Micro Studies: The Philippine Car Assembly Sector

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In the light of reforms on trade policy and the move towards the 5 percent uniform tariff rate by 2004, local car assemblers have expressed their apprehension over the government’s liberalization plans. Hence, they have persuaded the government to impose higher tariff protection in lieu of the removal of import restrictions. This study analyzes the probable impact of tariff reforms, the removal of import restrictions on CBU’s, the adoption of the 5 percent uniform tariff rate and the removal of the local content requirement on the car assembly sector. Analysis indicates that the trade and investment policy reforms have not granted most assembly firms marked improvement in their efficiency measures. Results also show that the Philippine passenger car assembly industry exhibit insipid performance compared to Thailand. In particular, Philippine car assemblers survive not because of the volume they produce but because of the high protection they enjoy.