New Strategy For Resurgence of the Philippine Auto Industry

Transcription

1 New Strategy For Resurgence of the Philippine Auto Industry Rafaelita M. Aldaba PH Department of Trade and Industry Board of Investments 4 February 2016, WTC Conference Center, Tokyo

2 Presentation Outline MACRO PERFORMANC E NEW INDUSTRIAL POLICY CARS PROGRAM Roadmaps for upgrading industries to foster sustainable & inclusive development, transformation, & growth

3 PH MACROECONOMIC PERFORMANCE PH REMARKABLE GROWTH PERFORMANCE

4 PH-Japan Trade Relations Free trade agreements: PH-Japan Economic Partnership Agreement, ASEAN-Japan Japan: top trading partner in 2014 Total trade: $ billion (15% of total trade) 2014 Exports to Japan US$13.9 B (22.4% of total) Electronic products, woodcrafts & furniture, machinery & transport equipment, ignition wiring sets, chemicals 2014 Imports from Japan US$5.3 B (8.03% of total) Electronic products, transport equipment, industrial machinery & equipment, iron & steel, telecommunication equipment, electrical machinery

5 Japan FDI Inflows Japan one of the major investors in PH Largest share of approved projects in p 2015 p Source: Bangko Sentral ng Pilipinas

6 Macro Performance Quarterly Growth AGRI., HUNTING, FORESTRY AND FISHING SERVICE SECTOR MANUFACTURING GROSS DOMESTIC PRODUCT Robust growth due to strong macro fundamentals supporting domestic demand & shielding us from global weaknesses Rising trend in manufacturing after sluggish growth in

7 PH a new growth area in % Industry Growth: PH vs Selected East & Southeast Asian Countries Year PH TH INO VN PRC MAL PH Industry growth: 7.3% ( 12); 9.3% ( 13, highest), 7.5% ( 14 highest) 7

8 WHAT MAKES PH DIFFERENT Market Growing market, middle class Demographic sweet spot Labor Young, English speaking, highly trainable Moderate wage increases Operating environment Strong macro fundamentals Political stability, strong business/consumer confidence Policy focus New Industrial Policy Investment Promotion Agencies Competitivenness Improved competitiveness ranking (World Economic Forum #47 from #52)

9 Comparison of Wage Rates Wages for workers & engineers are relatively lower than China, Malaysia, & Thailand (monthly rates in US$) Korea Hong Kong Taiwan Singapore China Thailand Malaysia Philippines Indonesia Vietnam Cambodia Myanmar Taiwan Hong Kong Korea Singapore Malaysia Thailand China Philippines Indonesia Cambodia Vietnam Myanmar Workers Engineers (mid-level) source: Japan External Trade Organization (JETRO)

10 THE NEW INDUSTRIAL POLICY FOR STRUCTURAL TRANSFORMATION MANUFACTURING, AGRIBUSINESS, & SERVICES ROADMAPS

11 New Industrial Policy Jobs, Competitiveness Industrial policy best way to create jobs, reduce poverty, & achieve inclusive growth Regional economic integration, FTAs* Competitiveness crucial in upgrading, rising regional integration & global value chains Inclusive growth * Free Trade Areas

12 Strategic Industrial Policy GOAL: Improve Competitiveness Upgrade industries Remove growth obstacles Government as Facilitator Create proper environment for private sector development Private sector: proximate source of growth GVC-focused, Cluster-based How to plug in regional production networks Move up the value chain Build strong regional economies

13 MANUFACTURING ROADMAP VISION: globally competitive & strongly linked with other sectors, a main growth driver Phase I automotive, aerospace parts electronics, garments, food, resource-based industries, chemicals, furniture, tool & die, shipbuilding Phase II high value added activities upstream industries: chemicals, iron & steel, med-tech basic & fabricated metal Phase III move to high tech transport equipment, chemicals, electrical machinery -manufacturing hubs in regional & global production networks for auto, electronics, machinery, garments, food

14 Major Strategies Coordination mechanism Horizontal measures Vertical measures Promotion Power, smuggling, logistics, infrastructure Improve regulation, reduce cost of doing business Competitive exchange rate Manufacturing --15% to GDP Close supply chain gaps Expand domestic market & exports HRD & skills trainings SME development Innovation Green growth open trade regime, sustainable macro policies, sound tax policies & administration, efficient bureaucracy, secure property rights, institutions

15 Strategic Actions: Manufacturing STRATEGIC ACTIONS Close Supply/Value Chain Gaps : Copper, Furniture, Tool & die, Paper, Iron & steel, Petrochemical, Plastic Domestic Market Base & Exports: Automotive, Shipbuilding HRD & Skills/Trainings: engineers, design, tool-making, prototyping, molding, die casting, technical-vocational SME Development & Innovation: Finance access, compliance with product standards, Incubation, Quality testing, R&D, Industry-academe linkages, Fablabs, SME Business Centers Aggressive marketing & promotion to attract investments Horizontal issues: high cost of power & domestic shipping, smuggling & streamline & automate government procedures 15

16 AGRIBUSINESS ROADMAP DRIVE REGIONAL ECONOMIC TRANSFORMATION Transform & upgrade agriculture from traditional farming to a globally competitive agribusiness sector Phase I rubber, coconut, mangoes, coffee, cacao, banana, palm oil & other high value crops -supply chain gaps Phase II strengthen agroprocessing & its linkages to production: R&D; strengthen supply chains, upgrade commodity clusters; access to technologies, finance; regulatory & certification system Phase III deepen participation in GVC -PH as agribusiness regional hub

17 SERVICES ROADMAP Glue That Binds All Sectors Together Globally competitive services, create quality jobs, move up the value chain, enable structural transformation Phase I Labor-intensive sectors: tourism, construction, ship repair, MRO -accelerate infrastructure investments -move up IT-BPM GVC Phase II Education, design, R&D, finance, infrastructure - Services embedded in manufacturing - HRD & skills training - Innovation ecosystem linked with manufacturing Phase III PH as regional hub: training - upgrade services, manufacturing related services to sustain growth & job creation

18 Comprehensive National Industrial Strategy (CNIS) EXTERNAL FACTORS: GLOBALIZATION, REGIONAL/BILATERAL/MULTILATERAL TRADING ARRANGEMENTS, GLOBAL & REGIONAL PRODUCTION NETWORKS AGRICULTURE FISHING, FORESTRY MINING MANUFACTURING SERVICES INTERNAL FACTORS: GOVERNMENT POLICIES &PROGRAMS, INSTITUTIONS, INFRASTRUCTURE, MACRO STABILITY, RULE OF LAW, PEACE & ORDER, POLITICAL CLIMATE THREE IMPORTANT CHANNELS AFFECTING INDUSTRY GROWTH: COMPETITION, INNOVATION, PRODUCTIVITY 18

19 Philippine Industry Development Council Eminent Persons Group (EPG) 5 industry leaders Industry Development Council (IDC) IDC Secretariat IDC Executive Committee DTI Chairman 11 representatives from government 7 representatives from private sector 1 representative of academe 1 representative of research institute/think tank 1 representative of labor 1 CSO representative IDC Technical Committee DTI - Chairman DTI, NEDA, DA, DOF, OP; Private sectors representatives Paper Metal casting, Tool & die Retirement Natural health Motorcycle Iron & steel Rubber Mass housing IT-BPM Furniture Electronics Chemicals, plastics, petrochemical Ceramic tiles Biodiesel Aerospace Automotive Copper

20 COMPREHENSIVE AUTO RESURGENCE PROGRAM Auto roadmap visions, goals, strategies, timeline

21 Current State and Strengths Industry Characteristics Rated capacity: 200K units/year 4 carmakers Parts & components: 272 Direct Employment: 68K Net exporter of parts: Exports US$4.3B (7% of total) Strong current comparative advantage: ignition sets, radio receivers, external power, leadacid electric accumulators, brake system, transmissions, air filters for engines, tires, etc Highly skilled labor & technical manpower Cavite Batangas Vehicle 7 plants electrodeposition painting systems Pampanga Parts Metro Manila Laguna 3 stamping, 5 transmission, 6 wiring harness, 2 large injection, 3 suspension system, 2 tool & die, 50+ others

22 PH: high population with low vehicle ownership o Motorization rate: PH: 35; VN:20; INDO:73; THA:200; MAL: 395 Significant market potential as the share of households who can afford to buy vehicles increased from 26% to PH Auto Industry Sales & Growth % 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% Total Industry Growth

23 Vehicle Sales of Selected ASEAN Countries (Jan.-Jun. 2015) Vietnam 67% Thailand -16% Singapore 72% Philippines Malaysia 21% -3% Jan-Jun 2015 Jan-Jun 2014 Indonesia -18% Brunei -12% 0 100, , , , , , ,000 source: ASEAN Automotive Federation

24 Vehicle Production of Selected ASEAN Countries (Jan.-Jun. 2015) Vietnam 45% Thailand -2% Philippines Malaysia 9% 3% Jan-Jun 2015 Jan-Jun 2014 Indonesia -14% 0 200, , , ,000 1,000,000 source: ASEAN Automotive Federation

25 Market Opportunities ASEAN Market Size 1.7 MILLION 2.5 MILLION 3-6 MILLION VEHICLES VEHICLES VEHICLES Thailand s Snapshot GDP per capita : US$2,603 Population : 62 Million Domestic Sales : 626K units Production : 923K units ASEAN Market Share 37% Production Indonesia s Snapshot GDP per capita : US$2,980 Population : 238 Million Domestic Sales : 764K units : 764K 702K units ASEAN Market 31% Share Source: Sugata, M. (2014). TMPC Indicator GDP/capita (US$) Population (M) Motorization starts at GDP/capita level US$2,500 Mitsubishi to stop US operations, expand Asia

26 PH Auto Industry Roadmap Auto Program Formulation and Approval STAGE 1 ( ) Government support critical Local Market Expansion STAGE 2 ( ) Investment & capacity building Integration of PH Auto Industry into ASEAN Production/ Sales Network STAGE 3 ( ) Full integration to take advantage of AEC

27 Goals The CARS Program o Revive auto manufacturing, generate employment, attract investments, build domestic scale, develop PH into a regional auto manufacturing hub Coverage o Vehicle Production o Parts Manufacturing: body shell assembly, large plastic assemblies, common parts, strategic parts not currently produced in PH, shared testing facilities Fiscal Incentives o Time-bound; Output/performance-based o Fiscal support not exceeding PhP27B spread over 6 years o 3 models; 200,000 units per model o Fixed Investment Support (40%): Invest in parts &/or shared testing facility o Production Volume Incentive (60%): Exceed 100,000 units in production volume per model

28 Fiscal support: Allocation Model Life Budget (MLB) PHP9B Production Volume Incentive (PVI) 60% of MLB Fixed Investment Support (FIS) 40% of MLB Standard Production Support Actual Annual Production Logistics Efficiency Index Body shell assembly Common parts & shared facility Strategic parts

29 Common & Strategic Parts 1.Auto grade fabric 2.Engines, engine parts & assembly 3.Engine mounts 4.Transmissions/transaxl e parts & assembly 5.Constant velocity joints 6.Axles 7.Grill 8.Lamps 9.Shock absorber, struts 10.Suspension members 11.Wiper motor mechanism, blade 12.Steering wheel 13.Electric power steering system 14.Window regulators 15.Combination meter/instrument cluster 16.Chassis & sub-frame 17.Interior finishing 18.Electric Relays, switches 19.Alternator, starter motors 20.Seat mechanism/seat recliner & sliders 21.Retractable seat belts 22.Aluminum radiators, evaporators, condensers & oil coolers 23.Plastic fuel tanks 24.Fuel pumps 25.Brake system & components 26.Aircon compressor & parts 27.Air bag systems 28.Auto glass 29.Door & rear view mirrors 30.Tie rods 31.Clutch disk 32.Clutch cover 33.Locks 34.Motors

30 Who are eligible to enroll in Participants the program Qualifications Car Maker Internationally-recognized carmaker Proven track record Multinational operations including R&D, manufacturing, marketing & after sales services in Asia, Europe, N.America Parts Maker Endorsed by the PCM to manufacture parts of its enrolled model OEM auto parts maker proven track record member of good standing of the PH Parts Makers Association Shared Testing Facility Provider Collectively endorsed by the PCMs proven track record

31 Criteria for evaluating applications Track record & model competitiveness including global & domestic sales New investments in body shell assembly & large plastic parts assemblies Planned volume no lower than 200K units over model life up to maximum of 6 years Economic impact of the investment plan: parts manufacturing, linkages, strategic & common parts, employment, consumer welfare Impact on overall competitive environment & long term industry development Safety, fuel efficiency, emission level standards (no lower than standards under the Clean Air Act)

32 Non- Fiscal Measures o Adoption of national standards for auto parts & certification of international quality systems (TS 16949) & environmental management system (ISO 14001) o Alignment of PH standards with other countries: labor incentives, customs procedures & systems, technical, environment & safety standards o Strict implementation of vehicle registration regulations Motor Vehicle Inspection System o Full implementation of the automated import & export documentation system o Streamline regulatory procedures to reduce cost o Allocation of road user s tax to improve infrastructure o Demand stimulating measures: easy consumer

33 Envisioning the Future 350 CARS Program to sustain the growth & development of the industry from 2016 and beyond Actual Production Actual Imports Projected Production Projected Imports

34 Guided by the industry roadmap s clear vision to transform the economy & a more pro-active government focused on establishing an environment conducive to private sector growth, the Philippines is now an excellent place to invest & one of Asia s brightest spots. For more information, visit our website at industry.gov.ph Arigatou Gozaimasu!