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Philippine Automakers Need Gov't Subsidies to Sustain Exports

MANILA - The government has to extend subsidies for each vehicle exports to ensure the viability of automobile exports and to attract more investments for an exports program.

This was the assessment of Ford Motor Co. Philippines Inc. president Henry Co. when interviewed by reporters at the launching of the new Ford Ranger.

At present, the government moves to encourage local assemblers to go into exports of completely built-up (CBU) units and auto parts.

According to Co, Australia grants $600 subsidy per unit while in South Africa the government subsidy is $2,000 per unit.

South Africa, which has a domestic market of 300,000 to 400,000 units, has been providing in the last four years fiscal incentives in the form of rebates on taxes and duties to encourage local assemblers to export.

At present, South Africa exports 100,000 units a year to Europe and Australia.

The Philippines, however, plans to provide export incentives but the Board of Investments has a hard time convincing the Department of Finance to support its position to grant tax credits to local assemblers to export their products because of the revenue loss consideration.

Among the big motor vehicle market in ASEAN that includes Indonesia, Thailand and Malaysia, the Philippines has the smallest market with only 85,000 vehicles last year.

According to Co, an attractive exports incentive is needed for assemblers to offset the country's small market, weak supply base and high infrastructure costs.

The subsidy, Co said, should be big enough to cover for the cost of bringing the unit to the target market and to lower the cost of production.

"It all depends on the proximity of the target market. But with the ballooning budget deficit, I don't think the government can afford to give too much to export subsidies," Co said.

Most of the local assemblers are gearing their exports program for the ASEAN markets.

This means the subsidy could be just around the $600 per unit.

At present, FMCPI is the country's lone volume exporter of CBU packs (Lynx and Escape) to Thailand and Indonesia.

Other local assemblers are also urging the government to grant tax credits because this has direct impact on their operation especially on the initial years of their export program.

Tax credits, which are tax claims, can be used to partly settle corporate income taxes.

FMCPI is targeting 1,500 units of Ford Ranger sales this year.

The Ford Ranger 2003, which is being manufactured in Ford's Auto Alliance of Thailand, is being introduced in the Philippines at an introductory price that is P20,000 lower than the previous model.

"We have said it before and we are saying it again, the complementation and product specialization that Ford has initiated in the ASEAN Free Trade Area Agreement will benefit consumers in the long run," Co said.

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