TEXTILE MANUFACTURING PROCESS IN THE PHILIPPINES

OVERVIEW
The Republic of the Philippines' textile industry was established in the
1950s under the principle of import substitution industrialization, which
promotes producing goods domestically rather than importing them from other
countries. The textile industry comprises fiber production and the manufacturing of
yarn, fabric and textile end-products. It consists of two sectors: the primary
processing sector, comprising spinning, twisting, weaving, knitting, dyeing and
finishing; and the secondary processing sector, comprising the manufacturing of
apparel and textile end products.
The Philippine apparel manufacturing industry began in the late 1950s as a
cottage industry that took over home sewing, dressmaking and tailoring activities.
The Philippine Department of Trade and Industry's (DTI's) Garments and
Textile Industry Development Office (GTIDO) reports that Philippine textile and
apparel exports increased annually from 2009 to 2011. According to GTIDO, exports
in 2011 totaled US$2.14 billion of which apparel exports accounted for $1.92
billion; textiles, US$162 million; and used apparel, US$53 million and accounted
for 4.4 percent of total Philippine exports. During the January through October 2012
period, the United States ranked first among export markets for Philippine textiles
and apparel, accounting for a 59-percent share, followed by the European Union, 13
percent; and Japan, 9 percent.
Apparel exports increased annually from 2008 to 2011, and on average,
accounted for approximately 91.1 percent of total textile and apparel exports,
GTIDO notes. The DTI recently announced that apparel exports alone reached US$2
billion in 2012.
The Philippine Export Development Plan (PEDP) 2011-2013 has identified
the textile and apparel industry as a key sector that can help drive the country's
export growth.
MANUFACTURING PROCESS (check PDF)
The whole range of textile activities covers:
(1) fiber production, both natural and man-made; and
(2) yarn, fabric, garmentand made- up textile manufacture.
As usually defined, the textile industry comprises:
(1) primary processing sector spinning, twisting, weaving, knitting, dyeing
and finishing; and
(2) secondary processing sector garment and made-up textile goods
manufacturing.

The exclusion of natural and man-made fiber production is borne out by the
consideration of the former as an agricultural activity and of the latter as part of the
basic industrial chemicals industry.
ADVANTAGES
1. Increase of Exports (Export Opportunities)
The Philippine textile and apparel industry has been focusing its efforts on
increasing exports to the United States mostly by way of the Save Our Industries
Act (SAVE Act), which was first introduced in the U.S. Congress in 2009 and again in
2011 to expand textile and apparel trade between the United States and the
Philippines by eliminating certain duties on apparel products made in the
Philippines using U.S. fabric. The bill considered to be "the best hope for the
Philippine garments industry as we work towards its revitalization, targeting US$3
billion in apparel exports and 600,000 jobs," according to the Confederation of
Garment Exporters of the Philippines did not reach a vote in Congress's 112th
session, which adjourned on Jan. 3, 2013, and it is unclear whether it will be
reintroduced in the 113th Congress that is now in session.
In addition to efforts to increase its textile and apparel exports to the United
States, the Philippines is considering negotiating with the European Union (EU) for
Generalized System of Preferences Plus (GSP+) which will provide for reduced
tariffs or duty-free entry of eligible products exported by the Philippines to the EU. If
the Philippines should qualify for GSP+ status this year, it will be able to export
products under concessionary tariff lines duty-free to the EU beginning Jan. 1, 2014.
2. Investment Opportunities
Investments are strongly encouraged in the areas of textile and apparel
manufacturing, dyeing, printing and finishing to promote global competitiveness in
the midst of the free trade era. The abundance of indigenous Philippine fibers such
as abaca, pina, silk and ramie provides an opportunity for the development and
production of ecologically-friendly fabrics at commercial quantities.
3. Good labor skills in production
4. Historical familiarity with Western culture
DISADVANTAGES
1. Increasing electricity rates
The Philippine textile and apparel industry recently has faced several
challenges, including the country's steadily increasing electricity rates, which are
among the highest not only in Asia but also in the world. Textile and apparel
manufacturing is an industry that uses a lot of power and therefore is especially
vulnerable to the effects of higher electricity charges.

2. Wage increases
The industry also has been dealing with continual wage increases. In 2012,
the Philippines reportedly had the highest minimum wage among third-world
countries in Asia, according to the Employers Confederation of the Philippines.
However, the Philippine industry boasts a highly skilled workforce prized for its
embroidery and other intricate design capabilities that have been passed down
through generations, including hand weaving of fabrics from indigenous fibers.
Therefore, it has remained competitive at the mid- to high-end market tier.
3. Lack of a clear industry map
One reason for the difficulty associations have when lobbying for
government support is the lack of a clear industry map. Without verified facts and
figures, it becomes exponentially more difficult to identify priority areas for
investment, spot gaps in the industry, focus on policy reforms, and see where
legislative lobbying can have the most impact.
4. High Shipping Cost
5. Dependence on imported raw materials
7. Political and Social unrest
SOLUTION
1.Mapping the industry
One way to create this map is for manufacturers, exporters and other
enterprises to provide information through surveys sent out by the GTIDO.
Understandably, many companies are more focused on day-to-day activities rather
than participating in surveys. However, if the industry is to regain its former
economic prominence, it will require commitment, participation and cooperation
from all players. For example, simply identifying the actual number of garments
exporters is a challenge for the DTI. Current estimates are at 360 to 380 exporters,
down from 700 or 800 in 2009. Preliminary data shows there are around 900
registered manufacturers, but there is no information if all are still in operation.
Sectoral roadmap
The sectoral roadmap will contain a database of complete, accurate and
up-to-date industry information that will help the government devise and execute
programs to support the textile and apparel industry. GTIDO is developing a sectoral
roadmap in an effort to boost the textile and apparel industry's competitiveness.
The Philippine textile and apparel industry has lacked a clear industry map, and
without any verified facts and figures, it has been difficult for the government to
pinpoint which areas need the most focus.
2. Managing labor costs

Many analysts have stated that one of the issues facing the garments
industry is the high cost of labor in the Philippines, especially when compared with
wage costs in other developing countries. However, reducing wages is a difficult
option, as this would cause hardship for our craftsmen and laborers.
a. Productivity incentives
A possible solution may be found in the practice that has been
adopted by some garments manufacturers and assemblers. This is a
productivity-based arrangement that pays wages on a per-piece basis,
rather than a fixed rate. Productivity incentives have already been adopted
in the Calabarzon area early this year, based on mutual agreements
between workers and management. A productivity-based wage system is
not as simple as it sounds though. Safeguards must be built-in, and there
must be constant dialogue between all stakeholders, including labor groups
and officials. However, given that the Department of Labor and Employment
says that there are over 500,000 people employed in the garments and
textile sector in 2011, it is important to find an effective and equitable
answer to the wage question.
3. Change the rules of engagement
Another alternative to competing against countries with a lower cost of
mass-producing clothes is to change the rules of engagement. Given the natural
creativity, affinity for design and generations-honed craftsmanship of our artisans,
it would make sense for garments enterprises to move up the value chain into
higher-value products and services.
Studies show that the most valuable elements in the garments value chain
lie not in the manufacturing, but in the design, branding and marketing of the
products. Many fashion houses, for example, outsource the design and production
of their fashion lines to external suppliers. This may be an area of opportunity for
the Philippines. By upgrading the technical expertise of our workers and adding
value to the manufacturing and assembly process, we can bypass competing on a
mass-production level where we have a disadvantage, and instead move up to the
apparel design and development level where we can put our peoples talents to
best use.
4. Gaining better access to markets
Historically, apparel and textile have been some of the most protected
industries, from the initial source of the raw materials (e.g., the rule of origin
principle) to most-favored nation agreements, export quotas, and many others. For
the industry to recover, it needs to gain more export destinations. This is primarily
an area where the government can work closely with trade groups and garment
enterprises to identify areas where the most assistance is needed, including
favorable legislation and trade agreements.
a. SAVE Our Industries Act aims to promote industry and job creation in
both the Philippines and the US. In essence, the law provides for duty-

free entry into the US of Philippine-made apparel, as long as they are

manufactured using US made fabrics. However, the bill is still pending in
both houses of the US Congress, which is why local industry stakeholders
should work together and explore ways to work for its passage.
b. European Union (EU) Generalized System of Preferences Plus (GSP Plus)
provides duty-free access to EU markets for developing countries that
comply with 27 international conventions in areas such as human rights
and sustainable development. This may be an excellent opportunity for
us, considering the Philippines is one of the countries that has qualified
for the GSP Plus from 2014 onwards. Yet there seems to be very little
participation or preparation from local enterprises, possibly due to a lack
of information or awareness on the part of industry stakeholders. It would
be a shame to waste this opportunity under the previous GSP, the
Philippines only utilized around 36.6% of the allowed incentive.

References:
Sarah C. Thomasson, Associate Editor | textileworldasia.com
January/February/March 2013
John C. Ong, Partner of SGV & Co | sgv.ph
October 2012
Aurora Sanchez | Journal of Philippine Development
Development of the Garments and Textile Industry
(source: Garments and Textile Export Board)| invest.cfo.gov.ph
Philippines Apparel, Clothing & Textile Industry | asiafashionclothing.com