After the country lost its position as the world’s top supplier, foreign buyers of Philippine garments are looking for a revival of the garments sector. Robert Young, President, Foreign Buyers Association of the Philippines (FOBAP) stated the group will push for the immediate conclusion of a free trade agreement (FTA). Currently, Philippine garments going to the US are taxed 15 to 20 per cent.
Young says members of FOBAP, lost 70 per cent their market from $1 billion 15 years ago due to a number of reasons, primarily the removal of quota system that led buyers to source from other countries offering same products at half the price. Inclusion of garments in the US Generalized System of Preferences (GSP) as being lobbied by the Philippines, would also be a big help but the tax privilege is subject to graduation that they could lose in two years.
FOBAP plans a campaign for FTA in the US following a proposed bill that would have given Philippine garments preferential treatment not being passed by the US Congress. This would be the third attempt to revive the industry through the US. Young however says, it is not all bad news for the industry as big brands, still source from the Philippines as they are high priced items and cannot be competed with the basic garments like T-shirts which cost twice as much to produce.
Young also says incentives offered in Philippines are not enough, as these are limited to tax holidays and bonded warehousing. Even finding an economic zone under Philippine Economic Zone Authority which offers 5 per cent tax rate and tax and duty-free importation of raw materials, is not enough.
Young admits Philippines has also lost its efficiency and factories have become outdated especially with the advent of robotics, digital cutting and sewing. FOBAP members that include big retail chains Neiman Marcus, Walmart and JC Penney, have been conducting roadshows to teach factories about social compliance on like wages, working conditions to make sure there is no child labor or sweatshops. The FOBAP’s membership too has dwindled, from 75 to 40. It targets $850 million in exports this year for all items bought by members.
