doing the right thing is its own reward
The news of resumption of funding for the Comprehensive Automotive Resurgence Strategy (CARS) program was warmly welcomed by the auto industry and trade sector at large. This prompt action of the Government reflects its resolve to maintain efforts to enhance foreign investor confidence and strengthen the business environment in the country. This is a clear signal that the government stands firm on its commitments to investors and that it respects a transparent rules-based approach to progress and development.
In his announcement of finalizing the funding solution for CARS, Finance Secretary Frederick Go stressed that it is in response to private sector concerns on “ease of doing business, cost of doing business and predictability of doing business” in the Philippines. He assured that “car manufacturers enrolled in the program will ensure that the government fulfills its commitment to investors.”
Business leaders praised the resolution of the funding issue. In a report of businessworldPhilippine Chamber of Commerce and Industry (PCCI) President Ferdinand A. Ferrer was quoted as saying that the return of funding for CARS is “a clear signal that the government will support critical industries and prior commitments.”
In the same article, Federation of Philippine Industries Chairperson Elizabeth H. Lee was also quoted as saying, “Only by maintaining industrial programs with credibility can the Philippines establish itself as a reliable destination for long-term manufacturing investment.”
This year, the Philippines will hold the presidency of the Association of Southeast Asian Nations (ASEAN). It is an excellent platform to enhance the country's reputation as a preferred partner for investors. Accordingly, the clear demonstration of consistency in policy direction, implementation and governance is a clear confirmation that the Philippines is open for business and a trusted investment destination.
Indeed, I believe the Government has clearly demonstrated its responsiveness and ability to act swiftly and determinedly in addressing the obvious pain point of the business sector. CARS's returned funding is particularly significant as it impacts the government's goal of revitalizing the industry under the Philippine Development Plan (2023 to 2028).
The automotive industry – especially as far as local vehicle production is concerned – is an essential pillar of the manufacturing sector. It has a significant contribution in transforming the manufacturing sector by creating more quality jobs and competitive products. Senator Loren Legarda, in her proposed Senate bill in 2022, cited the observation of former National Economic and Development Authority (NEDA) Director General Cielito Habito that the manufacturing of automotive parts has “strong backward linkages with local industries, indicating strong multiplier effects for the local economy.” Director Habito cited a study – albeit from 2010 – that “every P100 worth of output in the industry increases total economic output by P367.” In addition to its impact on other industries, it provides technology transfer to local firms, thereby increasing the overall efficiency of the domestic economy.
The strategic value of the automotive industry is important to ensure. In 2017 – the peak of auto sales before COVID – it was noted by then-Executive Secretary Salvador Medialdea that the industry's output value reached P300 billion or 4% of the country's gross domestic product (GDP). At the same time, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) reported that combined investments by auto industry players had reached P120 billion, while the Technical Education and Skills Development Authority (TESDA) said in a report that each P100 billion investment would create 169,000 jobs. Furthermore, a recent report by the International Trade Council in December 2024 projected that automotive exports from the Philippines will reach US$1.28 billion in 2025.
Given that domestic motor vehicle sales are projected to reach more than 490,000 in 2025, the scale of economic contribution by the auto industry should be even more attractive. In an economy that is driven by local consumption (up to 70%), increasing local production capacity is a strategically important pillar of sustainable development for the country. This will help us improve our trade balance, reduce our sensitivity to imported inflation, reduce supply chain disruptions and logistics cost fluctuations, increase local value addition and create more jobs.
Motor vehicles are even more important in view of the increasing mobility needs of the country. The ASEAN Statistics Report for 2024 showed that by 2023, the number of registered motor vehicles (including four- and two-wheelers) per 1,000 people in the Philippines was 128. This compares with 1,097 in Malaysia, 682 in Thailand and 473 in Indonesia. Vietnam – with data only for 2020 – was reported at 42. Given the archipelago nature of the Philippines, the need for transportation vehicles cannot be ignored – for farm-to-market use, retail, commerce, commuting, private use, and special purposes such as ambulances, police vehicles, and other civilian needs. Therefore, “mobility security” should be the priority concern of the government.
However, in the returns of funding for CARS, it was also mentioned that funding for RACE (Reviving the Automotive Industry to Enhance Competition) was not included. I believe this is not due to a lack of appreciation of the strategic importance of the proposed program by the Board of Investment (BOI). I believe the government is taking a more thoughtful approach to ensure that – once approved and announced – there will be no further obstacles to realizing the goals and benefits of the programme.
We will move forward as a nation, taking one measured step at a time. After all, haste leads to waste.