Auto parts makers hail government incentives package

MANILA, Philippines - Local autoparts makers said the proposal of the government to extend income tax holidays and allow the duty-free importation of raw and semi-processed materials will help rev up the local auto industry.

The incentive package being contemplated by the government includes reduced or zero excise tax, income tax holidays and duty-free importation of raw and semi-processed materials and capital equipment - benefits similar to those granted to locators in export processing zones and to Board of Investments (BOI) registered companies. Incentives are also being eyed for participants exporting not only vehicles but auto components as well.

Also part of the proposal is for the creation of an Industry Support Fund intended to finance the upgrade of facilities of the participants, boost their R&D capabilities and purchase test equipment.

“The Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP) wholeheartedly supports this long-awaited move as finally, the BOI has seen the need to make local CKD (completely-knocked down) operations viable. Proof of this is the proposed addition of an entirely new section on parts manufacturing in the revitalized MVDP [motor vehicle development plan],” MVPMAP president Raffy Villarreal said.

“There is also the provision of incentives for a locally designed and assembled Philippine winner brand, the Philippine Brand Vehicle (PBV). Even the environment is considered, with incentives for alternative-fuel vehicles (AFV) like electric vehicles and hybrids,” he added.

Villarreal said this is very helpful as local parts makers start rebuilding the industry.

 He added that all these proposals will promote competitiveness in the automotive sector in the light of the forthcoming full trade liberalization paving the way for tariff-free importation starting 2010.

“Philippine auto industry sales have not grown substantially during the last 12 years. It has not even surpassed the peak of 162,097 unit sales in 1996. It broke the century mark only two years ago. We have lagged behind our Asian neighbors,” Villareal said.

“But what is more disheartening is that the volume of vehicle sales from CBU (completely-built up) units has steadily grown to the extent that last year, it has reached 52.5 percent. There were more CBU units sold than CKD units which have local value added labor and components in them. The local parts making industry is reeling from the negative effects of all these,” he added.

The proposed PBV is a locally-designed, developed and assembled vehicle for the mass market, low priced, with high local value added labor and materials and compliant to standards.

Also part of the proposal for a revitalized MVDP is the strict implementation of vehicle standards and technical regulations. The BOI believes that “standards shall be the new pillar of the revitalized MVDP”.

It has noted that currently, the implementation of standards is not strictly enforced and even worse, if ever implemented, it is not coordinated with all the government regulatory agencies concerned. This has resulted in the proliferation of imported used vehicles, improperly assembled vehicles, fake and rebuilt auto parts.