It was reported that Trade and Industry Secretary Mar Roxas II had expressed his partiality to the idea of imposing a uniform tariff rate of five percent on both CKDs (completely knock down) and CBUs (completely built-up) motor vehicles by next year.
As you may know, CKDs are vehicles that come in knocked down parts and assembled in the country with local content infused (meaning local labor and locally manufactured parts) while CBUs are vehicles that are completely assembled unit ready for running with only tires and batteries to be installed.
Presently, CKD cars are taxed at 10 percent and CKD commercial vehicles at three percent while the CBUs are uniformly taxed at 30 percent.
Why the disparity?
Well, it’s simply because CKDs are more encouraged due to the thousands of jobs that are created not only from the assembly of the units but also from the manufacture of the locally made parts needed to be infused into the assembly as dictated by the policies of our country’s Motor Vehicle Development Program or MVDP. Aside from the creation of jobs, the MVDP has also encouraged foreign investments from those who engage in the manufacture of the said parts.
This business landscape created by our country’s MVDP prompted many major industry players to invest huge amounts in putting up additional plants and increasing plant capacities, most of which were made just before the Asian Financial meltdown in 1997, an economic debacle, which our country has not even recovered from yet.
With the move for a uniform rate of taxation for both CKDs and CBUs, it will be a lot cheaper and more convenient for all the car companies just to bring in CBUs, especially if some would just forget about all the prior investments they have made geared toward assembly.
Considering that CBUs would only need to be installed tires and batteries, importers would require less workers, which would also not even need to be trained. That means less labor costs, no training costs (no technology transfer either) and even infinitely less labor problems. The trade off – job displacement for thousands of workers now presently employed in the assembly plants.
The car companies would only need enough office and warehouse for their imports. No real estate requirements for their plants. The trade off – no significant business for the real estate sector, either for sales or even leasing, no huge investments to the country.
But due to the factors earlier mentioned – job displacements in the assembly plants, job displacement in the local parts manufacturing sector and immediate negation of huge investments for plant construction, most of the major industry players are appealing to the government to delay the implementation of the said uniform taxation.
Of course the government has commitments to the AFTA for the reduction of specific tariffs. However, the industry players were citing Malaysia, which successfully lobbied for the exemption of its automotive industry for similar reasons. They now ask, "why can’t we?"
Now those who called to discuss what they refer to as an "alarming" development were not from the automotive sector but represent varied business interests – finance, banking and services. Their concern was the government’s reaction to valid pleas from business. And they considered these pleadings from those in the automotive industry as very valid and stand on solid ground.
What actually triggered the concern was what was partly mentioned in the news report (not in The STAR) that "our government gave in to pressure from the United States, which has been badgering the Philippines on its trade related investment measures (Trims), specifically the local content and export requirement that will be abolished next year."
Their contention now is that the present government is willing to the relentless pressure of the US to just abide by whatever commitments the government had made regarding the eventual wiping off of tariffs, at the expense of local business and even foreign investors, both still reeling and have not recovered from the financial nosedive that the region have recently gone through, with some countries, including ours, still presently going through.
The belief is if it’s the automotive sector now, despite plausible reasons for its pleadings, it can be any sector next, as long as it stands in the way of flooding our market with products that gravely need to be dumped. No matter how small our market is.
Now, business and political observers have offered that these are all part of the prize we have to pay for the continued presence of the Americans in Mindanao (however, unsuccessful they are in helping eradicate the Abus) and the "Balikatan" excercises.
The Balikatan was the lunch, and we have to pay for it. No free lunch nowadays.
Ness Astilla, after getting out of the shadow of his "guru" by putting up his own hair and beauty salon some years back, gets closer to his unconscious dream of having more of them all throughout the metropolis and eventually all over the country. But knowing Mama Ness, the dream is not much because of the very lucrative business but more about sharing his know-how and making more people, men and women, more confident and feeling good by looking good.
Ness recently opened his second outlet along Shaw Blvd., the same site as that of Pure Gold and no less than a fashion show featuring avant-garde creations and hairstyles marking its well-attended launch that was even covered on television.
Ness Astilla has gone a long way and he has arrived.
Now, what may be eerie or sometimes macabre to some people, the coffin is a means of livelihood to many in Pampanga. We’ll have an interesting feature tonight on this as we continue with our series showing the different livelihood and tourist sites of the different provinces in the country. Don’t fail to watch.
For comments: (e-mail) bl-star@sunshine-tv.com (postal mail) Business & Leisure Column, c/o Sunshine Television Ventures, #68 Doña Juana Rodriguez Ave., New Manila, Quezon City.