Garments sector pushes cut in labor, power costs

MANILA, Philippines—The garments industry needs help to cope with the increasing cost of doing business in the country, particularly expensive labor and power, the Philippine Exporters Confederation Inc. (Philexport) said in a statement.

Citing reports from Marites Agoncillo, executive director of the Confederation of Garment Exporters of the Philippines Inc. (Congep), Philexport said labor was the highest cost component in garments manufacturing and a major factor that influences decisions in investment locations.

Most members of Congep operate in Regions 3, 4A, 4B, and 7, where Congep is discussing possible wage flexibility with the Department of Labor and Employment (DOLE).

If approved, Agoncillo says about 3,000 workers may be employed, Philexport said.

Congep is also agreeable to the two-tier wage system that the DOLE is promoting, she said.

The system combines a fixed “floor wage” or entry-level wage for new entrants and low-skilled workers, and a flexible wage above this floor level based on worker productivity and industry or enterprise performance. This may be negotiated between the employer and the workers.

Agoncillo stressed the need to address smuggling and expensive electricity, which makes up 15 to 20 percent of textile firms’ costs.

Articles of apparel and clothing accessories, with a 3.9 percent share in total export receipts, was the fifth-largest export category with value posted at $144.7 million in February this year. It slid 1 percent from $146.17 million recorded in Feb. 2012, according to the National Statistics Office (NSO).

Combined garment and textile exports from the Philippines amounted to $1.74 billion in 2012, down a significant 16.34 percent from the $2.08 billion recorded the preceding year.

Overseas shipments of garments fell to $1.57 billion, a decrease of 17.03 percent.

Fabric exports dropped 7.26 percent to $170.36 million, according to the Department of Trade and Industry (DTI).

The lower export numbers are also attributed by the DTI to the appreciation of the peso and the low utilization of preferential tariff rates by the industry.

Exporters are reportedly reluctant to go through the process of acquiring preferential tariffs since doing so was expensive.

The garment and textile segment is trying to improve its overseas performance by pushing for the passage of the Save Our Industries Act (SAVE ACT).

The bill, first filed in the US Congress in 2009, is expected to be reintroduced this year.