April 24, 2024

Garment industry players are pushing anew the establishment of more factories to supply more export orders, particularly from the European Union which charges duty for the country’s exports because of its strict rules of origin (ROO), as they expect revenues to reach at least $1 billion this year.

Robert Young, president of Foreign Buyers Association of the Philippines and trustee for the textile, yarn and fabric sector of the Philippine Exporters Confederation Inc., said they have been requesting the government to build a pilot commercial-scale wearable textile factory.

“Just one will be enough, we have to quickly start something so that these foreign investors will follow suit,” he said. “Garments, once it’s there, can be a lifesaver to any economy just like in Bangladesh, Vietnam, India, Laos, and Cambodia.”

Young said Philippine garments exported to the EU are subjected to a 12 percent or higher duty due to its strict ROO imposing a ceiling for value-added inputs sourced from a non-Generalized Scheme of Preferences (GSP) beneficiary country. This, even as these goods enter into the EU market duty-free as provided under its GSP Plus. 

“They prefer that the fabric we will be using will be sourced from the Philippines. So this is one way of saying the Philippines has to produce its own fabric,” he said.

“Which as everybody knows is not possible because we do not have the textile industry in the Philippines right now to be used for these products for exports and therefore, we have to import. And if it’s imported fabric that we use, it will not qualify for the EU GSP+ zero duty,” he added.

Young said building a pilot factory to produce own fabric or textile is thus imperative especially as he expects that the revival of negotiations for the country’s bilateral free trade agreement (FTA) with the EU will also prescribe the same ROO on textile usage for exported garments.

He said industry players are expected to hit just 80 percent of their target garment and apparel exports of at least $1 billion this year with EU’s enforcement of these ROOs.

“We underperform now. How will we perform, you are not allowing us to use imported materials. There is another way to use the imported material but we have to buy from an FTA country which has a bilateral agreement with the Philippines. We have to look for these kinds of countries,” he added.

Young said the EU currently accounts for only 10 percent of the country’s total export receipts of garments, textile and apparel. The United States is the main export destination, followed by Australia, Canada and Japan.

Young said the industry group has been requesting the government to submit a derogation letter to the EU to allow the country to use imported fabric and qualify for zero duty while the pilot factory is not yet built. – Press release