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

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.



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:-

country report: Philippines

world’s car manufacturers: A financial and operating review