The Philippine Parts Maker Association (PPMA) is recommending the adoption of a local content requirement (LCR) policy in the country’s automotive parts manufacturing industry in a bid to revitalize the struggling sector.

Inspired by Indonesia’s LCR model, PMPA President Ferdi Raquelsantos said this policy will help boost domestic manufacturing, creating new job opportunities in the process.

“Indonesia’s local content policy has been a game-changer for its automotive sector. By requiring automakers to source a significant percentage of components locally, they’ve built a robust supply chain and attracted major global players,” said Raquelsantos in a statement on Friday, Jan.  31.

“The Philippines can achieve similar success if we take decisive action now,” he added, noting how this can position the country as a competitive player in the region’s automotive market.

Based on latest figures, Indonesia is the second largest car manufacturing country in Southeast Asia, trailing behind Thailand. The Philippines is ranked fourth, after Malaysia.

The PMPA, the sole organization representing the industry, is recommending a “phased implementation” of the LCR. 

Particularly, this would start with a “modest percentage” of required locally-made components, which gradually increases over time.

Raquelsantos said this approach gives flexibility for manufacturers to adapt while encouraging investments in local supply chains. 

Acknowledging the challenges of such a policy, he stressed that incentives would be crucial to ensure strict compliance.

“To make this policy work, we need strong government support. Tax breaks, duty exemptions on raw materials, and grants for research and development can make it financially viable for automakers to source components locally,” Raquelsantos said.

“At the same time, we must provide technical and financial assistance to our SMEs (small- and medium-sized enterprises) to help them meet global standards,” he noted.

The PMPA president emphasized that workforce development is similarly vital in ensuring the LCR’s success in the country.

He cited the need for training programs in advanced manufacturing and robotics, as well as stronger collaboration with universities and technical schools to build a skilled talent pipeline for the industry.

Raquelsantos also sees the importance of further infrastructure improvements, particularly in the form of modern industrial parks with reliable utilities and enhanced logistics networks, to attract investors and reduce production costs.

“Streamlining customs procedures and reducing bureaucratic red tape will also make the Philippines a more attractive destination for automotive investment,” he added.

The PMPA said it is committed to working with the government, automakers, and other stakeholders to ensure a successful implementation of this policy. 

“With the right support, the Philippines can unlock the full potential of its automotive industry and secure its place in the regional market,” the group said.