Press Release
October 4, 2011

Sponsorship Speech On Alternative Fuel Vehicles Incentives (AFV)
Act of 2011

(SBN 2856 under Committee Report No. 44)
Sen. Ralph G. Recto
Chairman, Committee on Ways and Means

Mr. President:

The first automobile arrived in the Philippines in1900, a "Georges Richard" imported from France by the store La Estrella del Norte for its customer, a certain Dr. Miciano.

When the eight-horsepower buggy sputtered along Escolta, a priest in the nearby Santa Cruz church was said to have wagered the bet that the day will never come that the mechanized curiosity will be more numerous than carabaos.

Boy, was he wrong!

Because exactly 100 years later, in 2000, four-wheeled vehicles plying the streets finally overtook beasts of burden plowing the fields in number.

And a decade since the new millennium, the number of motor vehicles had almost doubled, from 3.7 million to 6.6 million, proving that the Malthus' theory on population didn't apply on carabaos but on Camaros.

There is now one motor vehicle for every 14 Filipinos, as 7 million motor vehicles cram our streets. In fact if you will line up all these motor vehicles - from trailers to scooters - bumper-to-bumper, they will form a single line that will stretch 31,000 kilometers, equal the length of national roads.

Our 111-year-old love affair with the automobile has brought us pleasure but also pains, happiness as well as headaches, and relief and grief at the same time.

We are brought into this world by mothers rushed to delivery rooms by cars and to our resting places in motor hearses. And for some of us, the romance with cars could have even started earlier if we're conceived in the backseats of sedans.

What can't be denied is that the automobile has given us the convenience to travel long distances in comfort. It drives our economy because despite the creation of the information highway much of trade still moves on motorized wheels.

But this convenience doesn't come free. This comfort doesn't come without any problem. For embracing the automobile culture some prices have to be paid.

Every hour, our motor vehicles consume 2.029 million liters of gasoline.

Every hour, one kilometer of road is built or repaved to accommodate the 47 new vehicles which are registered during the same period.

Every hour, we spend P53,000 to treat pollution-related diseases and to compensate for productivity losses.

Every hour, 2,200 metric tons of carbon dioxide is pumped into the air, a carbon footprint which requires the planting of 56,000 trees to absorb all that poison.

Every hour, traffic jams in Metro Manila alone cause P16 million in economic losses.

Every hour, four Filipinos die from dirty air.

But Mr. President, we don't need statistics to remind us what our senses already tell us every day.

We start our day with the irony that it is faster to fly across an ocean than drive to work. We spend it in an office with a view of a perpetual film of smog framing Manila's famous sunset. We end it by slogging through what are virtually parking lots pretending to be highways so we can join for dinner our kids or apos who are members of the nebulizer generation.

Mr. President:

My treatise is not to outlaw the car. I am not even that close to saying that progress should have ended with the invention of the bicycle.

And please don't get me wrong. I am not even hinting that the answer to the traffic mess lies with the automobile because there are far better solutions like a rail system that will move more people faster and cheaper, and better still, to retain jobs in the countryside so people will not move to cities like Manila.

But the automobile is the national ride in such a way that the concrete cloverleaf had become our de facto national flower.

So the challenge is to improve the motor vehicle so it will spew less poison and bleed less foreign exchange.

I believe that we are capable of rectifying the wrongs we have made with the same genius that got us in trouble in the first place. But genius does not move on its own. It has to be spurred by legislation because progress has always been stirred as much by politics as by science.

If Congress did not outlaw leaded gasoline in the Clean Air Act, it would have remained as a fatal additive to our fuel. All the legislation of making cars safe, from the strapping of seatbelts to the wearing of helmets, were birthed by Congress.

If cars today are emitting less poison and can run farther on a gallon of gas, it is because legislatures set benchmarks and deadlines in the past. Congress has always jumpstarted innovation. In this era of high gas prices, it is being asked again by the people to reimagine the future, on how to "pimp their ride" so it would either sip fuel or stop sipping it altogether.

Mr. President:

It is in this legislative tradition of blazing trails that I am sponsoring today a measure that will both promote clean cars and the right of the people to clean air that will lessen our country's need for fossil fuels, so it will no longer burn a deep hole in our pockets and a deeper hole on the ozone above.

Some may argue that we are putting the cart before the horse because the era when vehicles that run on non-internal combustion engines are more the norm than the exception in the streets of Manila is light years away. This is not true.

E-jeepneys now ply in Makati and in the Bigger House. Battery-powered tricycles roam the streets of Mandaluyong and Puerto Princesa. Taxis now lug cooking gas tanks in their trunks. CNG-powered buses shuttle between Metro Manila and Southern Tagalog. A Toyota Prius has debuted in Manila.

In Mandaluyong, for example, an ongoing experiment shows that an e-tricycle incurs a P200 savings daily for the driver, as it consumes 50 centavos of electricity per kilometer compared to P2.50 per kilometer cost that a gas-powered tricycle incurs.

And many more are waiting in the wings, and will make their appearance once the rules for this kind of technology have been set.

In short, the horse is there. What is not is the cart of legislation.

This bill, Mr. President, is the raft of incentives that will flag off the AFVs entry here.

I am therefore proud to sponsor Senate Bill 2856, or an "An Act Providing Incentives For The Manufacture, Assembly, Conversion and Importation of Electric, Hybrid And Other Alternative Fuel Vehicles."

And like a vehicle, its parts and components were sourced from the bills filed by Senators Defensor-Santiago and Trillanes.

As the title of the measure suggests, fiscal and non-fiscal incentives shall be granted to the importation and manufacture of electric, hybrid and other vehicles using alternative sources of energy such as, but not limited to, solar, wind, hydrogen fuel cell, compressed natural gas or liquefied natural gas and liquefied petroleum gas.

These types of vehicles are low on pollution but high on price. The irony of it is that green cars are expensive, while conventional cars, if you read the newspapers ads, are easy and affordable.

One reason is that because the technology is new, the efficiency that mass production sets off, which in turn lower prices hasn't kicked in yet. This is the function of the market.

But there is another culprit, the tax regime on vehicles, which does not distinguish whether the vehicle uses dirty fuel or not. This is where Congress should come in.

And why should it not when government routinely hands out fiscal incentives to condominiums, income tax holidays to mines, and even local taxes are waived for chicharon makers?

And if you study the record of the legislature over the past decade, it has been an obedient genie to the banking sector.

So let me ask again: If government has been generous in policy support to financial engineers who do not create anything of real value then why should it not extend the same assistance to real engineers who produce real things?

The AFV needs a push from the government. And the pushing will be easier if the vehicle is made lighter if it is unloaded of taxes. This bill seeks to bring down the price of AFVs by extending the following fiscal incentives:

  • For manufacturers or assemblers, the manufacture or assembly of completely knocked-down (CKD) parts of AFVs, including the conversion of vehicles into electric, hybrid and other alternative fuel vehicles, shall be exempt from the payment of excise taxes and duties for 9 years.

For manufacturers or assemblers, they are exempt from the payment of the Value-Added Tax for the purchase and importation of raw materials, spare parts, components and capital equipment used in the manufacture or assembly of AFVs also for 9 years.

  • For importers, the importation of completely built units (CBUs) of AFVs shall be exempt from the payment of excise taxes and duties again for 9 years.

  • For owners of AFVs, they are exempt from the payment of the Motor Vehicle User's Charge or the MVUC upon registration of their vehicles.

The non-fiscal incentives granted under this bill are as follows:

  • Priority in registration and issuance of plate numbers.

  • Priority in franchise applications for PUVs.

There are icings on the cake which may look trivial on paper but a big deal on the asphalt jungle of Manila, like the:

  • Exemption from Unified Vehicular Volume Reduction Program or Number-Coding Scheme.

  • Provision for free parking spaces in new establishments.

My dear colleagues, I know that Congress should not be in the business of influencing consumer choices. It is not an umpire of taste. But in this case, we have to make an exception.

The technologies behind these AFVs are still works in progress. By extending these incentives, we are giving them time to succeed and branch out, in the hope that a Model T on AFVs would be discovered. Tax incentives are the national equity to this venture.

With this bill, we hope to bring down the cost of AFVs, to put it within reach so that more of them are used on our roads and highways.

For example, the Toyota Prius - one of the best-selling hybrid cars in the world - costs around P2.25 million a unit. With the incentives granted under the bill, the price will be slashed to P1.6 million, a cut by as much as P650,000.

Another example would be an E-Jeepney. Today it will cost us around P625,000 to buy one. With the bill, the price is slashed by as much as P135,000 reducing the cost to P490,000.

These are just estimates, Mr. President. These prices could further go lower as the demand increases.

According to government records, only 55 electric vehicles were registered as of September 2010. There are more Ferraris than e-vehicles today.

Going back to the bill, its primary objective is to put more AFVs on the road in order to abate the level of air pollution in urban areas all over the country, particularly in Metro Manila.

Second is to temper our oil addiction.

The Philippines consumes an average of 49 million liters of petroleum products a day, a bulk of which is directed to transport.

By promoting AFVs, we shield ourselves from the volatility of oil prices, when tantrums of teapot dictators in OPEC countries can cause oil price shocks, or when a small rustle in the Arab spring can send oil prices to winter-time highs.

Another objective of this bill is to adhere to a global trend towards a shift to the use of alternative fuels particularly in the transport sector.

Converting the power source of 100,000 tricycles from gas engine to lithium battery will result in fuel savings of P8.3 billion and will prevent the release of 400,000 tons of carbon dioxide into the air.

Multiply this by five, and annual savings racked up will be in the neighborhood of P40 billion. And this is just for one-seventh of the national tricycle fleet. Imagine if we can retrofit other PUVs like jeepneys and buses.

Then there will be domino effect of benefits. For drivers, AFVs will be easy on the pocket as well as on the lungs. For them, lung cancer will no longer be a retirement benefit. It will also be good for the heart, as they don't have to hyperventilate every time oil companies announce price increases.

The riding public benefits too as the amount of fares will no longer be dictated by the numbers on the gas pump.

It may also bring order to our streets. City buses will no longer crawl on and clog the streets for fear that they will run out of juice. And when a jeepney driver can have a full load of power at a fraction of the cost of a full tank of diesel the need to recoup fuel cost by lassoing every passenger on the sidewalk is gone.

I once thought that only electricity can stop the anarchy on the streets -that is if policemen will wield electric batons or taser undisciplined drivers - until I heard of electric batteries.

If we look at initiatives in other countries when it comes to the promotion of the use of AFVs, it would seem that we are sorely lacking both public policy and financial muscle regarding green transport.

The US has allotted $2.4 billion in government funds for research and development on new generation electric buses. It also provides incentives such as a $7,500 tax credit for those who would buy hybrid or electric vehicles.

The United Kingdom likewise has set aside 10 million pounds to support technologies for electric and hybrid buses.

In China, the government has provided funding to 25 cities for the acquisition of 1,000 electric buses each.

South Korea had earlier announced that half of its massive fleet of buses will be electric by 2020. It also plans to have 120,000 electric vehicles by that year too to add to its present 1.7 million LPG cars on the road.

In Japan, Taiwan, Thailand, Malaysia, Vietnam and Singapore, tax credits and exemptions as well as subsidies and policy support for all new energy vehicles are provided.

Even if only a fraction of the funds are spent here or a shadow of the policies will be institutionalized, these will be enough to establish a vibrant domestic AFV industry that will reel in investors to set up shop and create jobs here.

With a market as large as the Philippines', it is one industry that can have a built-in "jobs odometer" that will always move.

While this bill helps a sunrise industry, it attaches sunset provisions on when the assistance expires. Any manufacturer or assembler of AFVs has nine years to avail itself of the incentives under this act. After that, the training wheels are gone.

So you see, my dear colleagues, we should have passed this bill yesterday. But enacting it now would be much, much better than not enacting it at all.

Mr. President, I fully support the objectives of this bill. Here, we are jumpstarting a major shift in public policy favoring the use of vehicles that do no harm to our well-being.

This bill will also provide our citizens an opportunity to take individual responsibility for their health and the environment.

We are going to offer them a choice between what is healthy and what is not, which we hope to put on equal footing.

Ultimately, we are saying that we want the alternative to be the mainstream in due time.

But in the meantime, all I can add is that this bill is a breath of fresh air, and I do mean that in its literal and figurative sense.

Mr. President, I urge the immediate approval of this bill.

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