The government’s Board of Investments (BoI) may allow Ford Group Philippines to retain its import privileges even if the firm does not meet a required export volume by April in light of the economic downturn, an official has said.
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Under the Automotive Export Programme (AEP), the Philippine subsidiary – the program’s only participant – is allowed to import cars at lower tariffs as long as it exports 5,000 units per year in exchange.
“In view of the global financial crisis … we have taken cognizance of that and would suspend their export commitments up to December 2009,” BoI managing head Elmer Hernandez told reporters.
Ford Group Philippines president Richard Baker earlier told BusinessWorld that the firm’s exports in January and February were 15% lower year on year.
“They can continue to earn export credits and use the privilege. That will allow them to continue importing CBUs (completely-built units) and keep them in business,” Hernandez said.
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By GlobalData“We are looking at recommending to the board that one condition [for such easing] is that no workers must be laid off,” he added.
AEP conditions provide that exporters of ‘developmental CBUs’, or models designed to be produced in the Philippines for export, must ship out 5,000 units yearly with each costing US$5,000. Other types of exports, luxury vehicles and niche cars for instance, have lower volume requirements.
AEP participants that comply with the export volume are granted lower tariffs for imported CBUs: 1% duty on cars from the Association of Southeast Asian Nations (ASEAN) and 10% on those imported from elsewhere, compared with regular duties of 5% for ASEAN imports and 20-30% for those from outside the ASEAN.
Ford Group Philippines said Hernandez had petitioned for the easing “several months ago”.
“We are looking at it favourably [because] we have already adopted a policy in relaxing general export commitments,” he said, referring to a BoI decision to allow merchandise exporters to continue to avail of tax breaks even if they do not ship out 50% or 70% of their produce.
Baker declined to comment on whether his firm would indeed be unable to meet the export requirement by April.
He instead said in an e-mail to BusinessWorld: “Over 58,000 CBU vehicles … have been cumulatively exported [since 2002] as of year end 2008. Ford Philippines is the only domestic manufacturer with a CBU export programme. We remain committed to our CBU export programme and appreciate the continued support from the BoI to the export sector.”
The firm exports the Focus and Mazda 3 sedans, and the Escape and Mazda Tribute sport utility vehicles to Thailand, Malaysia, Indonesia, and Vietnam.
Other car makers represented by the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) called for similar privileges.
“We commend DTI (Department of Trade and Industry) for thinking of something to assist the industry, although the Philippines is not in a crisis and seeking a bail out,” CAMPI President Elizabeth Lee said on Sunday.
“But the action should be fair and benefit not only one industry player but those who are also exporting [auto parts such as engines and transmission systems],” she said.
CAMPI expects the local market to buck the global automotive slump, forecasting a 2-4% sales growth or a flattening at worst.
In a related development, the Asia-Pacific Economic Cooperation (APEC) will be enjoining members in an automotive industry meeting today in Seoul to refrain from imposing new policies that will make it harder for foreign-made cars to enter domestic markets, Hernandez said.
