The Philippines Board of Investments (BOI) is relaxing several criteria for participants in the government’s Automotive Export Programme (AEP) to prop up sales.
Trade under-secretary Elmer Hernandez, who is also BOI managing director, told the paper that the AEP is being revised so that exporters could cope with the changing southeast Asian market.
Hernandez reportedly said the BOI has to ease the value and quantity provisions that exporters have to meet in order to get incentives to mitigate declining regional sales.
“We have to support the exporters because they bring in much-needed dollar revenues, but to avail of incentives under the AEP, they must reach a minimum number of units or a certain value. The AEP is being revised in such a way that it could be a mixture of value and volume,” Hernandez said, according to the report.
Under present rules, exporters of completely built up (CBU) units can only gain tax perks under the programme if they meet the minimum requirement of shipping out 10,000 units or at least $50m worth per year under the regular exports category.
Moreover, those enrolled under the developmental category are required to export at least 5,000 units at minimum FOB (freight on board) value of $5,000 per unit, or $25m every year.
The niche market category requires a participant to export 2,500 CBU vehicles that are not currently assembled in the country at a minimum FOB value of $10,000 per unit, or $25m, the Manila Times said.
Meantime, the high-value, low-volume category requires participants to export 2,500 units of luxury motor vehicles annually at a minimum FOB value of $20,000 per unit, or $50m in annual exports.
As an incentive under the programme, AEP participants can earn tax credits from their exports. The tax credits may then be used to make up for duties on their imports of fully built vehicles or CBU units. A CBU exporter earns $400 per unit in tax credit for the first two years. This will be reduced to $100 per unit for the fifth year.
Hernandez told the paper that the proposed revisions grant that the BOI will now allow all types of combinations of the various categories. However, it will increase the minimum requirement to $75m in terms of value and 15,000 units in terms of quantity.
He believes that these new flexibilities will simplify the AEP and help exporters meet the minimum export requirements to avail of incentives despite reduced demand.
“With a declining demand, we should adopt our AEP accordingly. We are amending the AEP without losing sight of the goal to maintain the volume or value threshold,” he told the paper.
The BOI official said that automotive sales to the country’s major CBU markets have been declining because of the political turmoil in these countries and tighter foreign-exchange rules.
For example, Thailand, the region’s biggest auto market, saw its domestic sales drop by 65% year on year in February this year. Indonesia and Malaysia suffered around 70% declines during the same period.
Ford, the only participant in the AEP, exports the Escape and Focus models, plus the Mazda Tribute and 3, to Indonesia, Thailand and Malaysia.
According to the Manila Times, Ford CBU exports to these countries decreased by 50%, or 6,677 units in 2006 from 13,352 the previous year. As a result, the country’s CBU export receipts were cut in half to only $90.6m last year from $168.9m in 2005.
Ford had yet to export to the region in the first two months of this year, the Manila Times added.