A THRIVING garments industry can provide a significant number of jobs and boost the overall health of the Philippine economy.
The ever expanding global market for garments holds great opportunities for both local businesses and foreign investors whose owners are looking to expand their companies.
Employment, productivity, and manufacturing are tied to our ability to drive export competitiveness and reviving the garments industry will certainly increase our exports.
Export producers should be granted additional incentives by the Board of Investment under the Export Activities component of the Investments Priorities Plan.
Philippine export products primarily include electronics, garments and textiles, footwear and leather goods, furniture, jewelry, marine and aquamarine, and mineral products.
According to the Philippine Statistics Authority, the country’s export sales totaled $4.899 billion in May 2015, a 17.4 percent decrease from $5.932 billion recorded value in May of 2014.
Combined merchandise exports for the first five months of 2015 registered a 5.0 percent decrease, from $24.772 billion in 2014 to $23.526 billion in same period of 2015.
This decline must be addressed in the IPP, which is crafted yearly to identify priority sectors that will increase investment inflows and generate more jobs.
Manufacturing revival should be made a central plank in the country’s economic agenda.
Various business organizations have been urging the government to step up measures such as power and water subsidies to revive the labor-intensive factories and high-value manufacturing that will help create new jobs.
The Joint Foreign Chambers of Commerce, for instance, in a policy brief titled, “Manufacturing: Creating Millions of Better Jobs,” called for the opening of new domestic/export enterprise zones, improved labor policies and increased training for labor requirements of low- and high-value manufacturing jobs.
The JFC said the Philippines should seize the opportunity while manufacturing investors in China are looking to relocate because of high manufacturing costs. The group said Bangladesh, Cambodia, Indonesia and Vietnam are also facing high manufacturing costs that can deter foreign investors.
One of the sectors that could easily create thousands of news jobs is the garments industry. Once among the country’s largest employers, the industry faded in the late 1990s after the elimination of quotas on textile and clothing trade worldwide. This helped countries like China and Vietnam dominate the export of cheap, mass-produced clothing.
But according to Trade Secretary Gregory L. Domingo, the garments industry is on a comeback and had been growing an average of 5-10% for the past four years.
It recently received a much-needed shot in the arm as a result of the country’s qualification for the preferential trade arrangement under the European Union Generalized System of Preferences (EU-GSP+).
The GSP+ arrangement brings tariffs down to 0% for around two-thirds of tariff lines including products that the Philippines is already exporting to the EU, like processed food and fruit, footwear and garments.
Domingo said this will be a tremendous boost to the garments industry because garment companies would get a lot more orders from Europe because of the tariff advantage, and even those companies that left because of difficulties in the past are thinking of coming back.
Domingo cited estimates that the special incentive arrangement could increase Philippine exports by as much as €600 million in the first year, although under his conservative scenario it will take 2-3 years to hit that level.
EU Ambassador to the Philippines Guy Ledoux said, “GSP+ gives the Philippines a comparative advantage and will help the Philippines increase exports and investments, by diversifying its industry. Foreign and domestic investors will put more resources in the Philippines, in facilities that produce the goods benefiting from 0% tariffs. This will translate into more competitiveness for the Philippines and more jobs for Filipinos.”
The GSP+ perk expires after 10 years and comes with certain requirements to comply with international conventions and so domestic reforms are crucial in order to take advantage of it.
The textile and garment industry road map should be expedited by the DTI. Power costs, which discourage investors from locating, must be lowered significantly. The dearth of locally sourced raw materials and other accessories and inputs used by garments manufacturers should also be solved. Given that the availment of the EU-GSP+ benefits is hinged on domestic content requirement for particular goods, the availability of locally sourced materials is significant.
Luring more investments in manufacturing activities, in particular garments assembly, would help the country lessen our over-reliance on OFW remittances.
The garments industry may never regain its peak revenues during the mid ‘80s to ‘90s because of today’s increased competition. But four years of growth is a step in the right direction.
If the Aquino administration, before the end of its term, could manage to use its strong ties with Washington to persuade American lawmakers to finally pass the Save Our Industries Act in the US Congress, which would allow Philippine-made garments using American fabrics greater access to the US market for men’s, women’s and children’s apparel, worth some $200 billion annually, then this could be another significant boost to the industry.
China controls 42 percent of the apparel market in the US, while the Philippines, which supposedly enjoys a special friendship with the US, only has a measly share of 1 percent.
Surely, if the EU can grant us garments perks, our longtime friends and allies in the US can do the same.