Exports of garments seen posting flat growth in 2020

By Elijah Felice Rosales, Businessmirror, 2 Mar 2020

The garments industry is projecting exports to register flat growth this year, as firms struggle to alternative sources for raw materials outside of crisis-hit China.

Robert M. Young, president of the Foreign Buyers Association of the Philippines (Fobap), said nearly all of the country’s apparel production is stopped due to the disrupted shipment of raw materials from source countries, particularly China. The Asian superpower is wrestling with its coronavirus crisis that forced many factories to shut down.

As such, the Philippines has to find alternative sources for fabric, textile and accessories, as it has no respectable domestic output for these items.

“At present, almost all of our apparel production are now halted due to raw materials delayed deliveries from China, Korea, Taiwan and other Asian countries,” Young said in a statement last Friday. “Reason being is that [the] Philippines has no local source or backup industries, such as fabric, textile and accessories, as every item is imported.”

This was largely the reason the garments industry, which is trying to make a comeback through public and private efforts, is tempering growth forecast this year, expecting export receipts to stay the same or increase by just 1 percent.

In spite of threats from the outside, Young argued the Philippines would keep its position in the worldwide market. His optimism is boosted by the looming passage of the proposed Corporate Income Tax and Incentives Rationalization Act (Citira), which was approved last year by the House of Representatives and is now just awaiting Senate legislation.

Young said the industry is anticipating new players to come in when the Citira bill becomes law, as it will reduce corporate income tax to 20 percent by 2029, from 30 percent at present—the highest rate in the whole of Southeast Asia.

In terms of market, the Fobap chief said the United States will keep its status as the country’s largest buyer of clothing products this year. He added the US will further solidify this position if it expands the Generalized System of Preferences (GSP) of the Philippines to garments.

As a GSP beneficiary, the Philippines can ship a total of 5,057 products to the US at zero tariff.

“Right now the GSP is only for gift wares and all these hard goods,” Young explained. “We are hoping that in the new GSP come December 2020, we will include the footwear and garments in the US GSP.”

Data from the Philippine Statistics Authority showed that exports of apparel and clothing products last year declined nearly 7 percent to $906.28 million, from $974.44 million in 2018.

Last year, the Board of Investments unveiled a road map seeking to bring back the Philippines as one of the world’s largest exporters of garments. In the short term, the industry is required to grow by 12.3 percent annually starting this year to enter the circle of the world’s top 20 by 2022.