The Philippines’ strict adherence to World Trade Organization (WTO) rules has left its automotive industry lagging behind regional neighbors like Thailand and Indonesia, according to Ferdi Raquelsantos, President of the Philippine Parts Makers Association (PPMA). While Thailand and Indonesia have strategically deviated from WTO guidelines to boost their automotive sectors, the Philippines’ compliance has resulted in missed opportunities and a declining domestic industry.
“Thailand and Indonesia have shown that strategic policies, even if they bend WTO rules, can drive significant growth in the automotive industry. Thailand now produces over two million vehicles annually, while Indonesia has become a hub for electric vehicle (EV) production. Meanwhile, the Philippines, which has followed WTO rules to the letter, has seen its automotive parts manufacturing industry shrink,” said Raquelsantos.
Thailand, often called the “Detroit of Asia,” has implemented aggressive incentives such as tax holidays, import duty exemptions, and subsidies for local production. These measures, though sometimes seen as trade-distorting, have attracted global automakers like Toyota, Honda, and Ford, making Thailand the largest automotive producer in ASEAN. Similarly, Indonesia’s local content requirement (LCR) policy, which mandates that a significant percentage of vehicle components be sourced locally, has strengthened its domestic supply chain and drawn investments from major players like Hyundai and Mitsubishi.
In contrast, the Philippines’ automotive industry has struggled. Local content in domestically assembled vehicles has dropped to just 20-30%, compared to Indonesia’s 40-80%. The number of local assemblers has also declined, with only a handful of major players remaining. Raquelsantos attributed this to the country’s strict compliance with WTO rules, which has limited its ability to implement protective measures or incentives for local manufacturers.
“While our neighbors were busy building their automotive industries, we were constrained by our commitment to WTO rules. As a result, our local manufacturers have found it difficult to compete with cheaper imports, and we’ve missed out on significant investments,” Raquelsantos explained.
The numbers tell a stark story. Thailand’s automotive industry contributes over 12% to its GDP and employs more than 850,000 workers. Indonesia’s sector, driven by its LCR policy, has attracted over 10 billion in investments in the past decade. Meanwhile the Philippines’ automotive exports amounted to just 4.3 billion in 2022, a fraction of Thailand’s 30 billion and Indonesia’s 15 Billion.
Raquelsantos emphasized that the Philippines must adopt a more balanced approach to remain competitive. “We don’t need to abandon WTO rules entirely, but we should explore policies that support our domestic industries without violating international agreements. For example, we can focus on indirect support like infrastructure development, workforce training, and R&D grants,” he said.
The PPMA is also urging the government to consider a phased local content requirement and targeted incentives for automakers that invest in domestic production. “By learning from our neighbors and implementing strategic policies, we can revive our automotive industry, create jobs, and boost economic growth,” Raquelsantos concluded.
With the right policies, the Philippines can unlock the potential of its automotive sector and catch up with its ASEAN neighbors.
