Sunday, January 02, 2011

Local auto development program hits bumpy road in 2010

MANILA, Philippines - The auto industry was supposed to receive a boost this year as the government crafted a new Comprehensive Motor Vehicle Development Plan (CMVDP). The plan was simple enough – encourage more firms to manufacture vehicles locally rather than sell completely built imported units. After endless consultations, the Arroyo administration signed the CMVDP, one of the last executive orders of the previous administration.

Even with the change in government, things are expected to go as planned because the only thing left to do was craft the implementing rules and regulations (IRR). The IRR which was supposed to be finished last August got pushed back until finally Trade and Industry (DTI) Secretary Gregory L. Domingo said he is not sure if the CMVDP is enough to make the local auto industry truly competitive.

Domingo is not alone in criticizing the CMVDP. A new industry group calling themselves the Alliance of Vehicle Importers and Distributors (AVID) led by Hyundai Asia Resources Inc. surfaced. From the day the group was conceptualized, AVID expressed its dismay over the CMVDP because it does not give car importers any incentives. This was immediately shot down by Board of Investments (BOI) managing head Cristino L. Panlilio who said that the CMVDP is for manufacturers and not pure importers. Panlilio said that manufacturers should be given incentives because they put in investments in hard infrastructure in the country and they provide employment.

The automotive industry has already highlighted the importance of crafting the IRR of the CMVDP as soon as possible because it is vital in the investment decision process of local car firms.

“There is a sense of urgency to finish the IRR,” Chamber of Automotive Manufacturers of the Philippines Inc (CAMPI) president Elizabeth H. Lee said in a telephone interview.

“Our current MVDP is already outdated. There is a need to implement the new one now because our neighboring countries have good investment packages for automotive firms,” Lee said.

Lee said that the industry appreciates the move of the BOI to make the IRR for the MVDP as industry friendly as possible. In fact, the BOI has even asked the industry to give specific inputs for the IRR.

Lee said that aside from attracting more potential investors in the country, the MVDP will also help existing players decide on whether or not they will expand their operations in the country. “These are low hanging fruits that we can easily access but we need to take care of them,” she explained

She admitted that the industry has unused capacity. This means that the auto manufacturers can produce more here in the Philippines but they choose not to because it is not economically viable.

On the upside, Lee said it is not too late to implement a regulation that will help make the country an attractive destination for auto firms but said that because our neighboring countries like Thailand and Indonesia have a strong incentive package for firms the Philippines may lose out on possible investments if no incentive package is implemented.

“We really have to act now because we don’t want to lose out on other countries that are very aggressive in trying to lure investors,” Lee said.

Panlilio said that the government and the private sector must work together to push the local car manufacturing because the industry’s manufacturing plants are operating 60% below capacity.

Panlilio has been pushing for the creation of a supplement to the MVDP. Panlilio has earlier revealed that he would like to make an MVDP which will cater specifically to exporters. However, approval may take longer given that the consent of the House of Representatives is necessary because higher incentives will be given to exporters.

The DTI said they are looking at crafting a better strategy to help the local automotive industry. “Right now I cannot see the light. I need to see the bigger picture and craft a better strategy,” Domingo said. “What I’ve seen so far doesn’t give me confidence,” he added when asked about the MVDP.

According to Domingo, the industry may be worse off in the future if a good plan is not put in place. Domingo said he will meet with the players of the auto industry next year in order get a better feel of the industry.

“We will work with the industry players and clarify their plans,” Domingo said. Although he refused to directly confirm if a new MVDP will be issued, Domingo said that the IRR will not be released this year. The IRR was supposed to have been issued in August.

In fact, it is possible that the government will no longer come out with the IRR for the MVDP given all the pressure that the DTI specifically the BOI is receiving.

A ranking government official said the DTI is already receiving a number of inquiries both from industry players and senators for the IRR. The official said that it is possible that an IRR may no longer be issued.

Domingo admitted that the importation of second hand vehicles is one of the areas they are having trouble with in the IRR.

In a separate interview, Panlilio admitted they are having trouble with the IRR but denied that they will no longer come out with one. Instead, he said that they might come out with different IRRs for different subsections. The subsectors are automobiles, motorcycles, trucks and e-cars and Philippine Utility Vehicles (Phuv).

Panlilio said that they might be able to come out with the IRR for the motorcycle and its parts earlier because it is not “contentious.” “The auto and the truck may take some time,” Panlilio conceded.

Domingo said he has not yet approved the IRR and thus it is still not ready to be presented in a public hearing. A public hearing is needed before the IRR can be implemented.

Domingo admitted that one of the issues that is being closely reviewed is the importation of second hand vehicles. Earlier, an official who refused to be named said that four senators have already called the Board of Investments (BOI) because they are worried that the new MVDP will not allow the importation of second hand imported vehicles.

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