By BusinessMirror, April 29 2019

Image Credit to Business Mirror

Manila is amenable to providing tax incentives for South Korean car manufacturers under a bilateral free- trade agreement (FTA) as long as they commit to make the Philippines their production hub for electric vehicles and its parts in Southeast Asia.

Trade Undersecretary Ceferino S. Rodolfo said the government is willing to develop the market and put up the infrastructure for South Korean e-vehicles. The catch, however, is that South Korea should produce the parts and assemble the units in the Philippines.

“If, say, we will help you develop the market and infrastructure for electric vehicle here, would you be able to assemble electric vehicles here? In particular, we are interested in electric motor. [We are also interested in the] batteries because we have nickel and copper wires,” Rodolfo said, when asked by reporters last week on the investment agenda in an FTA with South Korea.

The government could also provide tax holidays and incentives for developers of infrastructure for e-vehicles, such as charging stations. Further, it is open to reducing tariffs on automotive inputs needed in manufacturing parts and assembly of the units.

“We can include in the IPP [Investment Priorities Plan] the putting up of charging stations, as well as other infrastructure,” Rodolfo said. “If they say [they] could probably make [the Philippines] as assembly center but they need lower tariff rates on particular e-vehicle parts, we are open to that. We really need to be more practical, and examine line by line what it is they need.”

He added the tax regime in the Philippines is favorable to buyers of e-vehicles. E-vehicles are exempt from the excise on automobile under the Tax Reform for Acceleration and Inclusion law.

Rodolfo said the Philippines is the “best Southeast Asian destination” to invest in for South Korean car manufacturers, as its competitors Thailand and Indonesia are swamped with Japanese shops, while Vietnam is developing with German EDAG its own e-vehicle brand.

“We are enticing them [South Korean brands]. The competition is between Vietnam, the Philippines and Thailand. What we are saying is Thailand and Indonesia are flooded with Japanese investments. The remaining options are Vietnam and the Philippines. The problem with Vietnam is it has VinFast. VinFast developed an electric vehicle together with European technology,” he argued.

Manila and Seoul are negotiating a bilateral FTA—targeted to be signed by November—to enhance economic ties and expand trade and investment activities.

On top of asking South Korea to provide preferential rates on farm goods, the Philippines is eyeing to generate more investments from the East Asian country under a trade deal.

Last year investments from South Korea declined to P1.88 billion, from P3.88 billion in 2017, according to the Philippine Statistics Authority.