, 
16TH CONGRESS OF THE REPUBLIC ) 
OF THE PHILIPPINES 
) 
First Regular Sessio1t 
) 
SENATE 
Senate Bill No. 2249 
Introduced by SENATOR SONNY ANGARA 
AN ACT 
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'14 
MAY 27 P 6 :28 
RJ.X'EIVEV BY;-f-
TO STRENGTHEN THE SUSTAINABILITY AND COMPETITIVENESS 
OF THE PHILIPPINE MOTOR VEHICLE MANUFACTURING INDUSTRY 
EXPLANATORY NOTE 
The market for motor vehicles is expected to climb to as high as 5 to 6 million in 
2022 and up to 12 million by 2030 in the ASEAN region, according to the projections of, 
an international consulting firm McKinsey.& Company. In the Philippines alone, from a 
total turnover of 183,000 units in 2012, our institutional market is expected to climb to 
310,000 units in 2016, and as high as 500,000 in 2022. 
The prospect looks good. However, our automotive industry may not be able to 
respond to this demand given its current state. 
Of the five car-making countries in the region, the Philippines is the smallest in 
terms of production volume, with an output of 72,000 units in 2012, versus 74,000 units 
produced by Vietnam and 2.4 million units of Thailand. 
In 2002, the ratio between completely knocked down (CKD) and completely built 
units (CBU) was 98:2. After a decade, the ratio is now 39:61 in favor of CBUs. 
According to estimates, it is 14% more expensive to manufacture a car in the 
Philippines compared to Thailand. To make a car in the Philipines, assembly cost is 16% 
,·of its total cost as against Thailand's 13%. While 23% of the cost of producing a car in 
the Philippines goes to locally produced parts, 49% are imported from Thailand. To 
produce a car in Thailand, on the other hand, only 7% of its cost goes to parts imported 
from the Philippines and a huge 67% is sourced locally. 
Aside from the cost handicap, other problems faced by the local industry include 
smuggling, red tape in the bureaucracy and high power rate and its unreliable supply. 


To top this, car manufacturers from Thailand, Malaysia, Indonesia and Vietnam 
enjoy aggressive fiscal support measures thereby helping them achieve a critical mass 
economies of scale and reducing their per unit production costs.' 
Thus, the government is exhorted to extend able support to our car 
manufacturers, for them to be able to take advantage of the significant opportunities 
before us. 
Introducing policies and regulations to strenghten the automotive 
manufacturing industry is a sound approach towards generating quality jobs, 
increasing household income and government revenues. 
This bill aims to provide fiscal and non-fiscal incentives both for the assemblers 
and parts makers in the automotive industry. By offering these incentives, it is hoped 
that the business environment shall be conducive to grow the ailing Philippine auto 
supply chain, make it as competitive as Thailand and capture a huge volume of the 
ASEAN and not just the domestic market. 
In view of the foregoing, the early passage of this bill is earnestly sought. 
~ 
SEN 
OR SONNY ANGARA 
1 Expectations and Aspirations of the Philippine Automotive Manufacturing Industry, Presentation by PACCI 
Executive Director Ramon Vicente Kabigting 


• 
16TH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
) 
First Regu lar Session 
) 
'14 
f1AY 27 P6:28 
SENATE 
Senate Bill No. 2249 
Introduced by SENATOR SONNY ANGARA 
AN ACT 
TO STRENGTHEN THE SUSTAINABILITY AND COMPETITIVENESS 
OF THE PHILIPPINE MOTOR VEHICLE MANUFACTURING INDUSTRY 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
1 
SECTION 1. Title. - This Act shall be known as, "The Philippine Motor Vehicle 
2 
Manufacturing Industry Competitiveness Act of 2014." 
3 
4 
SECTION 2. Declaration of Policy. - The national economy shall be geared towards 
5 
sustainable inclusive economic growth and will be developed by promoting 
6 
industrialization through competitive industries and by encouraging enterprise. In 
7 
recognition of the significant role in economic development and nation-building of the 
8 
Philippine Motor Vehicle Manufacturing Industry, as well as its central function in the 
9 
country's industrial and manufacturing sectors, the following are the declared policies 
10 
of the State: 
11 
12 
a) The State shall develop a comprehensive policy that will fast-track the 
13 
sustainable development and competitiveness of the Philippine Motor Vehicle 
14 
Manufacturing Industry, thereby effectively contributing to industrial capital 
15 
formation and employment generation; 
16 
17 
b) The State shall ensure a balanced transition phase to free trade at a minimized 
18 
risk to the Philippine Motor Vehicle Manufacturing Industry by efficiently 
19 
developing its capacities for competitiveness and promoting greater participation 
20 
in a further globalized economy through increased export; 
21 
22 
c) The State shall promote the maximum scale integration of vehicle manufacturing 
23 
and the assembly of its respective parts and components; 
24 
25 
d) The State shall encourage the effective and sustainable implementation of 
26 
research and development activities, including, but not limited to, technology 
27 
transfer, testing facilities and activities, and the promotion of automotive skills 
1 
"".'" ' 


" 
1 
training and development as a means to enhance the competitiveness of the 
2 
Philippine Motor Vehicle Manufacturing Industry; and 
3 
4 
e) The State shall integrate motor vehicle manufacturing into the overall transport 
5 
policies and programs of the national government to optimize the sustained 
6 
growth and competitiveness of the Philippine Motor Vehicle Manufacturing 
7 
Industry and to ensure the development of sustainable transportation systems in 
8 
the country. 
9 
10 
SECTION 3, Definition of Terms. - For purposes of this Act, the following terms are 
11 
defined as follows: 
12 
13 
a) "Board of Investments (BOI)" refers to the attached agency of the Department of 
14 
Trade and Industry created under Republic Act No. 5186. 
15 
16 
b) "Department of Trade and Industry (DTI)" refers to the government agency 
17 
created pursuant to Executive Order No. 133, series of 1987. 
18 
19 
c) "Investment Priorities Plan (IPP)" refers to the overall plan prepared by the BOI 
20 
in accordance with the provisions of Executive Order No. 226, otherwise known 
21 
as the Omnibus Investment Code of 1987, as amended. 
22 
23 
d) "Motor Vehicle Manufacturing Industry" encompasses enterprises that are 
24 
engaged in the manufacture of motor vehicles and its parts and accessories or 
25 
components. 
26 
27 
e) "Manufacture of Motor Vehicles" refers to the activities classified under Section 
28 
D, Division 34, Group 341 of the United Nations (UN) International Standard 
29 
Industrial Classification of All Economic Activities (ISIC) Revision (Rev.) 3, 
30 
which includes the manufacture of passenger cars, commercial vehicles, buses, 
31 
trolley-buses and coaches, motor vehicle engines, chassis fitted with engines and 
32 
other motor vehicles. 
33 
34 
This also refers to the activities classified under Section D, Division 35, Group 
35 
359, Class 3591 of UN ISIC Rev, 3, which includes the manufacture of 
36 
motorcycles (including mopeds) and cycles fitted with an auxiliary engine, 
37 
whether or not with attached side-car, and "delivery" or "sporting" motorcycles. 
38 
39 
f) "Manufacture of Parts and Accessories of Motor Vehicles" refers to the activities 
40 
classified under Section D, Division 34, Group 343 of the UN ISIC Rev. 3, which 
41 
includes the manufacture of parts and accessories for motor vehicles, including 
42 
their bodies and engines: brakes, gear boxes, axles, road wheels, suspension 
43 
shock absorbers, radiators, silencers, exhaust pipes, clutches, steering wheels, 
44 
steering columns and steering boxes and other parts and accessories not 
45 
elsewhere classified. 
46 
47 
This also refers to the manufacture of bodies (coachwork) for motor vehicles, 
48 
engines for motorcycles, side-cars, and parts and accessories of motorcycles. 
2 


1 
2 
g) "Medium Term Philippine Development Plan (MTPDP)" refers to the master 
3 
plan for economic development implemented by the National Economic 
4 
Development Authority (NEDA), which identifies growth sectors for the next six 
5 
(6) years and defines the programs, policies, strategies and action plans to the 
6 
economic development goals of the government. 
7 
8 
h) "Philippine Export Development Plan (PEDP)" refers to the rolling three (3) year 
9 
export development plan prepared by the DTI, which defines the country's 
10 
annual and medium-term export thrusts, strategies, programs and projects 
11 
jointly implemented by the government, export sector and other concerned 
12 
stakeholders. 
13 
14 
SECTION 4. National Motor Vehicle Manufacturing Development Plan (NMVMDP). -
15 
The DTI, through the BOI, in consultation with the representatives from the private 
16 
sector, the academe and other pertinent stakeholders, shall prepare and implement a 
17 
rolling three (3) year National Motor Vehicle Manufacturing Development Plan, 
i8 
hereinafter referred to as the "Plan". This Plan shall be validated and updated annually 
19 
by the BOr. 
20 
21 
The Plan, which shall be integrated into the PEDP and the MTPDP, will define the 
22 
Philippine Motor Vehicle Manufacturing Industry's annual and medium-term 
23 
manufacturing and export targets, as well as its programs and strategies to support the 
24 
country's manufacturing and export thrusts. The Plan shall also identify priority 
25 
development products, which shall be characterized by high manufacturing value-
26 
added and with high potential for economic efficiency, as primary focus of incentives. 
27 
28 
SECTION 5. Fiscal Incentives for Manufacturers of Motor Vehicles, Parts and Accessories. 
29 
- Enterprises engaged in the manufacture of motor vehicles, parts and accessories duly 
30 
registered with the BOI as participant under the National Motor Vehicle Manufacturing 
31 
Development Plan (NMVMDP), shall be entitled to the following incentives: 
32 
33 
a) Income tax-based - A manufacturer may choose any of the following options as its 
34 
income tax-based incentive, subject to the condition that its choice shall be final 
35 
and cannot be changed: 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
i. 
7% Gross Income Earned - A manufacturer may avail of the seven 
percent (7%) tax on GIE in lieu of all national and local taxes, except 
Value Added Tax (VAT) and Real Property Tax on land owned by 
private developers. 
OR 
ii. 15% Reduced Income Tax - A manufacturer may be entitled to a reduced 
income tax rate of fifteen percent (15%) instead of the regular income tax 
rate provided for in the National Income Revenue Code, as amended. 
3 


1 
b) Net Operating Loss Cary-Over (NOLCO), - A net operating loss incurred during 
2 
the first three (3) years of operations shall be carried over as a deduction from 
3 
taxable income for the seven (7) consecutive taxable years immediately following 
4 
the year of such loss, Provided, however, That the net operating shall be computed 
5 
in accordance with the provisions of the National Internal Revenue Code and its 
6 
Implementing Revenue Regulations, any provision of this Act to the contrary 
7 
notwithstanding, except that income not taxable either in whole or in part under 
8 
thus or other laws shall be included in gross income, 
9 
10 
c) Accelerated Depreciation, - At the option of the taxpayer and in accordance with 
11 
the procedure established by the Bureau of Internal Revenue (BIR), fixed assets 
12 
may be (1) depreciated to the extent of not more than twice as fast as normal rate 
13 
of depreciation or depreciated at normal rate of depreCiation if expected life is 
14 
ten (10) years or less; or (2) depreciated over any number of years between five 
15 
(5) years and expected life if the latter is more than ten (10) years; and the 
16 
depreciation thereon allowed as a deduction from taxable income Provided, That 
17 
the taxpayer notifies the BIR at the beginning of the depreciation period which 
18 
depreciation rate allowed by thus section will be used by it. 
19 
20 
d) Deduction on Training Expenses, - In addition to the allowable ordinary and 
21 
necessary expenses on training which are fully deductible under the provisions 
22 
of the National Internal Revenue Code, expenses incurred in training schemes 
23 
approved by the appropriate agency shall be eligible for deduction during the 
24 
financial year the expenses were incurred: 
25 
26 
27 
28 
29 
30 
31 
i. 
Expenses incurred in providing employees training shall be eligible for 
single deduction; and 
ii. 
Expenses incurred in proViding training to Small and Medium 
Enterprise (SME) parts manufacturers shall be eligible for double 
deduction; 
32 
e) Dou/lie Deduction on Research and Development. - Expenses incurred for research 
33 
and development activities shall be eligible for double deduction from taxable 
34 
income. 
35 
36 
f) Tax and Duly Free Importation of Capital Equipment. -
The importation of 
37 
machinery, equipment and its accompanying spare parts imported in the name 
38 
of the manufacturer as consignee shall be exempt to the extent of one hundred 
39 
percent (100%) of the duties and taxes payable thereon, Provided, That the 
40 
importation complies with the following conditions: 
41 
42 
43 
44 
45 
46 
47 
48 
i. 
These are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
ii. 
These are reasonably needed and will be used exclusively in the 
manufacture of motor vehicles; and 
iii. 
Prior approval of the BOI was obtained for the importation of such 
machinery, equipment and its accompanying spare parts, 
4 


1 
Provided further, That such machinery, equipment and accompanying spare parts 
2 
' shall not be sold, transferred or disposed without the prior approval of the BOI 
3 
within five (5) years from date of acquisition, in which case the manufacturer as 
4 
consignee and the vendee, transferee, or assignee shall be solely liable to pay 
5 
twice the amount of the duty and tax exemption given it. 
6 
7 
g) Tax and Duly Free Importation of Training EquipmenL - The importation of 
8 
equipment, tools and implements for in-house training projects and imported in 
9 
the name of the manufacturer as consignee shall be exempt to the extent of one 
10 
hundred percent (100%) of the duties and taxes payable thereon, Provided, That 
11 
the importation comply with the following conditions: 
12 
13 
14 
15 
16 
17 
18 
19 
i. 
These are not manufactured domestically in sufficient quantity, of 
comparable quality and at reasonable prices; 
ii. 
These are reasonably needed and will be used exclusively for training 
projects; and 
iii. 
Prior approval of the BOI was obtained for the importation of such 
equipment, tools and implements. 
20 
Provided further, That such equipment, tools and implements shall not be sold, 
21 
transferred or disposed without the prior approval of the BOI within five (5) 
22 
years from date of acquisition, in which case the manufacturer as consignee and 
23 
the vendee, transferee, or assignee shall be solely liable to pay twice the amount 
24 
of the duty and tax exemption given it 
25 
26 
h) Qualified enterprises availing of incentives provided under this Act and its 
27 
Implementing Rules and Regulations shall be eligible to incentives and privileges 
28 
provided for by other special laws: 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
i. 
Executive Order No. 226, otherwise known as the Omnibus Investment 
Code of J 987, Provided, That the manufacture of motor vehicles shall 
regularly form part of the IPP as a preferred area for investments, 
unless otherwise declared by law; 
ii. 
Republic Act No. 7844, otherwise known as the Export Development 
Act of 1994; 
iii. 
Republic Act No. 7916, otherwise known as the Special Economic Zone 
Act of 1995, as amended; and 
iv. 
Issuances related to the implementation of the NMVMDP. 
40 
Provided, That the enterprise shall register under the aforementioned laws and 
41 
that there is no double availment of the same incentives. 
42 
43 
SECTION 6. Period of Availment of Incentives. - The total period of availment of all 
44 
tax incentives enjoyed by a manufacturer provided herein shall in no case exceed 
45 
twenty (20) years. 
46 
47 
SECTION 7. Congressional Oversight Committee on the Competitiveness of the Motor 
48 
Vehicle Manufacturing Industry. - To ensure the effective implementation of this Act, a 
5 


1 
Congressional Oversight Committee on the Competitiveness of the Motor Vehicle 
2 
Manufacturing Industry is hereby created to be composed of the Chairs of the 
3 
,Committee on Trade of both Houses, six (6) members of the House of Representatives 
4 
and six (6) members of the Senate, to be designated respectively by the Speaker of the 
5 
House and by the President of the Senate, who shall endeavour to have the various 
6 
stakeholders of the Philippine Motor Vehicle Manufacturing Industry represented. 
7 
'8 
The Chairs of the Committees on Trade in the Senate and House of 
9 
Representatives shall be, respectively, the Chair and Co-Chair of the Oversight 
10 
Committee. The other members shall receive no compensation; however, traveling and 
11 
other necessary expenses shall be allowed. The Committee shall oversee and monitor 
12 
the implementation of the National Motor Vehicle Manufacturing Development Plan, as 
13 
well as all programs, projects and activities related to the competitiveness of the 
14 
Philippine Motor Vehicle Manufacturing Industry, and its aligned concerns in both 
15 
public and private sectors, with a view to providing all legislative support and 
16 
assistance within the powers of Congress to ensure their inclusion, wherever feasible, in 
17 
the national, regional, provincial, municipal, and sectoral development plans, and to see 
18 
them through their successful implementation. 
19 
20 
SECTION 8. Powers and Functions of the Committee. - The Congressional Oversight 
21 
Committee on the Competitiveness of the Motor Vehicle Manufacturing Industry shall 
22 
have the following powers and functions: 
23 
24 
a) Prescribe and adopt guidelines that will govern its work; 
25 
26 
b) Hold hearings, receive testimonies and reports pertinent to its specified concerns; 
27 
28 
c) Secure from any department, bureau, office or instrumentality of the 
29 
Government such assistance as may be needed, including techriital information, 
30 
preparation and production of reports and submission of recommendations or 
31 
plans as it may require; 
32 
33 
d) Summon by subpoena any public or private citizen to testify before it, or require 
34 
by subpoena duces tecum to produce before it such records, reports or other 
35 
documents as may be necessary in the performance of its functions; 
36 
37 
e) Use resource persons from the public and private sectors as may be needed; 
38 
39 
f) Approve the budget for the work of the Committee and all disbursements 
40 
therefrom, including compensation of all personnel; 
41 
g) Organize its staff and hire and appoint such employees and personnel whether 
42 
temporary, contractual or on consultancy, subject to applicable rules; and 
43 
44 
h) Generally, to exercise all the powers necessary to attain the purposes for which it 
45 
is created. 
46 
47 
SECTION 9. Periodic Reports. - The Committee shall submit periodic reports on its 
48 
findings and make recommendations on actions to be taken by Congress and the 
6 


1 
appropriate departments, and that in order to carry out the objectives of this Act, an 
2 
initial amount of Twenty Million Pesos (P20,000,000.00) is hereby appropriated for the 
3 
Oversight Committee for the first year of its operation. 
4 
5 
SECTION 10. Automatic Review. - Every five (3) years after the effectivity of this Act, 
6 
the oversight committee shall review the policies and programs in the National Motor 
7 
Vehicle Manufacturing Development Plan and shall make recommendations, based on 
8 
its findings, to the President and to both Houses of Congress. 
9 
10 
SECTION 11. R!liionalization Measures. - In general, the Government shall formulate 
11 
and implement rationalization measures in specific areas in need of adjustment, or 
12 
where existing policies are challenged, rendered inefficient or obsolete by varying 
13 
business climate with the end view of promoting economies of scale, efficiency, 
14 
productivity and competitiveness. 
15 
16 
SECTION 12. Harmonization with Non-Fisr;al Support Measures. - The Government 
17 
shall formulate and implement industry-wide non-fiscal support measures that will 
18 
harmonize the goals of the Philippine Motor Vehicle Manufacturing Industry towards 
19 
effective and consistent regulation, transparency in its rules, and sustaining efficiency, 
20 
productivity, cost-reduction and competitiveness. These aforementioned measures 
21 
should address the strengthening of supporting and complementing industries such as, 
22 
!:mt not limited to, steel, plastic and electrical in order to establish a strong and 
23 
sustained foundation for the aforementioned industry. 
24 
25 
SECTION 13. Implementing Rules and Regulations (IRR). - The Secretary of the DTL 
26 
within ninety (90) working days after the effectivity of this Act, in consultation with the 
27 
Department of Finance (DOF), the National Economic and Development Authority 
28 
(NEDA) and other agencies concerned, the private sector and other concerned 
29 
stakeholders, and in coordination with the Congressional Oversight Committee on the 
30 
Competitiveness of the Motor Vehicle Manufacturing Industry, shall promulgate the 
31 
rules and regulations for the effective implementation of this Act. The Secretary of the 
32 
DTI shall submit to the Committee on Trade of both Houses of Congress copies of the 
33 
IRR within thirty (30) days after their promulgation. 
34 
35 
Any violation of this section shall render the official/s concerned liable under 
36 
Republic Act No. 6713 otherwise known as the "Code of Conduct and Ethical Standards 
37 
for Public Officials and Employees" and other existing administrative and/or criminal 
38 
laws. 
39 
40 
SECTION 14. Repealing Clause. - All laws, decrees, executive issuance, rules and 
41 
regulations inconsistent with this Act are hereby repealed or modified accordingly. 
42 
43 
SECTION 15. Separability Clause. - The provisions of this Act are hereby declared to 
44 
be separable, and in the event one or more of such provisions are held unconstitutional, 
45 
the validity of the other provisions shall not be affected thereby. 
46 
7 


1 
SECTION 16. Effectivity. - This Act shall take cffect.thirty (30) days from the date of 
2 
its publication in the Official Gazette or in .at least two (2) newspapers of general 
3 
circulation. 
Approved, 
8