not just export their products to the Philippines but do actual production in the country.

Trade and Industry Secretary Ramon M. Lopez
Trade and Industry Secretary Ramon M. Lopez

DTI Secretary Ramon M. Lopez told reporters at the unveiling of Marahuyo, a sub-brand of the Go Lokal featuring the best fashion brands from Manila Fame, that he was looking at manufacturing support that is tied to productivity and performance.

This package of manufacturing support could include lower power cost, tax deduction or cash support.

The planned manufacturing support strategy is seen as wider application of the existing Comprehensive Automotive Resurgence Strategy (CARS) Program, which grants tax incentives based on actual production of cars and fixed capital investments in automotive partsover a six-year period.

Lopez was looking at more CARS-like program in other industries outside of the CARS Program.

“We want to do more CARS-like assistance to the manufacturing sectors that we need in the country,” he said.

The CARS Program has been availed of only by Mitsubishi Motors and Toyota Motors, which are required to produce 200,000 units of cars locally over a six-year period to avail of the P9 billion worth of tax incentives that may be granted to each participant and other local auto parts manufacturers.

The manufacturing support that DTI is looking at would cater to other industries outside of the automotive sector. The move would encourage other manufacturers to go into value adding.

Apparently, the DTI’s plan to impose safeguard measure on imported cars is a strategy to help the local auto industry.

The move to consider safeguard duty on CBU car importation was based on petition filed by the Philippine Metalworkers Alliance, which claimed of layoffs in the industry due to influx of imports of over the past few years and killing the domestic auto manufacturing in the country. PMA observed that there is a steady decrease in workers from its highest 86,428 units in April 2015 to its second lowest of 37,398 units in July 2018.

PMA attributed the steady decline to the increasing trend in car parts imports from 2014 to 2017. Similarly, the sudden decrease of jobs could be ascribed to the sudden surge in imports in 2018.

“Basically, what we’re saying is that foreign manufacturers have to look at the Philippines as production hub and not just want us to buy their products but as production hub in the same manner that these firms invest in production hubs in other countries,” he said.

“These car companies should also assign a product to be produced here so it is a win-win situation and not just the Philippines importing especially that we are a growing local market, so it’s about time.”

The Board of Investments is also reviewing the Motor Vehicle Development Program (MVDP) to ensure local motor vehicle production in the country.

Lopez said the MVDP 2.0 will craft a similar scheme for CARS for more support for manufacturing sectors.

He explained further that the Philippines would benefit from the planned safeguard measure on imported cars as it would encourage companies to invest in a manufacturing operation in the country. The imposition of safeguard duty, which is a legal trade remedy allowed by the WTO for member countries, is to stop the injury on domestic industry caused by surge in imports,
“Not really to force them but will somehow encourage them to establish operations so local manufacturing has to be supported,” he said.

On the planned safeguard measure on imported CBUs, data showed that the volume of imported CBU cars grew from only 153,000 units in 2014 to 270,000 units in 2018. Total importation for the period 2014-2018 reached more than a million units.

These imported brand new CBU packs are mostly under HS Code 8703, or a tariff line for passenger cars. Major sources of imported CBUs are Thailand, Indonesia, Korea, Japan, India, US, China, Germany, Belgium, Malaysia, among others.

Thailand exported more than 428,000 units followed by Indonesia with 312,000 units and Korea with more than 100,000 units. Together these three countries account for more than 80 percent of total importation within the five-year period covered in the DTI safeguard measure investigation.

Japanese car manufacturers with production hubs in Thailand and Indonesia are seen to be hit the hardest. Toyota Motor Philippines, the Philippines largest car company, imports Camry, Corolla, Yaris, Hi-Lux, and Wigo from Thailand. It also imports Fortuner, Avanza and Rush. From Japan, TMP imports LC200, Prado FJ, Alphard, Prius, Prius C, 86, Supra, Coaster, RAV4, and Lexus. Meantime, TMP assembles only two models in the country – Vios and Innova.

Mitsubishi Motors Philippines, the country’s second largest car company, imports Montero and Strada from Thailand and Expander from Indonesia. It imports Pajero from Japan. Mitsubishi assembles two models here – Mirage and L300.

Nissan Philippines imports three CBU car models from Thailand including Sylphy, Terra, and Navara. It imports Gtr, Juke, Xtrail, Patrol and Urvan from Japan. Nissan assembles on CKD basis its Almera model at its Laguna plant.

Hyundai Asia Resources Inc. and Kia Philippines imports most of its CBU vehicles from Korea. CBU car imports from ASEAN are also at zero duty, while Korea is still at 5 percent.

Under the Philippines-Japan Economic Partnership Agreement, CBU car imports from Japan with more than 3-liter engine displacement and vehicles with 10 seats and above are already at zero duty. But other vehicles are slapped with 20 percent duty.

A study by the BOI showed that in 2013, the industry estimates that it has directly employed 8,000 workers in automotive manufacturing, whereas approximately 68,000 jobs have been generated in auto parts manufacturing. An estimated 340,000 are employed in autos-supporting industries.

Because of the surge in CBU car imports, the Philippines lost its car assembly industry and closure of automotive parts manufacturers and pose further threat to what is left of the local auto manufacturing. So far, there are only a handful of car models being produced in the country, on CKD basis.

A 2018 Board of Investments study showed that in 2018, there were a total of 15 vehicle manufacturers with operating plants in the country, seven of which are equipped with electro-deposition painting systems. There are a total of 272 parts and components manufacturers also.

The industry has an annual capacity of 250,000 units all vehicle types included. In 2011, the auto industry generated production valued at P368 billion equal to 4 percent in GDP.