The Philippines: Textile And Apparel Industry On The Mend

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


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 textile and apparel industry employed 13.05 percent of the nation’s workforce
in 2009, according to data from the Philippine Statistical Yearbook 2012, with 97,475 people
employed by the apparel sector and 25,767 employed by the textile sector.

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.

Indigenous Textiles

The Philippines boasts an abundance of native natural fibers, including abaca, piña, silk and
ramie. Abaca and piña are the most plentiful.

Abaca fiber, also known as manila hemp, comes from a species of banana. The Philippines is
the largest producer of abaca — accounting for 85 percent of global supply — and it exports both
abaca pulp and fiber. The Philippine Fiber Industry Development Authority (FIDA) reports the
country produced a total of 73,274 metric tons of abaca fiber in 2011. That year, the Philippines
exported abaca fiber worth US$140.3 million and pulp worth US$104.4 million, according to FIDA.

Abaca fiber is prized for its mechanical strength, buoyancy, resistance to saltwater damage
and long fiber length. Though it is used mainly to make specialty papers, rope, twine, fishing
lines and nets, coarse cloth for sacking and automobile body parts, it also is being used to
manufacture lightweight, strong fabrics; and there is a growing market for abaca apparel, curtains
and furnishings.

Manila-based Asia Textile Mills Inc. has developed a way to mass-produce abaca yarn out of
raw fibers and then weave it into high-end textile products such as jeans. The company exported its
first lot of abaca jeans to Japan in 2012 and now is marketing the jeans in the United States.

Piña fiber, made from the leaves of a pineapple plant, is soft and lightweight but also
strong, and features high moisture absorption. It is finer than bamboo or ramie and is often
combined with silk or polyester in fabrics. Piña is becoming more widely used in apparel, and
specifically formalwear, such as the Philippine Barong Tagalog, as well as home furnishings.

The Philippines has been working to promote local production and use of textiles made using
abaca, piña and other indigenous fibers. The 2004 Tropical Fabrics Law mandates the use of
Philippines tropical fabrics — classified as those containing natural fibers produced, spun, woven
or knitted and finished in the Philippines — in the uniforms of government officials and employees.
Although it has plenty of raw materials, the Philippines lacks manufacturers able to process the
plant fibers into textiles, and reportedly is working to develop new processing methods.

Both abaca and piña are sustainable and biodegradable, and global demand for eco-friendly
fabrics has led to increased use of the fibers in apparel and home furnishings in a niche market
that could put the Philippines at an advantage. The country is looking for partners to commercially
produce its tropical fabrics, and is hopeful that such new business opportunities will help
strengthen its textile and apparel industry.

Industry Future

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.

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 handweaving of fabrics from indigenous fibers.
Therefore, it has remained competitive at the mid- to high-end market tier.

As mentioned previously, the apparel industry achieved its US$2 billion export target in
2012. Interestingly, DTI attributed the growth mainly to Chinese apparel manufacturers that are
setting up production in the Philippines because of labor inflation and other factors contributing
to increasing costs of doing business in China, and also to take advantage of the Philippines’
highly skilled labor force.

Data from NSO’s October 2012 Monthly Integrated Survey of Selected Industries show that
apparel and footwear production volume registered significant year-on-year growth of 128.9 percent.
Also encouraging for the textile and apparel industry is news that the Philippine economy grew by
7.1 percent in the third quarter of 2012 — placing it among the fastest-growing economies in Asia,
with growth second only to China.

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. 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. 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.

January/February/March 2013