Garments sector seeks government support, targets $10 billion contribution

MANILA, Philippines — The garments and textile industry is seeking government support in the form of incentives for new employees to address high power costs and to reconsider the planned rationalization of tax perks to revive the sector.

Robert Young, trustee for the textiles sector of the Philippine Exporters Confederation Inc. and president of the Foreign Buyers Association of the Philippines said in an interview the revival of the industry could provide $10 billion annually to the economy. 

At present, he said the industry is at around $1 billion.

For the garments industry to generate $10 billion per year, he said government interventions would be needed to address roadblocks hampering the growth of the sector.

As the high labor cost is among the issues affecting the garments industry and concerns of firms interested to invest and set up facilities in the country,  the sector is proposing a Pantawid Kabuyahan program which would incentivize employment by shouldering P2,200 per month of the wage of a newly hired worker outside of Metro Manila for three years. 

“We have a workforce that is young and English-speaking and that is very good. However, how much do we pay them? That is what firms would ask us first,” he said. 

At present, the Philippines has higher labor costs than apparel and textile competitors like Vietnam, Bangladesh, India, Cambodia, Laos, Myanmar and Indonesia as mandated wage increases in the country have not been accompanied by an improvement in productivity. 

Young said a Filipino worker could produce 10 shirts a day compared to 20 shirts in Bangladesh.

“Plus, we have too much holidays in the Philippines. We are losing our efficiency,” he said. 

He said the industry would also want the government to address issues on power cost in the country, which is among the highest in Southeast Asia. 

In addition, the industry is calling on government to rethink its plan to rationalize fiscal incentives under the proposed Comprehensive Income Tax and Incentives Rationalization Act (CITIRA). 

CITIRA, if approved, would reduce the corporate income tax rate gradually to 20 percent from the current 30 percent, and bring in changes to the incentives system which includes removing the five percent tax on gross income earned firms registered with the Philippine Economic Zone Authority pay after they use their income tax holidays.

For the industry, implementation of the CITIRA would mean up to 144,000 job losses as incentives allow firms to partially offset market inefficiencies. 

“Let us not scare investors with CITIRA,” Young said. 

He said addressing smuggling would likewise be beneficial for the sector. 

Earlier, the Board of Investments (BOI) said it is set to release the roadmap for the garments industry during the Philippine Garment, Leather Industries and Textile Expo 2019 slated on Dec.5 to 8, at the SMX Convention Center in Pasay City. 

BOI executive director Corazon Dichosa said the roadmap which covers a 10-year period or until 2029, would contain initiatives to address issues affecting production capabilities, human resource development, and concerns on the ease of doing business.

Given opportunities in sustainable fashion and upcycling or transforming materials into a product of better quality, she said the BOI is also looking at how the Philippine garments industry can be a big player in that segment.