Philippine exports of apparel face dim prospects as the industry loses orders to Myanmar where cost of production is significantly lower.
This dire situation is aggravated by the threat of reduced incentives to long-time manufacturers.
Maritess Jocson-Agoncillo, executive director of the Confederation of Wearable Exporters of the Philippines (Conwep), said the industry did not get the expected benefit from the US-China trade war. Instead, low-cost producer Myanmar has practically cornered most of the new orders.
Agoncillo said a major manufacturer of wearables of many US brands long been operating in the country has transferred its orders to Myanmar, leading to an almost 50 percent reduction in workforce in factories locally.
Agoncillo said the apparel industry has seen a 16 percent decline in exports in 2018 to $927 million, instead of the 10 to 20 percent increase Conwep anticipated in the beginning of last year.
For January to July, exports are down 4 percent. The group had expected a range 15 to 20 percent increase as an offshoot of the trade rift
Even for leathergoods, Agoncillo said, the expected growth did not come in.
Exports of travel goods like bags and luggage have increased by only 5 percent in January to July, a slowdown from the 20 percent growth registered in 2018.
Shipments of footwear rose 27 percent as of July, also a marked slowdown from the 50 percent increase recorded in 2018.
Agoncillo said when the Philippines gained market access for travel goods under the Generalized System of Preferences in 2016, the forecast was for exports to hit $800 million to $1 billion in 2018. The sector, however, delivered only $582 million last year.
“Myanmar is a big threat, it is the new terror,” said Agoncillo.
Monthly wages in Myanmar for a 26-day, eight-hour a day work shift range from $85 to $95 compared with the Philippines’ $190 to $274.
Aside from lower labor cost, competitor countries have significantly lower power and logistics costs, she said.
To illustrate, Agoncillo said, the cost of producing a basic men’s polo shirt has dropped 39 percent from 2010 to 2018 due to the cost advantages offered by competitor producers.
Last year, she said, local factories were forced to accept orders at $9.20 apiece from $15 in 2010.
According to Agoncillo, apparel is at risk of displacing 40 percent of its workers within 12 to 18 months after the passage of the Corporate Income Tax and Incentives Rationalization Act which rationalizes incentives.
She said the travel goods and footwear segment, which is a relatively new export industry and which have just started enjoying incentives, will shed 20 percent of its workforce within 18 months to two years.
“These are footloose industries. The older companies which have been here for the past 20 years will not leave but there will be displacements,” Agoncillo said.
One manufacturer, however, has cut its orders for apparel, resulting to significant job cut.
From 7,000 in 2015, the number of workers of factories contracted by this company has gone down to 5,200 in 2018 to 4,000 to date. (I, Isip)