Driven by an expected boost from a Free Trade Agreement (FTA) with South Korea that is anticipated to take effect in the first quarter, apparel exports by the Phillipines are projected to reach $1 billion in 2025, shares Robert Young, President, Foreign Buyers Association of the Philippines (FOBAP).
The FTA is likely to attract South Korean companies to set up manufacturing facilities in Philippine ecozones, where they can benefit from tax holidays and other incentives provided under the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act, explains Young. This act allows enterprises in ecozones to access benefits such as duty-free imports of capital equipment, raw materials, and accessories, he adds.
The zero-tariff status enabled by the FTA will facilitate greater market access for Philippine apparel exports to South Korea, potentially increasing revenues for local manufacturers, notes Young. While the Philippines has already ratified the FTA, it is awaiting South Korea's ratification to finalise the deal.
Currently, Philippine garment exporters to South Korea consist of a small network of factories and hand-knitters. In 2023, Philippine exports of knit or crocheted apparel to South Korea were valued at $15.6 million, according to United Nations Comtrade data.
However, the Philippine Statistics Authority (PSA) reported a slight decline in apparel exports from Jan to Sep’24, totaling $520.42 million, a 3 per cent decline from $536.56 million during the same period last year. Imports of textiles, essential for producing apparel exports, also declined by 5.9 per cent to $958.06 million as of Sep’24. FOBAP expressed concern that declining textile imports could limit apparel export production.
To support growth in the garment sector, FOBAP emphasises on the need for stronger government support. Last year, Philippine apparel exports totaled $705.52 million, and with the FTA’s potential impact, the sector aims to significantly expand its reach in 2025.
