The Philippines Board of Investments (BOI) has agreed to Ford's $500 million production sharing scheme between its Philippine and Thailand subsidiaries, the Philippine Daily Enquirer reported.

However, the board imposed a condition that Ford must ensure that the Ford- and Mazda-branded vehicles assembled under the deal use 40% Thai or Philippines-made components.

Ford's project is the first under the Asean Industrial Cooperation (Aico) scheme where the proponent has been allowed to trade fully assembled goods rather than assembly components, the newspaper said.

Ford Motor Co. Philippines Inc. will assemble Ford Escape and Mazda Tribute SUVs and Ford Laser/Lynx/Mazda 323 sedans at its Sta. Rosa plant for export to Thailand.

In turn, Ford's Thailand subsidiary, Auto Alliance Co. Ltd. (owned 48% by Ford and 45% by Mazda) will ship Ranger pickup trucks to the Philippines.

Strategic Review-


Ford had originally planned to ship some of its Philippine output to Indonesia and bring in Volvo sedans from its Thai plant to the Philippines, according to the Philippine Daily Enquirer.

Under its 5-year plan, the paper said, Ford is expected to ship $278 million dollars worth of completely built up vehicles to Thailand while importing $272 million dollars worth of vehicles and parts into the Philippines. The BOI said the Philippine subsidiary would yield $126 million in net foreign exchange inflows.

According to the paper, by shipping its CBUs through Aico, Ford will pay only between zero and 5% tariffs on its products compared to the prevailing CBU duties of 20% and 15% in the Philippines and Thailand, respectively.

Ford is likely to enjoy these perks if plans to grant duty-free status to Aico projects at the start of the Asean Free Trade Area or Afta (where duties on traded goods will be pegged at no higher than 5 percent) in 2003 go through, the Philippine Daily Enquirer said.

The newspaper added that the BOI justified its decision to grant perks to Ford by noting that CBUs were "critical to the future success of Afta implementation" and that these were scheduled for tariff cuts in the upcoming Afta except for Malaysia which wanted a longer period before tariff cuts to protect its national car, the Proton.

But, the Philippine Daily Enquirer said, while the BOI said it would strictly impose the minimum 40 percent cumulative Asean content requirement, the agency did not elaborate on how it could effectively enforce this rule considering that the scheme involves two assembly plants controlled by Ford.

The Aico project is expected to boost the Philippines' automotive exports to between 10,300 units and 19,800 units from 2002 to 2004, a big leap from its shipment of 94 units in 2000.

The major automotive exporters in the region are Thailand (141,436 units), Indonesia (47,001 units) and Malaysia (12,600 units), the newspaper said.

To view related research reports, please follow the links below:-

Automotive country report: Philippines

The world's car manufacturers: A financial and operating review