A Case for Resurgence in the Philippine Textile Industry and how Collaboration with Taiwan will prove Mutually Beneficial
In the 1990’s, the Philippine garments and textile industry was second only to semiconductors, as the country’s largest export sector. This all changed when the Multi-Fiber Agreement (MFA) which granted quota allocations from developing countries like the Philippines to developed countries ended in 2005.
As a result, what was once considered sunrise industry in the 1990s, quickly declined to becoming a sunset industry, with much of the global textile manufacturing business going to countries like China, Vietnam and India. Garment and textile enterprises in the Philippines which relied on the quotas underwent difficulties leading to closures of factories and downsizing.
According to a report by UN Comtrade, the Philippines was ranked 6th in 1970 among top exporters of garments and apparel to the United States. The Philippine garments and textiles industry posted continuous declines between 2005 and 2011, dropping 3% from US 2.29 million in 2005 to US$ 1.4 Billion in 2011. As of 2016, the industry exported a total of US$ 1.22 Billion worth of garments.
“Our garments industry used to be one of the top performing sectors both locally and internationally. But with the challenges brought about by the MFA, we saw a decline in the sector’s general performance,” said Undersecretary Ceferino Rodolfo of the Department of Trade and Industry and Managing Head of the the Philippine Board of Investments.
Given the Philippine’s substantial 100 million-population domestic market and local demand the Philippine Department of Trade and Industry still sees promising potentials for the Philippine garments and textiles industry. The Philippine Board of Investments focused its strategies to secure valuable global market access to key export markets such as Japan, Europe and the United States with Free Trade Agreements and Preferential Trade Arrangements. These strategic policies have proven very advantageous.
The Philippines enjoys highly advantageous extended coverage GSP privileges in the US, with zero or significantly reduced tariffs across 5,057 products lines or 48% of the US’s tariff lines. The Philippines is also the only South East Asian country that enjoys GSP + privileges across more than 6,000 product lines that are exported to the European Union’s 28 member countries. In the USA, 70% to 80% of all Philippine Exports enter the US duty-free under the GSP or MFN arrangements.
Two years ago, the Philippines also successfully negotiated its Free Trade Agreement with EFTA countries in Europe. As a member of the ASEAN, the country also enjoys FTA privileges with ASEAN’s FTA partners such as Japan, China, India, Korea and Australia and New Zealand.
The Philippines, forecasted to rank at 24th, is also on-track to be a one trillion US Dollar economy and one of the largest economies in the world by 2050 with a projected GDP based on Purchasing Power Parity at US$1.615 Trillion. This is according to a study released by Price Waterhouse Coopers in February 2017.
Almost 2 decades of consistent high-economic growth, is making this a reality, with GDP growing at an average between 6% to 7%.
The Philippines likewise sets its eyes to position the country as Taiwan’s gateway to its New South Bound Policy target countries - strategic grouping of countries south of Taiwan that includes ASEAN, South Asian countries and Australia and New Zealand. Of these countries, the Philippines is its closest neighbor.
“A partnership and cooperation agenda between the Philippines and Taiwan to help with the resurgence of the garments and textiles industry in the Philippines can prove mutually advantageous and highly beneficial,” said MECO Chairman and Resident Representative Angelito T. Banayo.
Taiwan’s textile industry remains a bright spot in the global market, given its strengths in technology, production and innovation. Taiwan has carved out a niche for itself in functional textiles, functional apparel, home textiles and textiles for industrial applications. This is widely due to Taiwan’s investments in R&D, leadership in manufacturing capabilities and cross-industry collaboration, which enabled Taiwan to develop its highly-integrated supply chain. Today, Taiwan accounts for 70% of the world’s production of functional fabrics, and is ranked the world’s sixth largest textile exporter.
The Philippines on the other hand, enjoys a sustainable and strong domestic market buoyed by its 104-million population and consistent high-growth economy. The country’s labor force is among the youngest in the world, with a median-age of 24, highly-trainable and english speaking. Every year, the Philippines produces more than 600,000 university and tertiary-level graduates.
These, coupled with a successful historical proof of concept that the country can be globally competitive in the global garments and textiles industry, lays the ground work for DTI’s focus to re-develop the industry. Under the DTI’s Manufacturing Resurgence Program, it is likewise formulating a Garments and Textile Industry Roadmap to chart how the country will position and grow its textile and garments industry.
Manila Economic and Cultural Office (MECO), the Philippine representative office in Taipei, through its commercial affairs section, the Philippine Trade and Investment Center, sees a lot of potential in possible partnerships between Taiwanese and Philippine firms to take advantage of the market opportunities, given what both sides have to offer.
Last April 26, 2019, MECO organized a high-level Philippine Investment Forum at the Grand Hyatt Hotel in Taipei, that was widely attended by some 400 Chairmen, CEOs and top Executives of Taiwanese companies looking at the prospect of investing in the Philippines, given the current global trade situation and conflicts between major economic players.
In 2018, MECO organized a business delegation composed of representatives from Philippine companies in the Philippine garments and textiles and allied industries, to undergo a week-long training for non-woven fabrics manufacturing at the Taiwan Textile Research Institute. “This year, we are working with the Taiwan Textile Federation, through its Director for Market Development, Ms. Melissa Wang, to possibly organize a substantial Philippine business delegation to Taiwan’s flagship textile industry event called the 2019 Taipei Innovative Textile Application Show (TITAS).
“We see Taiwan as a source for strategic cooperation, technology collaboration and joint venture partnerships to move our Textile Industry agenda forward, in a win-win scenario, given what both sides have to offer. Next year, we also want to organize a Taiwanese business delegation to visit the Philippines to explore potentials of partnership in the sector,” said Trade Representative and Director of Commercial Affairs, Mr. Michael Alfred Ignacio of MECO’s Philippine Trade and Investment Center.
In addition to the planned exchange of business missions, MECO and the Taiwan Textile Association also plan to hold a series of seminars that will promote Philippines-Taiwan partnerships in the textile and garments industry.
originally published in Linkedin
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The Philippine Trade & Investment Center in Taipei is the Commercial Affairs Section of the Manila Economic and Cultural Office and the representative office of the Philippine Department of Trade & Industry in Taiwan