AVID for change

“Those who are unable to change, will perish” Or they will have to find another job.

This in essence is what awaits market players in the Philippine automotive industry by 2016, or just six years from now, when the Philippines will have to fully abide and comply with free trade agreements our country has entered into with ASEAN nations and the World Trade Organizations.

The ideal scenario should be a situation where we can all buy the same cars they sell in all ASEAN countries, the country would be home or host to industry related business such as parts manufacturers as well as production facilities that cater to local buyers as well as for export.

Filipinos would have access to a wider selection of vehicle brands and models and more affordable prices once the protectionist tariffs or after sales tax are gone.

In reality, we find that government officials and leading industry players have been engulfed in side walk marketing and sari-sari store mentality. Rather than address industry issues at the level of excellence that makes Filipinos Global players, we discover an industry sunk by crab mentality, bureaucrats behaving like fixers, and a total indifference to creating solutions.

Last week, AVID or the Association of Vehicle Importers and Distributors hosted the first Thought Leadership forum to tackle and address two issues.

“ What is the right development path for the automotive industry? What do consumers gain from more competitive automotive industry?”   

In terms of commitments, the Philippines has been consistent and kept its commitment to pursue a “free trade” relationship with partners in the ASEAN.

Forty years ago, the Philippine automotive market was exclusively controlled by locally based manufacturers, there were stringent requirements regarding “locally-made” content such as tires, batteries, electrical etc., And there was a ban on importing “whole cars” or CBUs (Completely Built-up Unit).

Today, there is thrice as much players in the field and not all of them are manufacturers. As a result there is greater competition, more brands and more models for consumers to choose from. 

Unfortunately, the competitive environment has also caused the division of the industry, which now has three representative groups. In the good old days they were simply manufacturers, then one day someone questioned why a “distributor” was doing the talking for the manufacturers, so following “Pinoy mentality”, the manufacturers put up their own group.

In the meantime, the non-aligned importers and distributors noticed how they were being excluded concerning government policies and how certain lobbyists were using political connections to force or influence government officials to harass or discriminate vehicle importers and distributors.

So they formed AVID the third, and the largest group of companies involved in the automotive industry.

We now have three groups who are not working for their common interest and collective good. They are fighting over a small market, which, if they don’t unite, will ultimately be over-run by other players and products from the region or the world.

We have a government, and politicians, who still think at the barangay level and have not bothered to study and maybe even copy how other countries in ASEAN have managed to attract investor IN SPITE of their own bad press.

Instead of thinking about collecting taxes before the business operates, government should adopt policies that insure that the business will come in and continue, then collect taxes directly or indirectly.

According to one of the participants, their principals in China were offered and given free use of land to build their factories. As a result the company created thousands of jobs that created thousands of taxpayers, which created thousands of consumers, not to mention the money the state made on every automotive product made on site.

Half of them don’t even have to deal with the central government because provincial governments already have existing policies and systems that guide and allow them to deal with foreign investors. Remember, China is a country that only 20 years ago, hated capitalists!

We on the other hand, have copied the Mall management approach where we charge rent in Subic and Clark per square meter. Yes we now have industrial zones except they don’t house the major industries that bring in major money. They are merely vote-rich factories where Governors and Mayors campaign for re-election. 

At the end of the day, the Philippines and the automotive industry must quickly write down and create a genuine development agenda for the industry that is based on the collective interest and benefit of all, including consumers.

There MUST be ONE single authority to oversee all the needs of the industry instead of several departments, bureaus or agencies that merely creates multiple windows of corruption.

A list of incentive programs must be established through direct consultation with all representative groups in the industry. These should address the artificial and unrealistic cost of electricity as well as the volatile nature of dealing with labor groups in the Philippines. Some form of insurance must be provided by law, that tax holidays and incentives, will not be altered or withdrawn at whim.

In terms of transaction relationships, there must be a system of transparency at all levels where players or consumers can simply go on the web and know if a company or government official has performed their job and not been bought or fed by some lobbyist.

Government must plan for the welfare of assemblers as well as spare parts manufacturer and suppliers in terms of access or linkage to government financial institutions or joint venture programs.

 In other words government must make the same investments they demand from investors, they must work as hard as the investors and recognize the value of business in the growth of our economy.

Whether it is the Auto industry, tourism, infrastructure development, the government under P-Noy, must first make it, its business to take these industries or needs seriously. Stop acting like solicitors and start working as potential partners.