The Japanese government was the first to get a glimpse of the implementing rules and regulations (IRR) of the Comprehensive Automotive Resurgence Strategy (CARS) scheme, as Manila is banking on the commitment of Japanese automakers that they will join the program once it is officially rolled out.
A ranking trade official said Trade Secretary Gregory L. Domingo presented the CARS Program and the draft IRR to Japanese officials during the Japan-Philippines bilateral meeting on the sidelines of the Asia- Pacific Economic Cooperation meeting in Manila last week.
The said program offers P27 billion worth of incentives, plus nonfiscal perks, in a bid to spur auto production in the country.
“We felt the need to present it to the Japanese officials to update them on the progress of the program,” the source said.
Japanese car brands, as the dominant players in the Philippine auto industry, have been expressing their desire to participate in the country’s CARS Program. Automotive is also a major component of the Philippines-Japan Economic Partnership Agreement.
According to Board of Investments (BOI) Executive Director Corazon Halili-Dichosa, the IRR of the much-awaited CARS Program has been transmitted to Domingo last week and is now ready for the final round of consultations and signing.
Toyota and Mitsubishi, according to the BOI, are the likely participants in the program, but are waiting for the IRR’s release to determine if they can meet its hurdles or not.
Draft IRR
In the draft IRR, the model life budget (MLB), or the fiscal support allocated per enrolled model, has two types of incentives: 40 percent of the MLB is reserved for the fixed investment support (FIS) scheme, and 60 percent will go to the production volume incentive scheme.
According to a draft of the IRR obtained by BusinessMirror, the FIS is further divided into three categories: manufacturing of body shell assembly and large plastic assemblies; common parts and shared testing facility; and production of strategic parts.
According to the annex of the IRR, strategic parts include automotive-grade fabric, engine parts and assembly, engine mount, transmissions/transaxle parts and assembly.
A trade official said these strategic parts were chosen because they are not currently being produced in the Philippines at acceptable standards.
To be eligible for the FIS, participant car makers (PCMs) and registered parts makers must manufacture all “large plastic assemblies and no less than 50 percent, by weight, of the ‘body shell assembly’ covered in the program within three years of getting the certificate of registration from the BOI.”
According to the CARS Program executive order, the body shell assembly consists of the full set of metal components that goes from the body shop to the paint shop for one vehicle.
Large plastic parts refer to all major plastic parts of bumpers, instrument panels, center controls and door trims.
The incentive is meant to entice investments in large auto parts that are currently being imported, such as large car body panels, bumpers, instrument panels and head lamps, among others.
Moreover, based on the draft IRR, models that have been previously enrolled in the Motor Vehicle Development Program (MVDP) of the DTI can still be registered after the effectivity of the CARS Program, subject to requirements.
“In such cases, the PCM’s qualified investments made prior to the registration to the CARS Program for the model may be considered for the FIS, provided these are indicated in the PCM’s MVDP application,” the IRR read.
The CARS Program, seen as the cornerstone of the government’s Manufacturing Resurgence Program (MRP), envisions the Philippines to become a major auto-manufacturing hub in Asia. The country is currently a laggard in the Asean region in car production.