MANILA, Philippines–The Philippines is poised to become a competitive manufacturing base for motor vehicles and its parts and components by 2025, as the government moves to implement a new industrial policy that is largely centered on deepening the local companies’ participation in the global value chains (GVC).
Apart from being able to adequately serve both the domestic and exports markets, the local economy is also well positioned to become a global hub for automotive-related human resources development, Trade Assistant Secretary Rafaelita M. Aldaba said at the Avid 4th Thought Leadership Forum Wednesday.
According to Aldaba, this new industrial policy is expected to enable better coordination across government agencies; effectively address the binding constraints that are preventing new investors from coming in or moving up the value chain; and allow local firms to build economies of scale to reduce costs and eventually, participate in the large global production networks.
“The focus of the industry policy is not for the government to provide blanket subsidies such as income tax holidays. What we are pursuing is more focus on the global value chains. This is what we need to look at because this is the way for us to have access to technology, new markets, and consequently, maximize the opportunities in an open trading environment. It also calls for the government to be more proactive,” she explained.
At the heart of this industrial policy will be the development of the Philippine automotive industry through its integration into the production and sales systems of global automakers, she said.
Aldaba noted that much focus is being given to the automotive industry given its large “multiplier effect.”
“A car has over 30,000 parts and its construction is dependent on metal, chemical, plastic, textile, rubber, glass, steel, electrical and other manufacturing subsectors. As a consequence, through inter-industry and supply chain linkages, auto manufacturing can have a large multiplier effect in an economy because any expansion in the automotive industry drives growth in feeder industries,” Aldaba explained.
“While the Philippines’ domestic production of automobiles is currently limited, there are clear opportunities to increase production as the country’s middle class grows and the Asean Economic Community (AEC) integration creates an open market of over 600 million people,” she added.