Local garments manufacturers count the Corporate Income Tax and Incentives Rationalization Act (Citira) and competitor Myanmar as among the threats to the domestic garments industry, reiterating these could lead to heavy job displacement and continuous industry-wide slump if not addressed properly.
The Confederation of Wearable Exporters of the Philippines (Conwep) projected the apparel sector, for instance, to grow by 15 to 20 percent this year, boosted by the trade war between China and United States, which has pushed investors from both sides to seek refuge to other markets, particularly in Southeast Asia.
In recent months, however, Conwep executive director Maritess Jocson-Agoncillo said the group now forecasts continuous decline given the four-percent drop its member companies in the apparel sector have reported in the first seven months this year.
Conwep, which is engaged in producing high-quality products for international brands, booked $541.87 million in exports from January to July, four percent lower than exports of $566.75 million in the same period in 2018.
"The big threat at the moment is Myanmar due to (labor) cost and other factors. It's like adding fuel to the fire...cost of doing business is tough on us and there's also the threat," Jocson-Agoncillo told reporters at a briefing by the Philippine Economic Zone Authority (PEZA) in Taguig on 8 October.
Aside from higher power and logistics cost, the $190 to $274 monthly wage in the Philippines, said Conwep, is more than twice that of Myanmar's $85 to $95 labor cost. Here, Conwep's member firms have an average investment of $5 million equivalent to a work force of 3,000 direct workers. The apparel sector and footwear and travel goods sector alone directly employ about 180,000 and 75,000 workers, respectively.
Industry investors are banking on the tax incentives they currently enjoy under the PEZA to soften the blow of high business costs, but these perks are challenged by the Citira which seeks to harmonize the country's incentives regime.
Conwep estimates employment loss of 75,000 to 112,000 jobs in about 12 to 18 months once Citira is passed. Jocson-Agoncillo said one apparel company which was supposed to expand here has resorted to investing in Myanmar instead due to its more competitive cost of doing business.