Unfinished business
WITH the Aquino administration focused on getting President Aquino’s anointed elected in the May, 2016, elections, government officials are imagining “conspiracies” in every problem (i.e., dagdag bala) that sprouts up, one worry is that not much attention is given to important, unfinished business. I do not mean legislation that urgently needs to be passed – the Freedom of Information Bill, publicly supported by the President as a candidate and as a newly minted president but left hanging up to now and the Bangsamoro Basic Law, already consulted to death in the legislature and in public hearings even held in Mindanao – but an Executive Order already signed and needing the government bureaucracy’s follow through.
Before leaving for his June 2-5 state visit to Japan, President Aquino signed Executive Order No. 182, series of 2015, creating the Comprehensive Automotive Resurgence Strategy (CARS) program intended to enhance the competitiveness of the Philippines as a top investment destination for the regional manufacture of automobiles. Unlike EO Nos. 156 and 877-A which prescribed the policies and directions governing the Motor Vehicle Development Program (MVDP), EO No. 182 covers the manufacture not only of motor vehicles but also of motor vehicle parts.
The CARS Program is limited to 1. The manufacture of three models of four-wheel motor vehicles and covers only the production of enrolled models; 2. Manufacture of body shell assembly and large plastic assemblies of the model; 3. Manufacture of common parts and strategic parts not currently produced in the country at original equipment manufacturer standards of the model; 4. Shared testing facilities for vehicles and parts.
DTI Secretary Gregory Domingo was quoted, “…plan will attract more than 27 billion in new parts manufacturing investments and generate economic activity estimated to be worth 300 billion over the life of the program.” Seen to be developed under CARS are auto parts such as large body panels, bumpers, instrument panels, head lamps, shock absorbers, plastic fuel tanks, and other components leading to the development of basic support industries for manufacturing.
Critical to the program’s success is the substantial government support consisting of a maximum of 27 billion in fiscal support beginning 2016 through a fixed investment support (FIS) and a production volume incentive (PVI). Each enrolled model shall be qualified for fiscal support in an amount not exceeding 9 billion, where 40% will be allocated for FIS and 60% for PVI while for parts and shared testing facilities, the FIS shall not exceed 40% of the capital expenditure for tooling and equipment to manufacture the parts, including the training costs for the initial start-up operations.
The Aquino administration needs to be reminded that under EO No. 182, the Board of Investments is required to establish the application and selection process for model enrollment and the qualifying program for participants; constitute an inter-agency committee to review the existing MVDP and other relevant incentive schemes in light of the CARS program and regional and global economic developments; and explore the possibility of granting incentives for a limited transition period to new entrants intending to eventually participate in the CARS program. The review must be completed within six months from the issuance of EO 182 which is around November, 2015.
What is disturbing to advocates of Philippine automotive development is that up to today there seems to be no discernible movement towards meeting the November deadline. The Aquino administration should consider the coming APEC Summit as an opportunity to issue the implementing details of EO 182, take advantage of the presence of leaders from investing economies and the international media, and send a strong message to the world of an investment-friendly Philippines. With the looming state visit of the Emperor of Japan, knowledge as to the specific parameters of the CARS program and the firm Philippine government commitment to specific fiscal support could lead Japanese firms to highlight the Emperor’s visit with substantial investment decisions.
If the Aquino administration could just pause for a moment from its obsession to make the President’s choice win the 2016 presidential elections and attend to unfinished business, it could have a solid achievement to present to the Filipino voter.