BOI rejects pioneer status for Yulon’s Nissan project

The Taiwanese-owned Yulon Philippines, Inc. will not get a pioneer status for the expansion of Nissan Motor Philippines, Inc.’s (NMPI) manufacturing facilities under the Investment Priorities Plan (IPP).

Documents obtained from the Board of Investments (BOI) indicate that Yulon is unable to justify its application as a pioneer industry by introducing new and critical technologies in automotive manufacturing.

In its initial evaluation, the BOI’s engineering industries department noted that Yulon’s proposed manufacturing processes for Nissan’s existing facilities are already being implemented by at least four other automotive manufacturers.

The evaluation team also noted that Yulon does not qualify as a new producer despite new investments that will result in a 105 percent increase in total assets of NMPI.

The team noted that Yulon only acquired 30.83 percent of NMPI which leaves majority control to the local group known as Sta. Cruz Island. Under the rules, new stockholders should own majority shares in any firm applying for incentives as a new producer.

The BOI said Yulon could still apply for incentives but only as an expanding domestic producer on a non-pioneer status and as an existing business since it will still be 60 percent Filipino-owned.

Under this provision of the investments code, the company would be able to avail of three instead of six years of tax holiday.

The BOI said Yulon’s subsequent applications would now be covered by the 2000 IPP where the company could register its proposed logistics center under the industry cluster listing for the motor vehicle industry.

To qualify as a new producer, Yulon had planned to invest a total of P8 billion on NMPI over a five-year period and increase its capital by P336.553 million. Of the total planned investment, P4.09 would go to machinery and equipment to upgrade the existing facilities and allow the development of new car models.

Yulon’s buy-in was also projected to result to a minimum increase of 50 percent in operating capacity of NMPI’s manufacturing plant when it begins manufacturing new models including the best sale models of Nissan and Renault.

NMPI’s actual production was recorded at only 4,030 units in 1999 and this is projected to increase to 7,240 units once the expansion program has been completed.– Des Ferriols