Taiwanese car maker seeks BOI incentives

Taiwanese automotive giant Yulon Motor Corp. has to invest at least $300 million to register with the Board of Investments (BOI) and qualify for incentives under the 1999 Investments Priorities Plan (IPP).

Yulon has submitted an unofficial proposal seeking incentives but the BOI said it was returned because the total investments declared was less than the $300-million minimum set by the IPP for pioneer projects.

Yulon is a multi-brand automotive manufacturer in Taiwan with Nissan as its biggest brand. It is the sole manufacturer and distributor of Nissan vehicles in Taiwan.

According to a top official, Yulon is seeking incentives for its planned assembly plant in the Philippines as the company gears up to use the country as an assembly hub and entry point into ASEAN.

The official explained that under the IPP guidelines, only investments over $300 million are qualified for incentives, including income tax holidays and exemption from various government fees and charges.

The minimum investment, according to the official, includes the $31.6 million acquisition cost paid by Yulon when it acquired the controlling interest in Nissan Motor Philippines Inc. (NMPI).

"This means Yulon has to invest $270 million more in order to qualify for incentives," the official said.

The official said Yulon's local partners have met with BOI officials to discuss the possible incentives and the requirements that the company has to meet.

"We were told that the money would have come in by now but Yulon had a project in China that fell through ahead of the Nissan deal," the official said. "So they infused money there first and the Philippine project is only now being put together for funding."

The official explained that Yulon could assume NMPI's registration and act as participant in the country's car manufacturer program. But this would not give the project the full incentives if it were able to register anew as a pioneer project.

Under IPP rules, Yulon falls under the category of a new investment for new stockholders equivalent to at least 25 percent of total company assets before the buy-in and resulting in the new stockholders owning majority share.

BOI earlier said Yulon is in the process of completing its application for registration under Executive Order 226 or the Omnibus Investment Code.

Yulon has not given any indication on how much it plans to invest in the country but the BOI expects this to be substantial since it is planning to include research and development, a huge component of automotive design and assembly.

"Yulon wants to use the Philippines as an entry point into the ASEAN since Taiwan is not within the region which is becoming increasingly significant in world trade," the official explained.