RP car devt program a failure, says BOI

THE Board of Investments (BOI) admitted that the government’s Motor Vehicle Development Program (MVDP) has been a failure. On the sidelines of a workshop, Efren Leaño, executive director of the incentives-giving agency, told reporters that MVDP was “not successful.”

“It did not meet its targets. Maybe the program did not give enough encouragement and incentives,” he added.

The local auto industry had been one of the biggest employers in the country, but the Asian financial crisis and a string of free-trade agreements that the Philippine subscribed to trimmed down the sector’s production capacity.

In a review of the program it undertook, the BOI said the industry’s sales have yet to reach pre-Asian crisis levels.

“CBU [completely built-up] sales dominated the domestic market [while] investments showed no expansion for the past 10 years,” the report read.

Furthermore, “industry capacity utilization only reached between 20 percent and 30 percent,” it said.

CBU units are imported vehicles, and so contribute little to Philippine economic output. In contrast, completely knocked-down (CKD) units provide some local value-added as they are assembled locally before sold in the domestic or foreign market.

Under Executive Order 156, the MVDP, launched in 2002, was supposed to bring back the local industry’s performance to pre-Asian crisis levels and make the sector more investor-friendly.

Auto sales peaked in 1996 at 162,095 units, but the industry managed to sell only 124,449 units last year.

Executive Order 156 called for the ban on importation of used vehicles, the restructuring of the excise tax and of tariffs on parts and components, promotion of exports, and region-wide production through the Association of Southeast Nations (Asean) Industrial Complementation Scheme.

The Philippines is one of 10 member-countries of the Asean.

Ford Motors remains the sole participant of the Auto Export Program under Executive Order 244, while, “other companies, for various reasons, failed to capitalize on the incentives offered by the government,” the BOI said.

Also, there had been several lawsuits that questioned the validity of Executive Order 156, specifically the provision on used vehicle importation, but the Supreme Court upheld the validity of the Palace directive.

Despite this ruling, the BOI said the entry of used vehicles has yet to be completely eliminated because of various temporary restraining orders.

During Friday’s workshop, auto companies came up with inputs to the proposed revision of the government’s Automotive Policy Framework. However, participants refused to divulge to reporters their initial recommendations. They said their inputs will be presented and collated during a subsequent meeting.

Elizabeth Lee, Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) president, told reporters that the new MVDP should maintain the ban on imported used cars. “If we can fix that one problem [entry of imported used vehicles], the industry could have already bounced back,” she said.

“We should show that the Philippine auto market is significant, so that those looking for a place to invest in will come into the country, while those who already have a presence here will expand,” she added. Campi brings together 12 companies, including eight involved in domestic assembly of motor vehicles.

Among the biggest local assemblers are the five leading Japanese carmakers—Toyota, Mitsubishi, Honda, Isuzu and Nissan—and the lone US carmaker Ford.

Enrico Talag, head for government and industry affairs of Isuzu Philippines Corp.’s corporate business division, told The Manila Times that the company is pushing for the maintenance of the basic framework of MVDP.

He said the MVDP should, however, be revisited in light of the various free-trade agreements the Philippines entered into.

The Isuzu official said the government must also ensure that the new MVDP’s provisions would be strictly enforced. –Ben Arnold O. De Vera, Reporter, Manila Times