PH seen as likely 3rd key auto maker in Asean

MANILA, Philippines—The Philippines has the potential to become the third-biggest player in the automotive manufacturing sector in the Asean next to Thailand and Indonesia, but it needs to put in place so-called key ‘enablers’ that will put the country in a more competitive position in the region, according to multinational management consulting firm McKinsey and Co.

Suraj Moraje, managing partner at Mckinsey and Co. (Phils.), said in an interview Monday that the Philippines had competitive advantages in automotive manufacturing, as well as in shipping, services, healthcare, and even food processing, given its huge domestic market and underlying economic stability.

Although there are gaps and issues that have to be addressed, Moraje believes that the local automotive industry can flourish if the government makes a decisive stand and takes on a more focused approach in terms of programs for the sector.

“What the Philippines has going for the automotive industry is the 100 million consumer market. If you look at the car market here today, it’s going to grow exponentially, there is no doubt about that. The question is how do you attract auto makers to manufacture here rather than in some other country,” Moraje said.

Fraser Thompson, a senior fellow at the Mckinsey Global Institute, said the Philippines must ensure the following “enablers” were in place to boost its automotive industry: an attractive fiscal package, an ecosystem for the sector and a conducive, stable business environment.

Thompson said the government should not only focus on providing the right kind of fiscal packages, but also ensure that the right skills were available.

A pitfall in other countries, he noted, was that most were focused on incentives.

Also, he said the country’s small- and medium-sized enterprises were critical in providing the right ecosystem and that the government should be able to effectively integrate these small firms into the automotive supply chain.

The Philippines must also be able to provide the right infrastructure (including port facilities, power, technology, among others) to minimize the costs and increase efficiencies, he added.

“Thailand has the most advantageous position at the moment as they have the ecosystem, while Indonesia has an advantage because of the size of the market. The question is which of those other Asean economies can step up and create the right environment where it is attractive to set up a significant scale like 100,000 units of minimum output,” Thompson said.

“If you look at the Philippines, most of (the companies’ production) are below that threshold. I think there are some advantages here in the Philippines with its large domestic market. But there are also some gaps. There is now this window of opportunity that’s saying that what plays in the next five years is going to be fundamental to whether the Philippines will become the third member of that (automotive manufacturers in the region),” he added.