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On August 9 to 12 the first Philippine International
Motor Show, managed by the Chamber of Automotive Manufacturers of
the Philippines, Inc. (CAMPI), will be held. About 18 new vehicle
models will be shown, along with seven concept cars, including units
that use alternative fuels like compressed natural gas.
In sense, the show is the
Philippine auto industry’s coming-out party, after a 10-year slump
resulting from the 1997 Asian crisis. From a record high of 160,000
units, sales nosedived to below 90,000. Aggravating the situation
was the rampant smuggling of secondhand vehicles whose number became
so large there were more smuggled cars being registered with the LTO
than the number of units made by local assemblers. The ratio was 60
percent to 40 percent, in favor of used vehicles three years ago.
This year that ratio has been
reversed, 60 percent of vehicle registrations are locally made cars,
40 percent are used. Credit for that sea change goes to CAMPI which,
under Elizabeth Lee, its president, waged a vigorous war against
smuggled used cars. The organization of the country’s 12 major car
producers went to the President and went to the Supreme Court. CAMPI
got an executive order from the President and a ruling from the High
Court—smuggled used cars are illegal. They cannot come in.
Then the economy turned around.
GDP growth rose to 6.9 percent in the first quarter and will be
about 6.5 percent this year. It was 5.4 percent last year and 5
percent in 2005. Interest rates were halved, hitting record low
levels. Inflation also declined to its near record lows. That gave
consumers more purchasing power.
Hence, demand for cars this year
will be 108,000 units—the best in 10 years. The original
projection was 103,000 for 2007 but this has been updated owing to
more positive developments. Under President Arroyo, the economy has
posted sustained growth for six and a half years—the longest
economic expansion in postwar history. The Philippines will be a
middle class country, with per-capita income of $3,000, in 13 years,
according to Goldman Sachs.
Getting the President and the
Supreme Court to declare illegal the importation of used vehicles
was a significant milestone and a tremendous achievement for the
industry, gushes CAMPI President Lee. She explains:
“For a number of years,
smuggling had sapped the energy of local manufacturers and almost
destroyed their faith in the Philippines as an investment
destination.
“Today, the industry is
starting to enjoy the fruits of its victory over used-car smugglers.
The crusade against smuggling continues with the strict
implementation of the law. But we have made significant headway.”
Lee notes that investments are
being made in the automotive sector. In March, Toyota broke ground
for a new P5.3-billion expansion plant while Ford inaugurated its
flexible fuel plant. Together with Honda, Isuzu and Mitsubishi all
have investments in transmission plants and all, including Nissan
and Kia have substantial investments in local CKD assembly amounting
to about P30 billion.
“With increased investments by
global auto brands in the Philippines,” Lee relates, “we see a
deepening of local auto manufacturing technology, increased exports
of complete cars and local auto components, increased employment for
our engineers and highly skilled people, and the emergence of the
country as a viable alternative regional auto manufacturing hub.”
Being a regional hub, she points
out, is a natural for the Philippines considering its strategic
location, being four hours or less from major capitals of Asia.”
The Philippines is Southeast Asia’s biggest English-speaking
nation. English is a common language, often more prevalent than
Tagalog and most of the local dialects. “We have a productive,
easily trainable pool of workers and a large core of highly
educated, highly trained and competent managers, the best in
Asia.”
Lee reminds everyone that the
Philippine automotive industry is perhaps the only remaining
significant manufacturing effort in the Philippines. It is an
enormous industry. “We have assets of P68 billion, taxes of P12
billion annually, work force of 74,000 workers, payroll of P325
million yearly, exports of $2 billion and heavy, long-term
investments by among the world’s largest and most respected
automotive companies.”
And with the strong economic
performance signaling a more vigorous growth, the auto industry is
now gearing up to support a rising market—the SMEs or Small and
Medium Enterprises.
Given the right incentive, the
right opportunity and the right motivation, Lee asserts, the local
vehicle market can expand and expand tremendously. Cars are now no
longer just for luxury. They are, more appropriately, a need, a
necessity, she says.
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