Garment export industry draws up survival package

The Garments and Textile Export Board (GTEB) and representatives from the garment export industry, tagged the "Garment Industry Transformation Team," have charted and began the realization of a crucial industry assistance package determined to preserve the 400,000 workers currently being employed by 1,200 garment firms, and to ensure continued existence for the industry in the quota-free setup of 2005.

The Garment Export Industry Transformation Assistance Package was fleshed out after several industry-wide consultations with Trade and Industry Secretary Manuel A. Roxas II acknowledged the critical state of the Philippine garments and textile export industry in light of its dwindling hold on the US market, compounded by stiff competition from China and other aggressive apparel suppliers from Asia and South.

"Free competition is what we will be facing in 2005. We have no choice but to find creative ways to maintain market access to our key markets, and remain as a competitive, viable, and vibrant industry in 2005," Roxas stressed.

The main components of the Garment Industry Assistance Package include a substantial lowering of administrative fees that will save the industry some P100 million; a P300-million development program geared for productivity enhancement, trade facilitation, and market product development and promotion; a P1-billion financing scheme from Tidcorp to mainly benefit small-medium enterprises (SMEs); an enhanced quota incentives scheme offering a more flexible reward system that shall allocate 30 percent of the free quota it gets annually from the United States; and, the relaxation of quota rules within the GTEB, particularly with regard to penalties.

More expensive inputs, slow turnaround time, low productivity, narrow product range, and limited value-added services were identified as the garment industry’s weakest links needing immediate counter-measures aided by government support.

The "China factor" was highlighted as one of the industry’s biggest threats, with China’s work efficiency being three times higher than the Philippines and its workers having a learning curve of 2.5 weeks with 85-percent productivity, versus the Philippines six to eight weeks with only 65- percent productivity. Vietnam’s export performance of $2.5 billion in only two years of trading relations with the US was cited as remarkable, considering it approximates the Philippines’ $3-billion performance over a span of 50 years.

The country is also losing its foothold as top apparel supplier to the US, slipping to its current position as No. 11 (based on quantity) and to No. 9 (based on value) from its rank as No. 7 in 1995, stepping aside for rivals Bangladesh, Indonesia and Honduras, which are cheaper, deliver faster, and provide a wider range of apparel and textile products. With the global oversupply for sewing capacity, the Philippine garment industry is being pushed to expand their supply markets and service buyers’ requirements with more value-added benefits.

Already, several plans and programs outlined in the assistance package are taking concrete form. In financing, Tidcorp formally launched its P1-billion guarantee fund and a special credit facility for garment exporters last March 20 in Malacañang. The scheme includes ‘short-term credit’ as pre-shipment working capital, and ‘medium-term credit’ for fixed assets for garment exporters who are credit-worthy but collateral deficient. Other financing windows to be made available to the garment industry are already being negotiated by the GTEB.

In productivity enhancement, the GTEB has already approved a scholarship fund for the training of garment workers in the entire country as a major step toward skills upgrading. The implementing guidelines for the scheme are being finalized.

Closer cooperation with the Bureau of Customs is also being secured with the GTEB set to meet with BOC commissioner Antonio Bernardo regarding the implementation of the "green lane" for garment exporters to shorten turnaround time. The GTEB is preparing a list of certified export companies is for endorsement to the BOC.

GTEB continues its market promotion efforts abroad with the participation in the ASAP Trade Show in Las Vegas last February, and in the World Apparel Market in Brussels this April. Sales blitz efforts to the US and Canada this year are already being charted to coincide with appropriate buying seasons. In addition, specific directions for "The New GTEB Beyond 2004" were also laid out last April 10 and 11,2002 at a workshop participated in by the agency’s officers and members of the garment industry transformation team. The business models established at the workshop are currently being evaluated.

With a generous quote incentive scheme co-written by the government and private sectors to motivate companies to invest in productivity and growth enhancement prorading, technology investments, ISO certification, and social responsiveness efforts to boost productivity, the GTEB has already begun to reap clear votes of confidence for the scheme, with several manufacturing companies already putting in their application for additional quota. The applications are currently being processed and considered.