The opening of the country’s biggest stamping and welding facility of Mitsubishi Motors Philippines Corp. (MMPC) last week signaled the government’s determination to give the local manufacturing sector the much-needed push to accelerate growth.
Mitsubishi’s project dovetails with the government’s Manufacturing Resurgence Program (MRP), which, based on its timelines, is already on Phase 2 of its implementation.
The MRP targets to close the gaps in industry supply chains, provide access to raw materials, and expand domestic markets and exports for Philippine manufacture products. The manufacturing sector is now the fastest growing sector in the domestic economy.
MRP Phase 2 (2018-2021) involves the shift to high value-added activities, investments in upstream industries, link and integrate industries between small, medium and large establishments.
Mitsubishi is the first participant in the Comprehensive Automotive Resurgence Strategy (CARS), a government program that allocates $600 million in tax incentives to three participants in exchange for their investments in manufacturing facilities and production of 600,000 units of cars over a six-year period.
The Japanese car company is investing R5.74 billion, the bulk of which goes to the welding plant at its manufacturing facility in Sta. Rosa, Laguna.
With the stamping facility in place, MMPC will now produce 200,000 units of Mirage/G4, its enrolled model in the CARS Program.
It is also outsourcing the supply of some of the parts of Mirage/G4 to local parts manufacturers. MMPC, the country’s second largest car company, has also started hiring additional workers.
The locally produced Mirage/G4 boasts of 37 percent local content. At the end of the six-year program, Mirage/G4 shall have attained 50 percent local content.
One cannot belittle the multiplier effect from Mitsubishi’s investments to the domestic economy. The local sourcing alone will definitely translate into robust economic activities for local parts producers, materials suppliers, down to logistics, jobs creation and additional income.
More than that there is technology transfer at the end of the program. All these would help sustain growth in the manufacturing sector, the only hope for decent employment wages by the less educated workforce, who have no place at the IT-BPO offices.
The CARS Program also comes at a time when the Philippine automotive sector is now ASEAN’s second fastest, if not the fastest growing market, because while Myanmar’s growth has accelerated, its volume is still way too small. Overall car sales in the Philippines have already breached the 531,000-unit level in 2017.
This incentive-for-investment CARS program is a good example of a quid pro quo strategy, benefiting both the domestic economy in dire need of foreign direct capital infusion and the capitalist in search of market expansion to sustain growth. It is a win-win strategy.