http://region4a.tesda.gov.ph/index/main/industry_s tudy/garments_.htm HISTORICAL OVERVIEW The Filipinos had shown their talent in weaving and garment making even in the pre-Spanish era. Although crude weaving weaving materials were used, used, but even then, then, garments were bartered for other goods with other Asian countries, particularly with China. When the Spaniards Spaniards came, better weaving weaving materials such as needles for fine embroidery were introduced. introduced. The Americans took cognizance of the economic potentials of the local garments industry which resulted in the industry’s preferential treatment in the U.S. market in the early 1920’s. The garments industry started as a cottage-type producer of dresses and other wearing apparel in the 1950’s. Although garments were produced in dress shops and tailoring shops, the bigger volume was home sewn and undertaken in cottage-type production outfits. It was only in the early 60’s that the industry started to flourish with the imposition imposition of the foreign exchange exchange and import control. control. The passage passage of RA 3137 ( othe otherw rwis ise e know known n as the the Em Embr broi oide dery ry Law) Law) in 1961 1961 brou brough ghtt abou aboutt taxtax-fr free ee impo import rtat atio ion n of raw raw mate materi rial als s and and capi capita tall good goods s and and attr attrac acte ted d more more garm garmen entt producers producers to venture venture into the export export market. This was further further enhanced by the government government incentives incentives granted under the Export Incentives Incentives Act (RA 6135) of 1970 and the creation of the Export Processing Zone Authority (PD66). Two distinct types types of firms availed of these investment investment incentives: those under the embroidery board operators and the non-embroidery board operators. While the latter catered to the domestic market, embroidery board firms served the foreign market. In the wake of the utilization of local raw raw materials, export activities of the operating firms grew and new garment factories were were established. Export quota allocations from the country’s major trading partners, namely, the United States, the European Economic Countries Countries and Canada further further bolstered the industry’s export orientation. The introduction of ready-to-wear (RTW) garments in the 1970’s ushered in a new era for the industry. Consumers elsewhere in the world followed the fashion trends in the US and started to buy RTW clothing. A bigger number of entrepreneurs, mostly from the Southern Tagalog, region joined the industry and started as contractors and sub-contractors of big garment manufactur manufacturers ers in Metro Manila catering catering to the export export market. In order to fill in the volumi voluminou nous s volume volume of orders orders from from import importers ers,, garmen garmentt manufa manufactu cturer rers s in Metro Metro Manila Manila delega delegated ted the most most labor labor intens intensive ive part part of produc productio tion n like like embroi embroider dery, y, hemstitching and monogramming to the sub-contractors in the region.
1.0 PERFORMANCE OF THE INDUSTRY AT THE NATIONAL LEVEL
The Philippine garment industry is the second second largest export industry industry in the country, country, generating generating export sales sales of $2.26 billion billion in 1998, which which was 7.6% of total exports during the year. The garmen garmentt sector sector consis consists ts primar primarily ily of subcon subcontra tracti cting ng operat operation ions s for international brands. Over the last few years, the growth of garment export has been marginal marginal and its contribution contribution to total exports has been been on a decline. decline. The sector sector is driven primarily by low-cost labor and quota allocations from major markets (75% of garment export go to quota countries _ USA, Europe and Canada).
1.1
Gross Value Added and Contribution to GDP
Garments reported value added amounting to P11,881 million in 1995, up by a minimal rate of 8.1% from the GVA reported in 1994. The sector’s sector’s contribution contribution to the the manu manufa fact ctur uring ing sector sector rang ranged ed from from 5.3% 5.3% in 1991 1991 to 5.8% 5.8% in 1995. 1995. Its Its contribution to GDP, however, remained constant at 1.4% from 1991 to 1994 and increased slightly to 1.5% in 1995 (Table1). Table 1. Gross Value Added in Garments :1991-1995 ( In Million Pesos)
At the same same time, time, over-all over-all growth growth rate in gross gross value added added (GVA) (GVA) for footwear and wearing apparel pegged at 8.1% in 1994 declined to –8.8% in 1996 and rebounded to a positive growth in 1997 at the rate of 2.2 percent.
1.2
Demand Conditions
1.2.1 Imports
Philip Philippin pine e garmen garmentt import imports s reache reached d $2.2. $2.2. billion billion in 199 1995 5 at an average average growth rate of 41% from 1991 to 1995 and by 3.7 % in 1996. Imported garments came mainly from Hong Kong, United States and Taiwan. Despite the drop in US imports in 1994, US imports still registered the highest average growth for imported fabric fabrics s of almost almost 78% from 1991 1991 to 199 1995. 5. As shown shown in Table Table 2, this this trend trend was however however reversed reversed in the following following year when imports imports from the US registered registered a decline decline of almost almost 78%. Recent Recent imports imports were from from Hong Kong, Kong, China, China, Italy and and France.
Table 2. Growth Rates of Garment Imports by Country and by Year: 1991-1996
Table 3 shows that during the year, 2000, there was a notable increase in imports from United Kingdom, France and Australia, especially of cotton shirt and blouse blouses. s. Althou Although gh there there had been been an influx influx of cheap cheap appare apparell from from neighb neighbori oring ng
ASEAN countries such as Malaysia, Indonesia and Thailand, there were no official figures to be obtained as these entered the Philippine Philippine market through untraditional untraditional channels. Table 3. Cotton Shirt/Blouse Imports (Jan.- June 2000) 1.2.2 Exports
Garments made up 17.7% of the total total Philippine exports of US$15.7 billion in 1995. In the following following year, its contribut contribution ion to total Philippine Philippine exports exports dropped to 13.37% brought about by a reduction reduction of exports to only US$2.74 US$2.74 billion (Table 4). A total of 1,200 export firms firms exported $2.74 billion worth of garments in 1996 and $2.95 billion in 1997, or an increase of 10%. Table 4. Total Export Contribution of the Garment Industry: 1995-1998
The U.S. remained the country’s biggest export market accounting for 62% of total garment garment exports exports in the the same period. period. As seen in in Table 5, the Philippin Philippines es was among the top suppliers of garments to the U.S from 1990 to 1996. In terms of value of apparel apparel exports exports,, it ranked ranked 5th in 1990 to 1991 but ranked 6 th in 1992 and th 1993 and 7 in 1994 and 1995. In 1996, it rebounded and climbed up to the 6th ranking with its exports exports of US1.293 billion. The country assumed almost the same ranking in terms of volume of apparel expo export rts, s, exce except pt in 1996 1996 when when it rank ranked ed only only 8th, ahead ahead of just just two countrie countries, s, Indonesia and India. Despite the lower volume, however, it managed to stay in 6th place place presum presumabl ably y becaus because e of the higher higher value value garmen garments ts that that the country country was producing for the U.S. U.S. market. Among other export destinations of Philippine garments were Great Britain and West West German Germany y which which had comparat comparative ive shares shares of almost almost 30% each each of the $390.08 million exports. Benelux and France were likewise top export export destinations acco accoun unti ting ng for for 15.6 15.6% % and and 11.4 11.4%, %, resp respec ecti tive vely ly.. Tabl Table e 6. pres presen ents ts the the majo majorr importing countries of Philippine garments. Table 6. FOB Value of Exports to the U.S. and E.U Markets as of December 31,1997 (in US$ million)
While Philippine garment export has grown faster than the world average, its growth is slower than than those from from other ASEAN and South Asian Asian countries. Relative to other subcontractor countries in Asia, wages in the Philippines have gone up and continue continue to rise. The gradual phase-out phase-out of the Multifiber Multifiber Agreement Agreement (MFA) until 2005 will erode whatever comparative advantage the Philippines has established vis-
à-vis its competi competitors tors.. The future future of the garment garment industry industry will depend depend mainly mainly on quality and value upgrading. The industry is largely reliant on imported fabrics because of limited textile production, especially fine woven woven fabrics. While local value added has increased increased to almost 50%, majority of the garment exporters, especially SMEs, still operate on CMT arrangements, thereby reducing their response flexibility. Growth of exports
The GTEB GTEB reported reported that that as of December December 2000, 2000, exports exports grew grew by nearly nearly 12 percent in the first 11 months of the year as more Filipino apparel makers complied with quality and ethical manufacturing standards. Exports rose to $2.917 billion from January January to November November in 2000 from $2.610 billion during the same period period in 1999. The Philippine reputation reputation can be credited to those making quality apparel for global brands such as GAP, Polo, Ralph Ralph Lauren, Ann Taylor, Liz Claiborne, Claiborne, Jansport, Nike, Sears and Disney. Aside Aside from from adheri adhering ng to their their strict strict qualit quality y standa standards rds,, Philip Philippin pine e garmen garmentt makers have shown shown their strict complianc compliance e with ethical manufactur manufacturing ing standards standards such as regulations against child labor and the mandatory installation of clean and safe safe workin working g condit condition ions s in factor factories ies.. Foreig Foreign n buyers buyers conduc conductt surpr surprise ise visits visits to factories to check the garments makers’ compliance with ethical standards, including the availability of fire extinguishers extinguishers and fire escapes, escapes, cleanlines cleanliness s of shopfloor shopfloors, s, and payment of social security premiums and benefits to workers. Apparel exports rose by 12.07 percent to $2.351 billion in the first 11 months in 2000 from from $2.097 billion in 1999. 1999. Non-apparel exports climbed by 14.35 percent to $481.571 $481.571 million in the first 11 months in 2000 from $421.123 $421.123 million million a year ago. Textile exports fell 7.18 percent percent to $84.098 million in the first first 11 months from $90.065 million in 1999. Philippine garment exporters shipped out $2.171 billion to the U.S, in the first 11 months this year, up by 10.88 percent from $1.958 billion in 1999. Shipments to Canada climbed climbed by 28.31 percent to $63.38 million in the the first 11 months this year from $49.395 million during the same period last year.
2.0 STRUCTURE OF THE INDUSTRY 2.1
Industry Players
Based on the NCSO data, there were 1,865 small and large establishments of which 1,612 were were ready-made clothing clothing manufacturers. There were 1,307 1,307 exporters and 300 local manufacturers manufacturers.. At the micro level, some 3,000 tailoring tailoring and dress shop operators served the made-to-order market. Four hierarchies exist in the industry industry value chain. Level 1 consists of textile mills mills that that provid provide e the fabrics fabrics and trimmi trimmings ngs.. These These are availa available ble in open open stock stock inventories or made to order specifications. specifications. Level 2 refers to apparel manufacturing which performs performs the marketing, marketing, merchandis merchandising ing and production production of garments. garments. Two structures structures exist: exist: integrated manufactur manufacturing ing and contracti contracting ng of services. services. Level 3 or the retail level consists of traditional traditional retailers retailers and integrated manufactur manufacturers. ers. The whol wholes esal ale e chan channe nell is crea create ted d if the the manu manufa fact ctur urer er or reta retail iler er is not not vert vertic ical ally ly
integrated. integrated. Level 4 or the consumers consumers define the needs and wants to be satisfied in the marketplace.
2.2
Size and Competition
The apparel business is a massive industry that spans global interaction to produce a wide variety of products. products. Short fashion cycles, cycles, labor intensive production production and the fragmented nature of the market interplay to create a complex environment of comp compet etit itio ion n and and a high highly ly dema demand nd driv driven en mark market et.. With Within in the the valu value e chain chain,, manufacturers or retailers compete as suppliers and users. From From 1995 1995 to 1996 1996,, dome domest stic ic prod produc ucti tion on,, net net of $2.5 $2.5 billi billion on of expo export rt garments, provided goods worth $9.7 billion representing 32.5% of the total gross revenues of large large wearing apparel establishments establishments amounting to $29,864,723. Half of these were manufactured manufactured in the NCR. Direct exports made up a significant significant 64% with with its gross gross rev revenu enues es of $19 $19,23 ,239, 9, 332 332.. An additiona additionall 4% were generate generated d by export subcontractors resulting in a total of 68% of total revenue accounted for by the export market. As seen seen in Tabl Table e 7, the the wome women’ n’s, s, girl girl’s ’s and and babi babies es garm garmen ents ts segm segmen entt accounted for the biggest amount of revenues revenues equivalent to almost 50%. This was followed closely by ready clothing manufacturing, not otherwise classified, totaling $10,184,844 $10,184,844 or 34%. Men’s and boy’s garments garments manufacturing manufacturing comprised comprised only 10%. Custom made clothing clothing added up to less less than 1 percent percent of total revenues. Table 7. Number and Gross Revenues of Large Wearing Apparel Firms by Gender Market Segment and Product Destination (1995-1996)
In 1996, some 218 garment companies made it to the top 7,000 corporations of the Philippines with gross revenues totaling P29.763 million and total assets of P14.10 P14.103 3 millio million. n. Firms Firms engage engaged d in the manufact manufacture ure of readyready-mad made e clothi clothing ng generated the biggest revenue equivalent to 49.2% of the total reported for the 218 large garment companies. Likewise, this group of companies registered registered the biggest assets representing representing 41% of the total. Gross revenues increased by 16.9% in 1996 while total assets increased by 14.2% (Table 8). Table 8. Number, Gross Revenue and Total Assets of Garment Firms in the Top 7000 Corporations
2.3
Products and Services
Garments manufacturing involves the production of apparel and non-apparel items (Refer to Figure 1: Wearing Apparel). It generally produces clothing or wearing apparel apparel for the domestic domestic and export market. market. A wide variety of product product classes classes are offere offered d in the market market in terms terms of materi material al fabric fabricati ation, on, produc productt usage usage and user user demogr demograph aphics ics.. User User class classifi ificat cation ion as to age and gender gender consist consists s of men, men, boys, boys,
women, girls and infants garments. garments. Product usage category refers refers to shirts, blouses, blouses, coats, coats, jackets, jackets, nightwear, nightwear, etc. Textile Textile material fabrication fabrication classifies classifies products products into knits and woven apparel. apparel. Table 9 presents presents the general general classific classification ation of the wearing apparel segment Table 9. Garment Industry Wearing Apparel Product Chain
Different product offerings offerings in terms of styling, (basic and fashion) and other intrinsic intrinsic values as to fit, care, and sizing compete compete in the marketplace. marketplace. Extrinsic Extrinsic offering in terms of price (low value, designer), branding and garments presentation, (i.e. display, appeal and packaging) has not only offered choices to consumers but has contributed to the creation of mega-brands worldwide. Custom Custom-ma -made de servi services ces are provid provided ed by tailor tailors, s, dress dress shop shop operat operators ors or design designer er houses houses locally. locally. Produc Productio tion n of garmen garments ts in larger larger volume volume has made outsourcing or contracting of manufacturing at various stages of production cycle widely practiced practiced.. This offers offers flexibility, flexibility, specializ specialization, ation, and augments augments seasonal seasonal requiremen requirements ts of the industry. industry. Contracto Contractors rs are normally normally located in countries countries with inexpensive labor supply. Services contracted include include sewing, embroidery, smocking smocking and others. They are either independen independentt entities or satellite operators operators of larger firms. firms. Specialty Specialty services services such as product product design, packaging, packaging, and drop shipping create value-added services to the chain.
2.4
Supplier – Buyer Dynamics
The Philippine apparel industry is characterized by many sellers and buyers contributing little individual shares in the market and having little control on total industry industry output, output, for both domestic and export market. market. The industry industry is generally demand driven, with big wholesaler and retail group oftentimes vertically integrated engaging engaging in cut-throa cut-throatt competition. competition. Having Having the financial financial and market muscle, muscle, they dictate purchase price leaving little margins to volume volume greedy manufacturers. manufacturers. Price competition is normally pursued at the low-end and budget markets. 2.4.1 Suppliers
Spinning, textile mills and finishing houses are the materials suppliers of the industry. The Philippine textile and spinning sector faces numerous challenges due to high cost of interest, energy and labor. Moreover, low tariff rates on finished fabrics have have made made import importati ation on attrac attractiv tive e to the appare apparell makers makers.. Howeve However, r, new player players s continue to come in as can be seen from the increase in the number of listed firms which grew from 210 in early 1989 to 260 as of April 1995. There are 102 large suppliers in the industry producing P19.0 billion in revenues in 1996 and P17billion in 1995. 2.4.2 Buyers
Buyers Buyers consist consist of domestic domestic and export buyers. buyers. Up to 80% of the garment garment industry’s total domestic sales now come from mall and retail chains. The emergence of a strong buyer groups with strong distribution systems has consolidated the huge but otherwise otherwise fragmented local market. market. Specialty Specialty shops comprised comprised of retail retail sales. sales. The figure does not include sales from traditional wholesalers which accounts for the bulk of local industry sales (Table 10). Table 10.
Gross Revenues and Net Income of Domestic and Wholesale and Retail Outlets: 1995-1996 2.4.3 Labor
The industry is highly labor intensive due to the difficulty of handling soft good goods. s. It em empl ploy oyed ed 148, 148,00 000 0 work worker ers s in 1995 1995 or 20% 20% of the the Phili Philipp ppin ine e tota totall employed labor force. Sourcing of of labor is not difficult. Workers are are highly trainable and flexible flexible in skills. skills. The Philippine Philippine labor force force totaled 900,000 900,000 as of 1995, half of which were were in the the NCR. The Philippines is still considered an inexpensive source of of labor, with skilled labor contracted by foreign foreign firms. However, low productivity due to lack of technologic technological al investment investment and competitio competition n from labor-rich labor-rich neighborin neighboring g countries threatens this competitive advantage of the Philippine apparel industry. Channe Channels ls of distri distribut bution ion are the tradit tradition ional al retail retailers ers,, outlet outlets, s, franch franchise isers, rs, wholesalers’ mail order or personal direct selling. Corporate accounts accounts are normally handled handled by internal internal personnel personnel or through through service sales representat representatives. ives. A basic salary, fixed commission rate or mixed scheme is generally offered as compensation methods. Selling skills and relationship building are normal normal hiring concerns. concerns. Fashion trends trends and technical technical knowledge knowledge are left to designers designers and production production personnel. personnel. Howe Howeve ver, r, garm garmen entt sell sellin ing g is high highly ly rela relate ted d to fash fashio ion. n. It invo involv lves es a deep deeper er understanding of customers’ needs and taste at particular point of time in fashion taste and technical knowledge is needed to address client needs 2.4.4 Financing Sources
Banks, trade supplier and internally generated funds normally finance apparel firms. firms. Custom Customer er check check redisc rediscoun ountin ting g and advanc advance e paymen payments ts offer offer altern alternati ative ve sources. Restricted credit access especially to small and medium players poses as a major concern concern for expansion. expansion. Lack of working capital capital had led business business stoppage, incapacity to expand and invest in fixed assets. 2.4.5 Legal Environment
Government agencies assigned to monitor and assist the industry are the Garments Trade Export Board (GTEB) and the Department of Trade and Industry (DTI). (DTI). GTEB, togethe togetherr with the Bureau Bureau of Customs Customs and Bureau Bureau of Investme Investments nts (BOI) oversees the operation of bonded manufacturing warehouses, regulates raw material importation and monitor monitor s textile textile export clearances (TEC). The Department of Trade and Industry (DTI) oversees local activities through its agencies, Bureau of Product Standards and Bureau of Patents and Trademark.
3.0 Structure, Conduct Conduct and Performance Performance of the Marketing System 3.1
Market Structure
3.1.1
Degree of Seller and Buyer Concentration
The market structure of the garment industry at the seller’s level is near perfect competition. There were 1,154 1,154 garment exporters in 1997 located in 10 regions all over the country contributing little individual shares in the market and exercising little control over over the total industry output. output. The National Capital Region (NCR) which registered 620 garment exporters controlled 49.63 percent of the total FOB value of garment exports. The Southern Tagalog Region comprising of 264 garment exporters exporters accounted accounted for the second biggest share share of the total output with with US$ 868,890M (29.3%) (29.3%) followed followed by Central Luzon Luzon controlling controlling 15.65 percent. percent. Southern Mindanao accounted for the smallest share of the market registering some .20 percent. (Table 11 ). Table 11. VALUE OF GARMENT EXPORT BY REGION (Based on TECs Issued) : As of December 31, 1997
Data culled from the national figures of the Bureau of Export Trade Trade Promotions (EDP-IRC) (EDP-IRC) show that garment exporters exporters in the province of Cavite controlled the biggest biggest share of the total total output of the Southern Tagalog Region in 1998. Firms in the province province of Rizal accounted for the second second biggest share with 28.5 percent. percent. Laguna contributed almost 16 percent percent of the total value of exports exports amounting to US$90M US$90M (Table 12). 12). Table 12. FOB VALUE OF GARMENT EXPORTS BY PROVINCE SOUTHERN TAGALOG REGION 1998
On the other hand, the buyers market are located worldwide which are classified as quota and non-quota countries. The USA, European Union countries and Canada took the first three biggest shares among the quota countries representing 62.86 percent, percent, 13.19 percent percent and 2.06 percent, percent, respectively. respectively. Japan maintained maintained its lead as the major non-quota buyer’s market with purchases purchases of US$190,284,340.69. US$190,284,340.69. Coming in close were Hongkong with US$99,298,429 and the United Arab Emirates accounting for US$78,008,555 US$78,008,555 (Table 13). 13). Table 13. FOB Value of Garments and Textile Exports (Based on TEC’s Issued): As of December 31, 1997 3.1.2
Degree of Product Differentiation
Garments are generally classified into wearing and non-wearing apparel. Products are differentiated in terms of style, quality of raw materials and users according to gender and age. Figure 2 presents presents the detailed classification classification of the different products of the garments industry.
3.2
Market Conduct 3.2.1
Price Determination
Upon receipt of the sample product sent by the buyer/importer, the head office usually located abroad prepares its price quotation which are generally based on the following: Material costs (including sewing, packing
and other accessories)
40%
Labor costs
25%
Overhead costs
35%
Awarding of bids are generally based on price, quality and track record of the garment manufacturer. In most cases, however, material costs are not included in determining the price since buyers supply the raw materials for production or even specify the suppliers where garment accessories accessories can be sourced sourced out. Since transactions are done at the head offices, prices are already agreed on at their level. Companies in the Philippines will just have to ensure that their production costs are within the price agreed upon by the buyer and the head office. Garment exporters in the Philippines who make their own designs and deal directly with foreign buyers follow the same pattern in determining the price. On the other hand, garment sub-contractors performing sewing, embroidery, hemstitching, hemstitching, or smocking jobs depend on the prices quoted by their mother companies.
3.2.2
Product Flow
Garment exports usually flows through the following channels before they reach the customers: a.
Traders
b.
Garment Manufacturers
c.
Manufacturing Sub-contractors
d.
Small Subcontractors or Satellites
e.
Wholesalers/Buyers’ Outlets
f.
Retailers
The finished products are delivered to the buyers either by air or sea. 3.2.3 Sources of Financing
The main source source of financing of garment manufacturers manufacturers are banks/financing banks/financing institutions. Some other entrepreneurs use their own money while manufacturing sub-contractors and and satellites depend on their mother mother companies to finance their operations.
4.0 The Competitive Competitive Advantage of the Philippine Garments Industry 4.1
Factors Affecting Competitiveness
Backwa Backward rd linkag linkage e with with the textiles textiles industry industry.. Due to the weak backw backward ard linkage linkage with the textiles textiles industry, the garment manufactur manufacturers ers are forced to import raw materials. On the average, the garments industry imports imports up to three quarters
of their their input input requir requireme ements nts.. The need to import import raw materials materials leads to longer longer turnaround time. The average turnaround time for the Philippines is from 120 to 145 days. Since fashion has a short cycle, like like six to ten months, a long turnaround time makes one one uncompe uncompetitiv titive. e. In order order to compet compete e in the the higher higher end market market that is is very fast paced, turnaround time should be faster. The weak backward linkage with the textiles industry can be traced to the uncompetitiveness of the textile industry industry in terms of price and quality. The industry industry has had a long long period period of protec protectio tion n from from the governm government ent.. The Philipp Philippine ines s is uncomp uncompeti etitiv tive e in materi materials als costs costs in yarn yarn produc productio tion n becaus because e of the high high cost cost of cotton cotton which is mostly mostly import imported. ed. Prote Protecti ction on drives drives prices prices up. To reduce reduce costs, costs, producers source source their input requirements requirements from the illegal market. market. This explains the lack of incentive for the garment industry to integrate backward. It is estimated that a quarter of the total domestic demand for textiles is supplied by smuggled fabrics; either through technical or direct smuggling.
Improved labor relations. relations. The rising wage rates rates in the Philippines makes the garments industry industry vulnerable vulnerable to fierce competition competition from lower wage wage countries. countries. This has driven the Philippines to go up to the the higher end market. Over time, wages were rising at a faster rate than productivity, making Philippine wage rates uncompetitive. Contributing factors to the decline of labor productivity during the latter part of the 1980s were problems problems concerning labor relations. relations. The period was marked marked by much labor unrest in the industry so that there seemed to be a tradeoff between minimizing labor costs on one hand and improving labor productivity on the other. Table 14 shows the labor productivity statistics in Asean countries. Labor productivity is positively affected by high level of skills which in turn are negatively affected by slow turnover rates, security of tenure and high employment morale. But slow turn-over turn-over rates are practiced to reduce labor costs which which include the minimum wage and other benefits. Contractual hiring hiring also keeps the labor force from being unionized, unionized, diminishing diminishing the possibility possibility of strikes. strikes. Industry Industry experts experts cited that labor productivity in the garments industry was low because of apathy, conflict, confusion, disorganization and inaction. Table14. Labor Productivity in Textile and Garments Industries in the Asean countries (in US$1,000 at 1985 prices)
Investment Investments s in new machiner machineries. ies. Part of the the explanation explanation of the decline decline in labor labor prod produc ucti tivi vity ty was was trac traced ed to tech techno nolo logi gica call back backwa ward rdne ness ss – too too many many old old machin machines es that that were were in need of replacem replacement ent.. It was noted, noted, however however,, that that the Philippines Philippines had taken steps steps to address this problem. problem. From 1989 to 1995, the total total value of imported textile machinery by the Philippines increased by 121% over the previous nine nine years. While organizational organizational set-up is efficient, efficient, the garments industry is plagued with either technological backwardness or inability to adapt to imported new technology. Technical efficiency, however, however, while positive has not been growing at an encouraging pace. Product Product development development and market market diversific diversification. ation. Firms Firms that are inefficient inefficient with geographically concentrated concentrated markets and lacking in product product differentiation are the most vulnerable to increased risk with the quota phase under the Multi-Fiber agreement. Risk also increases if the country is but an assembly base with the new rules of origin. Also with NAFTA, Mexico is capable of taking over over the market share of the Philippines. Mexico has even surpassed China as the number one garment supplier supplier to the United United States as of 1995. Therefore Therefore,, for competitiv competitiveness eness,, firms would need to diversify product lines lines and market clientele. Furthermore, they could develop particular market niches. Industry-wide competitiveness and the value chain. Much of the raw material inputs used in the Philippine garments industry are imported on consignment basis.If 67% of total costs in garments garments production are intermediate inputs inputs and at least 70%
are imported on consignments, then it implies that firms have no direct control, of at least, 46% of their costs. Having to import raw materials naturally lead to decreased competitiveness as reflected in longer turnaround time and lesser flexibility for the the local firms. This, together with the consignment arrangement, greatly constrains the local firm’s ability to manage the the value chain. chain. Protection Protection drives drives prices prices of textiles textiles to increase. increase. To reduce costs, as already noted, producers source their input requirements from the illega illegall market market.. This This explai explains ns the lack of incent incentive ive for the garments garments industr industry y to integrate backward. Energy costs: infrastructure infrastructure neglect. The energy infrastructure infrastructure environment characterized with frequent power outages, cross subsidies and large distribution losses throughout the 1980s to the early 1990s resulted in the decline in the price competitiveness of the garments garments industry. industry. Financial costs. Amidst the financial reforms reforms during the last half of the 1980s, the financial infrastructure environment was characterized by greater concentration with wider bank spreads and increasing profitability. This led to higher financial costs finally resulting in decline in competitiveness. Technolog Technology. y. Going to the upper end market necessitat necessitates es the feel for the changes in fashion. In order to do this, the structure structure of production should should be flexible and fast enough. Production flexibility, in turn, is heavily dependent on highly skilled workers, specialized equipment and revolutions in management practices. In the short and medium term, wage costs will still be the most important competitive advantage in garment production production in the low-end low-end market. The equipment most suitable would be the basic, inexpensive reliable equipment that is easy to maintain. maintain. However, However, higher quality quality fashion fashion and designs designs clothing clothing demand demand production production flex flexib ibili ility ty,, semi semi-s -ski kill lled ed and and high highly ly skil skille led d work worker ers, s, mana manage gers rs,, and and expe expert rts. s. Technological innovations enhance the possibility for the Philippines to move into the higher quality market segment. Output Output factors. While it is price competition competition that drives drives the lower valueadded added segme segment nt of the garmen garments ts market market,, it is produc productt differ different entiat iation ion or market market niching niching that character characterizes izes the higher end segment. segment. However, However, as more and more countries move up the higher value segments of the market, innovative designs and quality are given premiums. premiums. What is necessary is to be attuned to the latest styles in fashion and the possible direction it would be heading, if the ability to influence it does not exist. exist. This requires information, information, foresight, foresight, flexibility flexibility in producti production on and ability to respond quickly to short fashion cycles. A competitive and reliable source of raw materials is also imperative. Service reliability reflected in timely delivery with very minimal rejection rate translates to a competitive company image which is desired in any market segment. A custo stome merr shou hould not only only be satis atisfi fied ed with ith the the produ roduc cts of garm garmen ents ts manufacturers, in terms of price and quality, but also with the services provided for by manufacturers.
4.2 4.2 Industry
Anal An alys ysis is
of th the e
Comp Co mpet etit itiv ive e
Adva Ad vant ntag age e
of
the th e
The garments industry industry is composed composed of numerous highly competitive garment manufacturers in the country making its market structure move towards the perfect competition stage. From 1991 to 1995, it contributed an average of 5.6 percent to total manufacturing Gross Value Added Added (GVA) and 1.4 percent to gross Domestic Domestic Product (GDP). Its GVA grew by an average of 5.3 percent percent per year. The sector remains a top dollar earner, contributing more than 13 percent to the national export coffers. coffers. Region IV contributed contributed US$ 479M in 1995 1995 representing 17.23 percent of the total garment exports exports of the country. country. However, shipments shipments declined the following year both at the national and regional levels due to the world economic forces at play. The industry was able to recover in 1997 until 1998 and garment manufacturers in the region contributed 18.45 percent and 19.94 percent respectively to the country’s country’s total garment garment exports . A total of 17 firms, 13 from Cavite, 3 from Rizal and l from Batangas, were even listed in the 1997 Top 100 Garment Exporters in the Philippines. The industry’s critical advantages are its low-cost highly skilled labor and its quota allocations allocations from from the the USA, USA, ECC ECC and Canada. Canada. However, the critical variable that threatens to choke the growth of the industry is its dependence on its quota allocations. The full opening up of trade through the WTO would completely do away with with the existing quotas quotas in year 2005. This would mean mean that competition among garment manufacturers of developing countries would be more intense after five years.
4.3 4.3 Industry
Forc Fo rces es
Affect Affe ctin ing g
Comp Co mpet etit itio ion n
in
the
Garment Garme nt
Using Porter’s first model (Figure 6), the Philippine garment industry is characterized as follows: 4.3.1
Threats of New Entrants
The industry is relatively easy to penetrate for the following reasons: •
Economies of scale do not deter new entrants;
Preference of customers for quality overcomes business loyalties; •
4.3.2
•
Capital requirements are not very large;
•
Absence of proprietary technology;
•
Non-exclusive distribution channels; and
•
Provision of attractive incentives by the government
Bargaining Power of Suppliers
Although Philippine-made garments are import dependent, the bargaining power of suppliers is relatively low. This is attributed to the fact that manufacturers manufacturers do not have difficulties in sourcing out their raw materials such as a s fabrics/textiles
and garment accessories. accessories. These are either imported directly by garment producers, producers, consigned to producers by their mother companies or sourced out from local suppliers. Threads and packaging packaging materials can be purchased purchased also from local suppliers. The power of suppliers come only from the fact that raw materials comprise around 40 percent of the total product cost. 4.3.3
Bargaining Power of Institutional Buyers
The bargaining power of institutional buyers is not very high for two significant reasons. First, the industry industry is composed of many institutional buyers buyers located in 103 countries. countries. Due to the the industry’s capability to supply high quality products, they source their high-end apparel requirements from the Philippines while low-end products are given given to low-cost producing producing countries. Second, pricing of products is determined through bidding or negotiations between the head office/mother company and the buyers. 4.3.4
Threat of Substitute Products or Services
The threat of substitute products products or services is both both low and high. The threat is high when it comes to the manufacture manufacture of low-end garment products. products. The threat comes from competitor countries countries due to their lower labor cost. cost. However, when it comes to high-end garments, the Philippines Philippines is very competitive. competitive. It also has an advantage when it comes comes to designs with with intricate patterns. In this case, the the threat of substitute products is low.
4.4
Strategy, Structure and Rivalry
4.4.1 Strategy
The Philippi Philippine ne garmen garmentt indust industry ry has to brace brace itself itself for the impact impact of the curr curren entt libe libera rali liza zati tion on of appa appare rell quot quotas as or the the dism disman antl tlin ing g of the the Mult Multii Fibe Fiberr Agreement (MFA). The move to liberalize import quotas which will be implemented in three (3) stages over the 10-year transition period (1995-2005), will involve two(2) processes. First, the gradual phase out of quotas; and second, the accelerated quota growth for those remaining under quota in each of the phase out (NEDA Industry Situationer, 1997). Thus, by 2006, importers will be free to source their requirements anywhere. Purchase decision will be based on product competitiveness in terms of price, quality, service, delivery, reliability, and fashion intent, among others. In anticipation of this, the Philippines has formulated the following strategies: •
Increased market presence in five priority non-quota countries: Japan, Singapore, Hongkong, Taiwan and South Korea;
•
Development of emerging markets;
•
Productivity improvements; and
•
Expansion of product/production base and product development
4.4.2
Structure
The industry is composed of establishments owned and managed entirely by Filipinos and firms with foreign investors employing foreign and Filipinos workers. The number of firms with foreign equity is minimal compared to the Filipino owned owned one. one. Howeve However, r, the foreig foreign-o n-owne wned d firms firms lead lead in terms terms of invest investmen mentt and export exports s having having the capita capital, l, techno technolog logy y and market market advant advantage ages s (The (The Philip Philippin pine e Garment Export Industry, GTEB, 1997). These These foreign-ow foreign-owned ned garments garments firms are mostly mostly Taiwanese, Taiwanese, Koreans and Chinese. The companies in the Philippines are usually plant or manufacturing sites. The head offices or mother companies, where the wheeling and dealings are done are locate located d in the countr countries ies of the owners owners.. In this this case, case, produc productt design designing ing and sample making are usually done at the head offices. Most large manufacturing firms have one or more satellite companies which allow them to specialize. For instance, company X will distribute garment style a,b,c to Satellite A, B, and C or in some cases, each satellite will only be supplying orders of customers A, B, and C. The indust industry ry is basica basically lly labor labor intens intensive ive in view view of the unique unique produc productio tion n process involved. China and Hongkong have been ranked first and second among the Top 10 suppliers to the United States in terms of value and volume of exports in the last five years. However, China has encountered difficulties in resolving talks with the United States. The latter has threatened to reduce China’s quota by 35% if it would fail to meet its market demand. In addition, a cloud of uncertainly hung over the economic landscape of Hongkong due to its turnover to the Peoples Republic of China. China. Other Other US foreig foreign n suppli suppliers ers of garmen garments ts are also also having having politi political cal/in /inter ternal nal problems, i.e. Indonesia, Taiwan, El Salvador.
5.0 Factor Conditions and Industry Trends 5.1
Factor Conditions
5.1.1
Labor
To date, the industry is not having difficulties with regards to sourcing of workers. Skilled sewers, embroiderers, hand weavers and smockers for high-end products are abundant in the region. Some Filipino supervisors are even tapped to train workers in branches located in Turkey and El Salvador. Semi-s Sem i-skil killed led and non-s non-skil killed led worke workers rs are highly highly traina trainable ble,, intell intelligen igentt and knowledgeable in English. Moreover, training on operation of new equipment are usually provided by suppliers of the company. 5.1.2
Product Design
The Philippine garment manufacturers are mostly “order takers”, meaning the designs and materials to be used for production are dedicated by foreign buyers.
The Design Design Consu Consultan ltancy cy for Produc Productt Develo Developme pment nt Progra Program m is a step step to improv improve e the situat situation ion.. Target Targeting ing the medium medium to high-e high-end nd market markets, s, the move move is expected to gradually veer the local exporters from the traditional image of an order taker to one that initiates designs. The collections are envisioned to be responsive to market needs, tastes and preferences. 5.1.3
Technology
Incr Increas eases es in prod produc ucti tion on leve levell requ requir ired ed inve invest stme ment nts s in stat state e of the the art art machines and equipment. The use of barcodes, CAD, EDI and other computerized machin machines es improv improved ed the manufa manufactu cturin ring g proces processes ses and lowere lowered d the manpow manpower er requir requireme ements nts and superv supervisi ising ng time time nee needed ded in each each produc productio tion n proces process. s. Produ Product ct delive delivery ry has also also been been improv improved ed throug through h the use of contai container nerized ized shippi shipping ng and hanger shipping.
5.2
Demand Conditions
5.2.1
Domestic Demand
Filipino’s flair for dressing may be the single most important factor behind the evolution of Philippine garment manufacturing into an industry with world bearing potential. Our people, lower-income individuals included, have a penchant for high style dresses dresses and grooming. grooming. Total family expenditure expenditure for clothing, clothing, footwear and related products grew at annual rate of 20.82 percent from 1994 to 1997. It grew at an average rate of 22.56 percent (Table 12). Garment import averaged $20.6 M per year which is only about 0.10 percent of the country’s total imports during the period. Imports grew by an annual average of 41.3 percent. Major sources were Hongkong and Taiwan with an annual average share of 33.5 percent and 16.8 percent respectively. 5.2.2
Foreign Demand
The world demand for garment and textile is estimated at US$200 billion. However, total Philippine garments and textile exports to the world was US$2.957 billion in 1997 which only represents a mere 1 percent share. Men’s, women’s, as well as children’s and infant’s wear constitute the bulk of apparel demands accounting for an annual average of 17.3 percent, 19.6 percent and 17.9 percent, respectively, of the total garments exports.
5.3
Related and Support Industries
Infrastructure. Infrastructure relative to the garment industry have to do with with teleco telecommu mmunic nicatio ations ns,, transp transport ort/s /ship hippin ping g and govern governmen mentt proces processin sing. g. The The government is providing all the support to respond to the needs of the industry.
installation of the GTEBNet, an electronic electronic Information Information Technology. Technology. The installation interchange information system, allows garment exporters to electronically transact quota applications and file export documents. Another tool is the Electronic Visa Information System (ELVIS) is now being used to transmit all visas issued by the GTEB to the U.S. Customs to eliminate entry of illegal shipments to the U.S. Licenses for raw material importation are now processed within the targetted time frame with the aid of computerization. welcome e develo developme pment nt to the indus industry try is the Training Infrastructure. Infrastructure. A welcom establishment of the Asian Institute of Design and Technology thru Executive Order 414. The Institute hopes to bolster the design capabilities of the garment export sector, and could make the Philippines the fashion center of Asia. Figure 6. Forces Affecting Competition in the Garment Industry
5.4
INDUSTRY TRENDS AND PROSPECTS
5.4.1
Issues and Challenges
The Philippine apparel industry faces a cost disadvantage position in terms of material material and labor price. Whereas Whereas the Philippines Philippines used to compete with low labor costs in the world market, the other Asian countries –China, Vietnam and Indonesia offer offer lower wages. wages. Moreov Moreover, er, these these Asian Asian countr countries ies were able to speed up the growth of a vertically integrated clothing industry with government support and a more more libe libera rali lize zed d poli polici cies es.. Coup Couple led d with with low low prod produc ucti tivi vity ty and and low low long long-t -ter erm m technological investment, a shift to the upper end market was noted. Influx of cheap imports pose a major concern concern to apparel makers and retailers. retailers. Continuou Continuous s quality offerings and providing downstream services and brands are strategies pursued as the apparel market gives premium to quality and design. The industry has to hurdle raw material cost constraints, a low capital to labor rati ratio o of 0.08 0.08 in 1990 1990 comp compar ared ed to 0.16 0.16 in 1980 1980,, lack lack of tech techni nica call pers person onne nel, l, restricted access to financing, stiff competition from low labor cost of other Asian countries, notably China, Vietnam, Bangladesh, Sri Lanka and Indonesia and lastly, rampant technical smuggling smuggling that hampers the growth of the textile industry. These issues should be addressed by forming international joint ventures to improve our technical technical knowledge, knowledge, focusing focusing on high-value high-value added items and profiting profiting from the liberalization moves of the banking sector. A strategic shift to medium and high-end cost is deemed possible with the inherent skills of our workers, fluency in the English language and the positioning of local designers in the international market. A total of P7.8 billion in project cost for yarns and fabrics from equity of local sources has already been approved by the board with project cost for garments at onlyP715.0 million, A P36.4 billion investment investment in fabric dyeing, dyeing, printing and finishing finishing is planned to boost garment garment production by 1997. This hopes to increase the supply supply of locally processed fabrics, lower production cost and shorten procurement time from 120 days to 60 days. 5.4.2
Export Thrust
The garments sector is one of the sectors identified as the potential sources of increm increment ental al growth growth to achiev achieve e the US$50 billion billion export export target target for 2001. Its potential for achieving higher growth is based on the following: •
•
•
Product is competitive; product’s export growth rate is much higher than the market growth rate (for both growth and declining markets) Produc Productt is under under perfor performin ming: g: Produc Product’s t’s export export growt growth h is lower lower than than market growth rate or industry capacities or under-optimized. There is high and increasing world market demand for product.
The Export Export Development Development Plan of the Philippines Philippines places particula particularr focus on Philippine exports of men’s and women’s clothing, clothing, which have managed to grow grow at high higher er than than mark market et rate rates s for for the the past past six six year years. s. This This impli implies es some some leve levell of competitiveness for these specific products, which has translated into higher market shares. shares. Other quota categories categories could be given special attention, attention, especially especially those which are not being performed or where performance is low. Export of garments can grow higher through the following: Quota optimization. While the Multi-Fiber Agreement Agreement (MFA) is still in place, it shall be optimized to the the country’s advantage. DTI shall identify non-performed non-performed and substantial substantially ly under-utilized under-utilized quota allocations. allocations. Investors Investors and locators will then be invited invited to avail of these quotas. Particular Particular emphasis emphasis shall be given to those which can bring in new technologies to upgrade and diversify production. Upgrading Upgrading of plant plant facilities facilities and skills. skills. Both DTI DTI and and the indust industry ry shall shall prom promot ote e the the upgr upgrad adin ing g of plan plantt faci facilit lities ies and and skil skills ls to impr improv ove e qual qualit ity y and and productivity. This shall be accompanied by assistance assistance in sourcing sourcing funds. funds. The thrust of upgra pgradi din ng the the indu indust stry ry and and esta establ blis ishi hin ng more ore susta ustain inab able le base bases s for competitiveness will be a strategy to attract investors and keep them beyond the MFA. Aggressiv Aggressive e promotion promotion of Philippine Philippine designer designer clothes. clothes. DTI and industry industry associ associati ations ons shall shall initiat initiate e and promot promote e Philip Philippin pine e design designer er clothe clothes s in men’s men’s and women’s fashion. Initiatives such as the the Fashion Design Institute developed with the the Philippine Trade Training Center (PTTC), Natori and Philippine fashion designers must be expanded and intensified. The “gurus” “gurus” of international international fashion shall be sought to look into the Philippine fashion landscape landscape to identify potentials and strengths. strengths. This had been done for furniture where world famous designers were brought in under a Product Specialist Program. Promot Promotion ion of indus industri trial al peace peace and more more pragma pragmatic tic work work schedu schedules les.. The implem implement entati ation on of the New Social Social Accor Accord d must must be intens intensifi ified ed in the garmen garments ts sector. sector. Moreover, Moreover, the introduction introduction of more pragmatic pragmatic work schedules, schedules, such as flexitime, without violating the 48-hour week, could bring about higher productivity. An average annual growth rate of 5% for 2000 and 2001 for garments is targeted to achieve the millenium target (Table 15). Table 15.
US$34 Billion Target for 1999 and Projections for 2000 and 2001 5.4.3
Growth Forecast
The Univer Universit sity y of Asia Asia and the Pacifi Pacific c (UAP) (UAP) confir confirmed med that that footwe footwear ar and wearing apparel were considered as fast-growth industries, posting a 24.6% growth in value from January January to September 1998. 1998. During During the same period, footwear footwear and wearing apparel increased by 10.9% in volume. As a whole, the industry industry chalked up a 6.5% growth in 1998 and was expected to maintain maintain a 5.2% growth in 1999. The projected decline in the industry’s growth could be attributed to the very tight net margins and higher costs of imported materials. Garments had 43% import content, resulting in a 22.8% increase in costs of the finished finished products. Improvement in the consum consumer er market market will will boost boost the sector’ sector’s s growth growth in 1999. The followi following ng table illustrates illustrates the industry’ industry’s s performanc performance e as compared compared to other industries industries based on selected economic indicators:
Future prospects look promising promising for the industry. The industry is set to expand with the introduction of advanced technology by new players, improvement of export market conditions, and tariff tariff reductions. The phase-out of the Multi-Fiber agreement which administered quota agreements between countries for 20 years started in in July 1995. The World Trade Organization shall implement a three-stage reduction on quota restrictions within 10 years. Although quota phase out remains apprehensive, the move has given local manufacturers opportunities to explore more profitable and opportunities and expand sales to non-quota categories. Better regional regional cooperation cooperation in the ASEAN provides provides better access access to these markets. markets. A full trade agreement agreement of common effective effective preferential preferential tariff reduced reduced rates from 50% to 5% by 2003-2008. 2003-2008. Although Although still competitive, competitive, better prospects prospects await local manufacturers on higher value added products.
6.0 PERFORMANCE OF THE INDUSTRY AT THE REGIONAL LEVEL 6.1
Number of Establishments
In 1990, there were 379 garment establishments employing more than 10 employees in the Southern Southern Tagalog region. region. These represented represented around 20 percent percent of the total number of establishments. The remaining 80 percent were custom tailoring and dressmaking dressmaking shops. The number number increased to 473 in 1993, 137 of which were were invo involv lved ed in the expo export rt trade. trade. As a whol whole, e, the numb number er of appa appare rell maki making ng establishments rose by a minimal rate of 1.4% a year. This was mainly brought about by the slight increase increase in the number of ready made clothing clothing manufactur manufacturing ing establishm establishments ents averaging averaging 7.8% a year. A decline equivalent equivalent to –2.3% was noted amon among g esta establ blis ishm hmen ents ts enga engage ged d in the the manu manufa fact ctur ure e of wear wearin ing g appa appare rel, l, not not otherwise classified (Table16).
Table 16. Number of Garment Mfg. Establishme Establishments nts , Southern Tagalog Region: 1990-1994 6.2
Profile of Small, Medium and Large Enterprises
6.2.1
Employment Level
In 1994, the 401 garment establishments employing more than 10 workers employed, on the the average, a total of 34,946 workers, or or 19.8% of the total employed in manufacturing manufacturing activities in the region of 176,149. As seen in Table15, more than half (52%) were engaged in the manufacture of women’s, girl’s & babies garments. The second second biggest group of workers workers (24.2%) were into the production of ready-made clothing, not otherwise classified. The manufacture of men’s and boy’s garments absorbed 7.2% of the total employed. Custom tailoring shops shops and custom dressmaking shops employed the smallest number of workers aggregating to less than 500.
Size and Location In 199 1996, 6, the NSO identi identifie fied d 2,005 2,005 establ establish ishmen ments ts engage engaged d in wearin wearing g apparel manufacturing manufacturing in the region. Of this number, 385 385 or 19.2% were were small to large establishments employing 10 or more workers. As seen in Table 16, ready made clothing manufacturing which include garment production of women’s, boy’s , girls and babies clothes topped the list with 331 firms or 86% of the total number of establishments with more than 10 workers. In terms of employment size, small firms employing less than 100 workers numbered 299 and accounted for almost 78%. Large and medium firms firms numbered almost equally at 45 and 42, respectively. Medium sized firms with with employment level of 100 to 199 workers were mostly engaged in the manufacture of ready-made clothing except for seven establishments which were into the manufacture of miscellaneous wearing apparel located in Batangas, Cavite and Laguna and two embroidery firms operating in Batangas and Cavite. The largest largest firm was Capital Capital Garment Corporatio Corporation n located in Taytay, Rizal which had 2,000 or more workers. The firm was into production of ready made clothing. The second largest firm was Grandos Philippines Philippines Industries, Inc. Inc. located in Bauan, Batangas with more more than 1,000 workers. workers. Other large firms with employment size of 200 and more but less than 1,000 were Quality Hats and Bags Mfg. Corp. in Carmona, Carmona, Cavite; G&B Export Export Corporation Corporation in Imus, Cavite; and Les Grants Phils. Phils. Inc. in Dasmarinas, Cavite. Cavite. These four firms were engaged in the manufacture of various items of wearing apparel, not elsewhere classified.
The concentration of large firms was in Cavite which had a total of 26 large firms, followed by Laguna and Rizal Rizal with 10 each. Batangas had only two large firms firms operating in the area. Table 16. Number of Establishments by Level of Employment, by Industry Description: 1996
6.2.2 Compensation Level Based on the data presented in the same table above, some P1.603 billion in compensation were received received by garment workers and employees employees in 1994. This figure represented 11.8% of the total compensation received by workers in all manufacturing establishments establishments in the region amounting to P13.563 billion. The bulk (53%) of the compensation amount amount for garment workers workers went to the women’s, girl’s and babies garment manufacturing division and the ready made clothing workers (24%). Average compensation, compensation, however, appeared to be higher among employees in the manufacture of men’s and boy’s garments at P55,000 a year or an average of P4,583 a month. The second second biggest compensation average was reported by those engaged in the production of hats, gloves, handkerchiefs, etc. at P49,000 , followed by those in the manufacture of women’s, girl’s and babies wear at P47,000. P47,000. Workers in the the embroidery subsubsector received the smallest average compensation of P19,000 a year owing to the highly seasonal nature of the work (Table 17).
Table 17. Employment and Compensatio Compensation n for Garment Manufacturing Establishments with Average Total Employment of 10 or More : 1994 ( Value in P'000)
Compensation by Type of Worker The bigger percentage (84%) of the total compensation amount, was paid to production workers while a much smaller percentage (7.7%) went to the managers, executives executives and superviso supervisors. rs. Embroider Embroidery y shops and custom custom dressmaki dressmaking ng shops, howe howeve ver, r, prov provid ided ed bigg bigger er prop propor orti tion onat ate e shar shares es of more more than than 90 90% % of the the compensation amount to production production workers, indicating indicating perhaps that these types of workers tended to work in smaller administrative units requiring lesser involvement of paid managers or supervisors ( Table18)
Table 18. Number of Establishments & Compensation by Type of Employee for Garment Establishments With Average Total Employment of 10 or More, by Industry Sub-Group: 1994
6.2.4
Hours Worked in Garment Manufacturing
In 1994, the employed workers in the garment sector rendered 79,284,047 hours of work, or an average of 2,269 hours per worker. The hours worked in the sector comprised 22% of the total working hours of all manufacturing establishments in the region. Judging from the average hours worked worked by each production worker, production production workers in the garment garment sector were relatively fully employed, with average working hours ranging from 2,176 to 2,722 hours or from 272 to 340 days. Among the various industry divisions, production workers in embroidery establishments had the least number of working working hours while those in the manufacture of gloves, etc. and men’s and boy’s clothing had the most number of working hours. Table 19. No. of Establishments, Total Employment By Type of Worker and Hours Actually Worked by All Production Workers for Garment Mfg. Est. with Average Total Empl. of 10 or More, by Industry Group:1994
6.2.5
Value of Products Pro ducts Sold
The wearing apparel sector generated products valued at P5.633 billion in 1994, more than than three-fifths three-fifths (62.3%) of which were generated by firms engaged in women’s, girls and babies garments manufacturing. manufacturing. Another 25% were were generated by ready-made clothing (Table 20). Table 20. Number of Establishments & Value of Products Sold by Mode of Sale for Mfg. Establishments with Average Employment of 10 or More, by Industry SubGroup:1994 6.2.6
Mode of Sale
As seen in the the following Table 20, the bulk of wearing apparel products products were sold to the export export market. market. This mode mode of sale made up 77.4% of the total total while an additional additional 1.6% were were sold to exporters. exporters. The domestic domestic market market absorbed absorbed 17% and inte interp rpla lant nt tran transf sfer er corr corres espo pond nded ed to 3.45 3.45%. %. Cust Custom om tail tailor orin ing g and and cust custom om dressmaking shops sold their goods only to the domestic market whereas other types of establishments sold varying portions of their output to this sale outlet, with embroidery embroidery establish establishments ments reporting reporting the second second biggest biggest proportion proportionate ate share of produc products ts cateri catering ng to this this market market.. On the other other hand, hand, the bigger bigger propor proportio tion n of products generated by men’s and boy’s garments, women’s & babies garments and the manufacture of hats, gloves and others were for the export market (Table21).
Table 21. Percent Share of Value of Products/By-Products Sold By Mode of Sale: 1994
6.3
Profile of Micro-enterprises
6.3.1
Employment Level
In 1994, firms employing employing less than 10 workers workers numbered numbered 2,043 or 15% of those those employed employed in other other manufa manufactu cturin ring g firms firms with less less than than 10 worker workers s in the region. These firms employed employed a total of 7,344, with with 58% paid workers workers and 42% as unpaid unpaid workers. workers. This could could be attributed attributed to the the small operation operations s of these these firms where where workers workers usually include include family members. Employmen Employmentt level was highest in custom and custom tailoring shops as well as in the women’s, girls & babies segment (Table 22).
Table 22.
No. of Establishments & Total Empl. By Type of Worker for Garment Mfg. Est. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994
A big majority of workers in the the apparel sector were were women. Table 23-shows that almost 64% of the total employment in the micro-establishments were female. The female workers in this sector made up a third of the women workers in the total female female employ employmen mentt in other other manufa manufactu cturin ring g sector sectors s in the region. region. Paid Paid female female workers accounted accounted for 63% while while unpaid female workers workers made up 37%.
Table 23. No. of Establishments & Female Empl. By Type of Worker for Garment Mfg. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994
6.3.2
Size and Location
In 1996, the bigger bigger portion (81%) of the 2,005 wearing wearing apparel firms consis consistin ting g of 1,620 1,620 establ establish ishmen ments ts were were micromicro-ent enterp erpris rises es with with less less than than 10 workers. Custom tailoring and dressmaking dressmaking dominated the micro sector with 81% of the total belonging to this category. category. Laguna had the biggest concentration concentration of custom tailoring and dressmaking shops with Quezon, Cavite and Batangas ranking second to fourth fourth in this category. category. Rizal, on the the other hand, hand, lorded lorded it over in the readyreadymade clothing segment with 168 firms. Embroidery work was mainly confined confined to Laguna and Batangas with Rizal and Cavite Cavite having only only three three firms each each in this category. category. Laguna Laguna also had dominanc dominance e over the manufacture of other wearing apparel not elsewhere classified with its 174 micro-enterprises.
6.3.4 Compensation
Micro-enterprises were mostly made up of custom custom tailoring (969) and custom custom dres dressm smak akin ing g (500 (500)) shop shops, s, and and wome women’ n’s, s, girl girls s & babi babies es wear wear (210 (210). ). Tota Totall compensation amounted to P86,592,000 P86,592,000 in 1994 which came mostly mostly in the form of salaries and wages (Table 24) Table 24. No. of Establishments & Comp. By Type of Empl. for Garment Mfg. Est. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994(P'000)
6.4
BOI – Registered Firms
6.4.1
Number of Garment Exporters
As of 1997, a total of 186 establishments establishments were into export. export. Majority of these establishments establishments were in Cavite, Laguna and Rizal. From 1993 to 1997, the number of garment exporters increased increased by some 5.2% 5.2% a year. Laguna which registered 34 establishments in 1997 reported the highest average increase of 12.2%. Cavite and Rizal which which contained the bulk of garment exporters exporters had lower growth average of 5.7% and 3.2 %, respectively. It is to be noted that the
biggest increase in the number of garment exporting firms occurred in 1995 and 1997 (Table 25).
Table 25. Number of Garment Exporters by Province and By Year In 1997, some 17 garment exporters in the region ranked among the top 100 garment exporters in the the Philippines with four of them them classified among the top 20 garment garment exporters. exporters. Thirteen Thirteen of the top garment garment exporters exporters in the region region were in Cavite City, three were from Rizal and one was from Batangas. Refer to Table 26- for the listing of the top garment manufacturers in Region IV.
Table 26. Region IV Garment Manufacturers Listed in the Top 100 Garment Exporters: 1997 6.4.2
Value of Exports
The Southern Tagalog Region was the second biggest garment exporter in the country, next only to the NCR. In 1997, the region posted some US868,890 FOB value of garment exports, contributing 29.3% to the total garment exports for the year of US$2.965 million or some 39% lower than the export value reported by the NCR. The region likewise accounted for 26.9% of the total value added reported by garment exports in the Philippines in the same year (Table 27). Table 27. Value of Garment Export By Region (Based on TECs issued): As of December 31,1997
In 1998, the region reported garment exports amounting to US$566.385 million. More than half of the value of the regional exports could could be traced to Cavite with its garment exports amounting to US$303.724 million. The two other major exporting exporting provinces provinces of Laguna and Rizal accounted accounted for the two other bigger shares of the total at 15.9% and 8.5%, respectively. respectively. Table 28. FOB Value of Garment Exports by Province, Southern Tagalog Region: 1998
7.0 PRODUCTION AND TECHNOLOGY PROCESSES 7.1
Production Process
The production process of a garment establishment Inc. is divided into four (4) major operations namely: raw materials inspection, fabric layout, marking and cutting, sewing and finishing. The product design and master patterns are usually being prepared by its customers/buyers. 7.1.1
Raw Materials Inspections
Raw materials materials inspectio inspections ns constitut constitutes es the heart of garment garment manufactu manufacturing ring process as the results from the activity involved in this phased will determine the major quality aspect of the finished goods. This is being done at the raw materials warehouse.
a. Fabric Testing
Import Imported ed fabric fabrics s from from Hongko Hongkong ng and Thaila Thailand nd are inspec inspected ted using using the Inspection Machine. The Inspector normally notifies the QA head or the Warehouse Supervisor whenever major defects are arise such as smash, penmark, thin filling, cotton slub, pick-out mark, hole, dye, bulky thread, colored thread, thick yarn, fuzzy, missing yarn and stain. In this case, the buyer and the supplier are also notified in order to make necessary adjustments. However, the inspector always sees to it that a consistent grading standard is maintained. b. Raw Materials Inventory
This This is the checking checking of the actual actual quanti quantity ty of raw material materials s agains againstt the supplier’s deliveries and buyer’s and buyer’s requirement. The raw materials directly used in the manufacture of ready to wear garments include the following. a) Rolls of Cloth b) Embroidery Thread c) Sewing Thread d) Hang tags e) Buttons c.
Fabric Issuing
The warehouse clerk issue the roles of fabrics continuously to Cutting Section per per purc purcha hase se orde order, r, per per styl style e and and chro chrono nolo logi gica cally lly acco accord rdin ing g to the the ship shipme ment nt schedule. By this time, the Production Manager had issued the Cutting Note Sheets where information on purchase order number, style, colorways, quantities per size and cutting batch are indicated. These Cutting Note Sheets are the reference for the preparation of the bundles tickets. The bundle ticket is are attached to each bundle of cut goods where style, quantity size, purchase order, cutting batch number and sometimes even the destination are indicated for shipment purposes.
d. Fabric Measurement
Cutt Cutter ers s me meas asur ure e the the fabr fabric ic in orde orderr to dete determ rmin ine e whet whethe herr the the supp supplie lierr delivered them according to the specifications and more importantly, to determine whether actual consumption is in accordance with the computation. 7.1.2
Fabric lay-out, Marking and Cutting
After inspection and measurement, fabrics are laid out/spread out in a long and wide table. The roll of fabric is first placed on a bar suspended at the end of the table, spreading the whole roll layer by layer. In the layers of the fabrics, tissue paper are inserted to serve as separators for reference purpose. a. Marking
When all the required fabrics have been laid out, the marking process begin. The markers markers are placed placed on top of the layers layers of the fabric fabrics. s. These These markers markers are computerized which means that adjustments have already been made. Pins, weight and clamps are used as fasteners and fasten the layers of fabrics in order to avoid fabric movement while cutting. b. Cutting
After the markers have been pinned down, the cutters cut the fabric using an Eastman Cutter for big parts of the shirts. A baned Knife Machine is used for the collars and yokes. The cutters always see to it that they cut along the allowance lines. c.
Bundling
After cutting all the garment parts, bundling takes place. The bundlers tie and bundle together all parts as they are laid out to avoid mismatching of the color shades or size. A corresponding bundle ticket is assigned to the part / bundle. 7.1.3
Sewing Operation a. Preparatory Stage
Fusing is the preparatory process of the sewing operation. Depending on the order, some styles require fusible liners normally on collars and pockets. These are issued to the fusing section where a fusible liner together with the cut parts, are placed in the Kanneglesser Fusing Machine where heat is applied to fuse together the fabric and the liner. b. Sewing
The Sewing Division is composed of two production lines which use the latest high speed single and double wing types of sewing machines, button holing machines and button button sewing sewing machines. machines. The sewing sewing operation operation includes pocket preparatio preparation, n, front preparation, back preparation, sleeves preparation, cuffs and collar preparation and assembly parts.
c.
Quality Control Inspection
As the sewing operation is in process, the supervisor or the line leader, with the help of the roving inspector always see to it that each operation is properly done. They They check check on seam seam allowa allowance nces, s, proper proper labels labels/po /pock cket/ et/but button ton placem placement ent,, color color matching, stripes matching, number of stitches and such other details while they are still being done to avoid further damage or numerous rejects and fixing. Soon after the garments are finished or an output has been made, the line inspectors are assi assist sted ed by trim trimme mers rs who who trim trim unne unnece cess ssar ary y or exce excess ss thre thread ads s on seem seem and and hemlines. 7.1.4
Finishing Operation a. Pressing
Depending Depending on the requiremen requirements, ts, some style style require require steam pressing pressing while others others requir require e hard hard press pressing ing.. This This is where where the final final cosmet cosmetics ics featur features es of the garmen garments ts are enhanc enhanced. ed. The collar collars s mu must st stand stand firmly firmly,, side side seams seams shoul should d not appeared bubbling or crumpled and hemlines are evenly and smoothly pressed. b. Packing
Packing involves inspection, hagtagging, folding, polybagging, assorting and cartoning. The supervisor sees to it that handbags, stickers, size of polybags and cartons, destination are correct as to specifications. Once the shirts are completely packed, a buyer’s representative or inspector inspect the shipment. He picks several cartons for checking, prepares a final report and issues a release form which is issued as supporting document for shipment. A detailed process flow chart showing each phase of the production process is presented in Figure 7.
8.0 FINANCIAL PERFORMANCE 8.1
Profitability Measures of the Garment Industry
In 1996, the Development Academy of the Philippines came out with a study on the profitability measures of the garment garment industry in the Philippines. Philippines. The study covered the period from 1992 to 1994. As seen in Figure 8, the industry industry exhibited exhibited a steady increase in the ratio of its net income to sales. The return on assets ratio, however, showed a drop in 1994 after the significant growth in the previous year when it reached 0.0514 from 0.0407 in 1992. The cost of doing business, business, appeared to to have taken its toll on the industry as seen in the unchanged ratio of cost of goods and the almost equal performance of the the rati ratio o of operat operatin ing g expe expens nses es to sale sales. s. The The cost cost of mone money y has has gone gone up considerably in 1994 which brought about the steep climb of the interest expense to sales ratio ratio of up to 0.0196 as against against the 0.0115 in 1993. As a whole, the various various profitability ratios seem to indicate that the industry performed best in 1993 as shown by the positive ratios during this year.
8.2
Profitability and Liquidity Measures of Sample Firms
The study study presents presents financial financial data on two large firms, firms, All Asia and A Grade, two medium medium enterp enterpris rises, es, Kay Lee Fashio Fashion n and Andrew Andrew Appare Apparell and two small small enterprises, KBK Garments and MVL Apparel Corporation. Profile of the firms are presented in Table 29. There is no pattern that can be discerned that can be directly attributed to the size of the firms, except the inventory turn-over ratio which is a lot higher among the two medium medium sized firms firms compared compared to the two large firms. firms. As seen in Table Table 30, Kay Lee Fashio Fashion n and An Andre drew w Appare Apparell regist registere ered d invent inventory ory ratios ratios of 51.7% 51.7% and 40.2%, 40.2%, respectively respectively,, as compared to the 3.0% posted by All Asia and A Grade. In the same manner, manner, average average accounts accounts receivabl receivable e period was also also a lot shorter shorter with the two medium firms at less than 10 days. On the other hand, the two large firms had accounts receivables receivables of more than 100 days or three months. months. This means that the smaller smaller firms had less receivable receivables s and did not hold big inventory inventory at any given time. The larger firms, firms, on the other other hand, hand, because of of the nature of their operations operations could afford to provide goods on credit for a longer time and could maintain a bigger inventory. In terms of profitability, the larger firms as a whole were more profitable than the smaller firms as shown by higher percentages of gross profits and net profit, return on assets and return on owner’s equity.
9.0 PROJECTED HUMAN RESOURCE AND SKILLS REQUIREMENTS
9.1
Estimated Employment in Wearing Apparel Sector
Based on the 1996 survey of establishments, an estimate was done on the employment employment level level of establishm establishments ents engaged engaged in in the wearin wearing g apparel apparel sector. sector. This was done by assuming assuming an average average employmen employmentt size and multiplyi multiplying ng this by the number of establishments for each of the sub-sectors (Table 31). This became the basis for projecting employment for the subsequent years.
The human resource requirements of the industry is expected to grow in the next five years years owing to the industry’s positive performance performance in the the last two years. The 2000 third quarter economic economic performance report of the the NEDA which came out In November November 2000 indicated that manufactu manufacturing ring value-added value-added grew by 6.7 percent, slightly higher than the 6.2% in the second quarter and much stronger compared to the 2.4 percent expansion expansion in 1999. Footwear and wearing apparel was one of the 20 manufacturing manufacturing sectors sectors that showed positive positive growth equivalent equivalent to 23.5%, the
third highest among the 20 sectors, next only to paper and paper products (34.8%) and non-electrical machinery (24.3%). At the same time, time, Philippine exports as a whole remained strong strong (18.3%) as merchandis merchandise e receipts receipts increased increased by 22.9 percent. percent. Garments, Garments, the country’s country’s third largest export and which suffered for most of 1999, expanded by 7.7%, in part due to the depreciation of the peso. The GTEB reports cited that that as of December 2000, exports grew by nearly 12 percent in the first 11 months of the year resulting in the $2.351 billion value of garment exports for the period. Many other developments in the industry cited in the previous sections of this report point to the promising prospects for for the industry. industry. The University University of Asia Asia and the the Pacific projected a growth of 5.2% for the industry in 1999. The Export Development Plan of the Philippines likewise targets a growth rate of 5% for 2000 and 2001 for the garments sector in order that the country could achieve its projected projected Philippine Philippine export level of US50.0 US50.0 billion billion in 2001. This study study therefore therefore assume assumes s a conservativ conservative e estimate estimate of 5% in projecting the manpower requirements of the wearing apparel sector in Region 4. Based on the assumptions made, the garments wearing apparel sector is projected to employ an estimated 45,386 in 2001 and 55,167 55,167 up to the year 2005. Table 30 presents the employment data for the garments industry.
9.2
Critical Skills
The Region Regional al Invest Investmen ments ts Prioriti Priorities es Plan of TESDA TESDA has identi identified fied the following following critical critical skills skills in the garments garments sector: sector: sewers/s sewers/sewing ewing machine operator, operator, cutter, cutter, quality control, control, knitters, knitters, flast sewing, sewing, pattern pattern maker and CAD designer. designer. Based Based on the profil profile e of manpowe manpowerr complem complement ent presen presented ted in this study study of six garment firms presented in Figure 9, a breakdown of the human resource total was made and used as basis for arriving at the proportionate share of critical skills identified. As seen in Table 32, more than half half (61%) of the human resource resource would be sewers sewers sewing sewing machin machine e operat operators ors.. An additio additional nal 17% would would be involv involved ed in supervision and quality control and 20% would be into other forms of work such as knitting, knitting, embroidery, embroidery, etc. About About 2% of the workforce workforce would be into cutting cutting and pattern making.
Figure 9. Average Number of Workers by Firm Size and Position Table 31. Number of Establishments by Level of Employment, by Industry Description: 1996 Table 32. Projected Human Resource Requirements, Garments Industry: Southern Tagalog (Region IV)
Table 1.
Gross Value Added in Garments :1991-1995 ( In Million Pesos) Year
GVA
1991 1992 1993 1994 1995
% Contribution to % Contribution Manufacturing to
9,672 9,731 10,418 10,990 11,881
GDP 1.4 1.4 1.4 1.4 1.5
5.3 5.4 5.7 5.8 5.8
Source: National Statistical Coordination Board (NSCB) Table 2. Growth Rates of Garment Imports by Country and by Year: 1991-1996
Country
19911992
Total Imports Top 6 Hong Kong Taiwan France USA Italy China Others
19921993
41.6 59.3 66.0 1.4 91.0 195.7 42.4 107.0 (5.3)
19931994
26.1 32.6 35.7 (11.8) 50.7 116.1 (23.1) (19.7) (3.0)
19941995
28.3 26.2 42.9 11.5 16.6 (13.5) (11.1) 18.8 41.5
Average growth
69.3 55.3 80.2 24.1 52.0 12.9 174.6 61.9 100.5
19951996
41.3 43.4 56.2 31.3 52.6 77.8 45.6 42.0 33.4
3.7 (6.2) (9.1) (1.9) (6.4) (77.8) 95.6 109.1 37.7
Source: GTEB Table 3. Cotton Shirt/Blouse Imports (Jan.- June 2000) Country
Australia China Taiwan France Hong Kong India Indonesia Italy Japan South Korea Malaysia Singapore Thailand
Men (Qty) Value In $
%
96,975
102,629
8.0
24,240 1,880 16,794 156,757 104,633 8,605 1,701 810 18,287 1,770
20,759 13,109 309,244 166,190 145,867 51,603 39,527 11,990 12,969 4,305
2.0 1.0 24.0 13.0 11.0 4.0 3.0 1.0 1.0
7,638 60,055
30,226 37,976
2.0 3.0
Women Value in $ (Qty) 144 1,568 31,512 13,764 2,024 5,132 525 11,491 32,791 95,693 1,200 1,905 2,100 347 1,195 15,714 4,560 4,346 7,480 2,951 244 5,934 17,816 28,504 10,575 7,925
%
4.0 1.0 3.0 26.0 1.0 4.0 1.0 1.0 2.0 8.0 2.0
UK Great Britain & N. Ireland USA TOTAL
18,711
306,101
24.0
8,160
167,309
46.0
27,673 546,529
22,781 1,275,276
2.0 100.0
325 120,621
1,876 364,459
1.0 100.0
Source: GTEB
Table 4.
Total Export Contribution of the Garment Industry: 1995-
1998 Year
Total Phil
1995 1996 1997 1998
Total Garment
Exports 15.7B 20.5B
Exports 2.78 B 2.74B 2.95B 2.84B
Percent
17.7 13.37
Source: Garments & Textile Export Board (GTEB) Bureau of Export Trade Promotion (BETP) Table 6.
FOB Value of Exports to the U.S. and E.U Markets as of December 31,1997 (in US$ million) Rank
% Share
Country
1 2 3 4 5 6 7 8 9 10 11 12 13 14
USA European Countries Great Britain West Germany Benelux France Italy Spain Denmark Austria Ireland Greece Sweden Portugal Finland Total
Value of Exports Union
1,858.72 390.08
62.86
113.62 111.23 60.72 44.57 21.54 17.85 9.61 3.27 2.32 2.04 1.52 0.95 0.83 390.83
29.13 28.51 15.57 11.43 5.52 4.57 2.46 0.84 0.60 0.52 0.39 0.24 0.21 100.0
Table 7. Number and Gross Revenues of Large Wearing Apparel Firms by Gender Market Segment and Product Destination (1995-1996)
Industry Description
No. of establishments
Total
Sold to Interplant domestic transfer market 96,699 96,199
145
Custom tailoring shops Custom dressmaking shops Men’s & boy’s garments mfg. Women’s, girls’ and babies garment mfg. Ready clothing mfg n.e.c. Others Total
82
153,092
97,827
215
3,013,487
2,018,754
578
14,740,238
3,182,069
416
10,184,844
3,918,722
176 1,612
1,676,063 29,864,723
401,259 9,715,550
Direct export
Sold to exporters
53,92
3,054
923,007
68,443
11,113,057
327,729
239,539
6,001,031
21,441
13,832 256,425
1,148,285 19,239,332
109,668 527,301
Source: NSO Table 8.
Number, Gross Revenue and Total Assets of Garment Firms
in the Top 7000 Corporations Wearing Apparel
Women, girls and babies garments Ready made clothing manufacturing Men’s and boy’s garments Total
No. of firms
62
Gross Revenue 1996 1995 8,795,647 8,309,174
Total Assets 1996 1995 4,524,387 4,.477,937
125
14,662,111
11,860,720
6,935,409
5,446,230
31
6,303,465
5,278,123
2,641,990
2,419,935
218
29,763,219
25,450,012
14,103,780
12,346,097
Source: Top 7000 Corporations
Table 9. Garment Industry Wearing Wearing Apparel Product Chain Gender and Size Men
Product Usage Top
Materials Knitted
Fiber Content Natural
O pr
Ladies Boys teen Girls teen Preteens boys Preteens girls Girls children Infants Other wearing apparel
Trousers Coats Jackets Dress Skirts Sleepwear Underwear
Warp knit woven
synthetic
Table 10. Gross Revenues and Net Income of Domestic and Wholesale and Retail Outlets: 1995-1996 Wholesale & Retail
Gross Re Revenues 19 96 31,690,712 47,392,223
Net In Income
1995 25,631,951 39,683,206
1996 263,756 3,248,074
Supermarket Department & variety stores Wearing apparels 612,790 519,008 12,148 Textile fabrics, all 985,989 872,000 11,993 kinds Total 80,560,714 66,706 3,535,970 Table 11. VALUE OF GARMENT EXPORT BY REGION
1995 175,499 3,169,369 4,260 10,063 3,359,191
(Based on TECs Issued) : As of December 31, 1997 REGION
NO. OF
FOB VAL VALU UE*
EXPORT-ERS
TOTAL
LOCAL VA VALUE ADDED*
1,154
2,965,280
1,574.800
National Capital Region
620
1,471,720
842,930
IV
Southern Luzon
264
868,890
422,930
III
Central Luzon
192
464,150
255,430
VII Central Visayas
43
118,820
40,130
I
9
18,270
6,240
XII Central Mindanao
7
10,720
4,610
XI Southern Mindanao
1
006
006
V
5
4,030
2,380
2
002
002
11
480
390
Ilocos Region
Bicol Region
X Northern Mindanao VI
Western Visayas
* In million US Dollars Source: 1997 Annual Annual Report, Report, GTEB GTEB Table 12. FOB VALUE OF GARMENT EXPORTS BY PROVINCE SOUTHERN TAGALOG REGION 1998 PROVINCE
FOB VALUE
TOTAL
PERCENT
US$ 566,3855,250.96
100.00
Batangas
10,898,355.18
1.92
Cavite
303,724047.19
53.62
Laguna
90,128,517.80
15.91
Oriental Mindoro
620.00
Palawan
60,636.90
. 01
Rizal
8.53 161,573,073.89
Source: Bureau of Export Trade Promotion, EDP/IRC Table 13. FOB Value of Garments and Textile Exports (Based on TEC’s Issued): As of December 31, 1997 COUNTRY
TOTAL
VALUE
PERCENT
US$2,957,100,640.22 100.00
Quota Countries:
2,309,591,563.21 78.10
USA
1,858,720,922.93
62.86
EEC
390,079,694.47
13.19
60,790,945.81
2.06
647,509,077.01
21.90
Canada Non-Quota Countries:
Source: Profile of the Philippine Philippine Garment & Textile Textile Industry GTEB, 1997 Table14.
Labor Productivity in Textile and Garments Industries in
the Asean countries (in US$1,000 at 1985 prices) Phils.
Period Textile Industry
Indonesia
Malaysia
Singapore
Thailand
1970-74 1975-79 1980-84 1985-90 Garments Industry 1970-74 1975-79 1980-84 1985-90
3.82 3.64 3.20 2.03
1.41 1.99 2.27 2.45
3.31 5.67 5.41 6.44
4.96 7.27 9.71 14.21
4.10 4.26 5.27 6.54
1.64 1.59 2.05 1.60
0.91 1.28 1.74 1.71
2.27 2.94 3.33 3.38
2.94 4.77 6.30 7.51
2.71 3.07 5.20 5.74
Source: Romel L. del del Mundo
Table 15. US$34 Billion Target for 1999 and Projections for 2000 and 2001 Product
1998 Value
1999 Value % Change
Total Phil. 29,496 34,982 18.60 Exports Garments 2,260 2,314 2.39 % to 7.7 6.6 Phil. Exports
2000 Value %
41,813 2,430 5.18
2001 Value % Change
Change 19.53 50, 000 19.58 5.00
2,551 5.00 5.1
Source: Philippine Export Development Plan: 1999-2001 Rate
Indicator/Industry Sensitivity Index Profit squeezing in the local market
0.91 43.0
Import content
22.8
Increase in cost
6.8
% change (WPI)
16.0
Costs absorbed Industry growth (footwear & wearing apparel: Jan-Sept. 1998)
24.6
Peso terms
10.9
Volume terms Growth forecasts
6.5
1998
5.2
1999 (forecasts) Source: NSCB, UAP-SEC
Table 16. Number of Garment Mfg. Establishments , Southern Tagalog Region: 1990-1994 Table 16. Number of Garment Mfg. Establishments Establishments , Southern Tagalog Tagalog Region: 1990-1994 Description 1990 1991 1992 1993 1994 No. Total Custom tailoring & dressmaking shops Ready made clothing Manufacturing Embroidery establishments Manufacture of wearing apparel n.e.c.
% No. % No. % No. % No % % Share Share share share Share Change 379 100 468 100 494 100 473 100 401 100 1.4 17
4.49
21
4.49
309
8.53
34
8.97
34
7.26
38
7.69
36
19
5.01
22
4.7
20
4.05
16
391 83.55
16
3.24
420 85.02
19
4.02
23
5.74
7.8
402 84.99
328
81.8
1.5
7.61
31
7.73
-2.3
3.38
19
4.74
0.0
Source: NSO
Table 16-.Number of Establishments by Level of Employment, by Industry Description: 1996 Industry Description
Employment Size
a)Custom Tailoring & Dressmaking shops b)Ready made clothing manufacturing c)Embroidery estab. d) Manufacture of misc. wearing apparel, except footwear, n.e.c. Total
1-4 5-9 10-19 20-49 50-99 100-199 200-499 500-999 10 1,458 11 113 15 4 2 0 0 0
103
23 6
184
53
24
33
27
15
20 158
30 18
16 1
4 2
1 3
2 7
1 2
0 1
1,739
397
216
63
30
42
30
16
Table 17. Employment and Compensation for Garment Manufacturing Establishments with Average Total Employment of 10 or More : 1994 ( Value in P'000) Industry Description
No. of Establishment
Mfr. of wearing apparel except Footwear Custom tailoring shops
401
Employment Compensation (Average) Total Employees
34,946
13
34,514
1,603,716
241
5,327
189
4,922
2,469
138,094
18,001
846,677
8,361
380,073
1,017
20,028
4,236
208,595
259 Custom dressmaking shops
10 202
Men's and boy's garment mfg.
34
Women's, girls' & babies garment
192
Manufacturing Ready-made clothing mfg.n.e.c.
10 2
2,499 18 1 8,218
8,452 Embroidery establishments
31 1,066
Mfr. of hats, gloves, handkerchiefs
19 4,250
Neckwear, (except knitted & paper) & apparel belts regardless of Materials Source: NSO Census of Establishment
Table 18. Number of Establishments & Compensation Compensation by Type of Employee for Garment Establishments With Average Total Employment of 10 or More, by Industry Sub-Group: 1994
Mfr. of wearing apparel except 401 1,603,716 1,523,000 117,761 1,253,483 151,756 80,716 Footwear Custom tailoring shops 13 5,327 5,023 228 4,455 340 304 Custom dressmaking shops 10 4,922 4,627 59
4,244 325 294 Men's and boy's garment mfg. 34 138,094 132,002 6,953 108,118 16,931 6,092 Women's, girls' & babies garment 192 846,677 801,861 64,670 656,905 80,286 44,816 Manufacturing Ready-made clothing mfg.n.e.c. 102 380,073 361,236 28,677
293,704 38,855 18,837 Embroidery establishments 31 20,028 19,340 715 18,045 580 688 Mfr. of hats, gloves, handkerchiefs Neckwear, (except knitted & paper) & apparel belts regardless of
materials 19 208,595 198,910 16,459 168,012 14,439 9,685
Source: NSO Table 19. No. of Establishments, Total Employment By Type of Worker and Hours Actually Worked by All
Production Workers for Garment Mfg. Est. with Average Total Empl. of 10 or More, by Industry Group:1994 Industry Division
No.of
Total
Unpaid
Paid Employees
Est.
Mfr. of wearing apparel except Footwear Custom tailoring shops Custom dressmaking shops Men's and boy's garment mfg. Women's, girls' & babies garment Manufacturing Ready-made clothing mfg.n.e.c. Embroidery establishments Mfr. of hats, gloves, handkerchiefs
Empl.
Works.
Total
Mgrs.,exe. Prod. & Sup. Works.
401 40 1
34,,94 34 946 6
432
34,51 34,514 4
1,0 1,002
30,,75 30 751 1
13 10 34
259 202 2,499
18 13 30
241 189 2,469
4 2 71
218 1 73 2,121
192
18,218
217
18,,001 18
542
16,020
102
8,452
91
8,3 8,361
220
7,444
31 19
1,066 4,250
49 14
1,017 4,2 4,236
15 148
970 3,805
neckwear, (except knitted & paper) & apparel belts regardless of Materials Source: NSO Table 20. Number of Establishments & Value of Products Sold by Mode of Sale for Mfg. Establishments with Average Employment of 10 or More, by Industry SubGroup:1994 Industry Description
Mfr. of wearing apparel except Footwear Custom tailoring shops Custom dressmaking shops Men's and boy's garment mfg. Women's, girls' & babies garment Manufacturing Ready-made clothing mfg.n.e.c. Embroidery establishments Mfr. of hats, gloves, handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of materials
No. of Est.
Value of Products/By-Products Sold (P' Total Sold to Interplant Direct Dom.Market Transfer Expor
401 5,663,195 13 12,287 10 16,452 34 256,022 192 3,530,898
961,494 12,287 16,452 65,859 523,221
196,063
102 1,400,786 31 33,600 19 383,150
259,437 15,374 68,864
196,063
4,38
18 2,92 941 1 31
Table 21. Percent Share of Value of Products/ByProducts Sold By Mode of Sale: 1994 Industry No. Total Sold to Interplant Direct Sold to Other Description of Est. Dom.Market Transfer Export Exporters products Mfr. of wearing apparel except Footwear 401 5,663,195 17.0 3.46 1.6 0.06 77.4 Custom 13 12,287 100.0 0.0 0.00 tailoring shops Custom 10 16,452 100.0 0.0 0.00 dressmaking shops Men's and 34 256,022 25.7 73.5 0.6 0.09 boy's garment mfg. Women's, 192 3,530,898 14.8 82.8 2.4 0.00 girls' & babies garment #DIV/0! #DIV/0! #DIV/0! #DIV/0! Manufacturing Ready-made 102 1,400,786 18.5 14.0 67.2 0.3 0.03 clothing mfg.n.e.c. Embroidery 31 33,600 45.8 45.3 0.0 8.93 establishments Mfr. of hats, 19 383,150 18.0 82.0 0.0 0.00 gloves, handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of materials
Table 22. No. of Establishments & Total Empl. By Type of Worker for Garment Mfg. Est. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994 Industry/Description
Mfr. Mfr. of wearin wearing g appare apparell except except Footwear Custom tailoring shops Custom dressmaking shops Men' Me n's s and and boy' boy's s garm garmen entt mfg. mfg.
No. of Est. 2,043 2,043
949 500 58
Total Unpaid Empl. Workers 7,344 7,344 3,102 3,102
2,489 1,401 549 54 9
1,431 721 86
Paid Workers 4,242 4,242
1,058 68 0 463 46 3
Women's, girls' & babies garment Manufacturing ReadyReady-mad made e clothi clothing ng mfg.n. mfg.n.e.c e.c.. Embroidery establishments Mfr. of hats, gloves, handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of Materials
210
1,621
301
1,320
87 60 179
548 38 381 355
143 165 255
405 216 100
Source: NSO
Table 23. No. of Establishments & Female Empl. By Type of Worker for Garment Mfg. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994 Industry Description
Mfr. of wearing apparel except footwear Custom tailoring shops Custom dressmaking shops Men's and boy's garment mfg. Women's, girls' & babies garment manufacturing Ready-made clothing mfg.n.e.c. Embroidery establishments Mfr. of hats, gloves, handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of materials
No. of Total Unpaid Paid Fem. Est. Fem.Emp. Fem.Wkrs. Workers 2043 4678 1698 2980
949 500 58 210
809 1150 376 1410
496 587 54 211
313 563 322 1199
87
356
57
299
60 179
325 252
132 161
193 91
Table 24. No. of Establishments & Comp. By Type of Empl. for Garment Mfg. Est. w/ Aver. Total Empl. of Less than 10, by Industry & Sub-Group:1994(P'000) Industry De D escription
No.of Estab.
Total Comp.
Salaries Empl.Cont. & Wa Wages (SSS,etc.)
Mfr. of wearing apparel except
2043
86,592
1,139 85,454
Footwear Custom tailoring shops
949
20,773
221 20,552
Custom dressmaking shops
500
10,146
231 9,915
Men's and boy's garment mfg.
58
Women's, girls' & babies garment
210
83 7,719 32,723
7,636 205 32,518
Manufacturing Ready-made clothing mfg.n.e.c.
87
10,564
362 10,203
Embroidery establishments
60
Mfr. of hats, gloves, handkerchiefs
9 2,898
2,889
1,770
1,743
1 79
27
neckwear, (except knitted & paper) & apparel belts regardless of Materials Source: NSO Census of Manufacturing Establishments
Table 25. Number of Garment Exporters by Province and By Year Southern Tagalog Region: 1993-1997 1993 1994 1995 1996 1997 137 149 162 163 186 8 8 6 6 6 53 58 70 69 74
Province Total Batangas Cavite
Laguna Occ. Mindoro Palawan Quezon Rizal Philippines
%change 5.2 -4.7 5.7
17 0
22 0
28 1
26 0
34 0
12.2
1 0 58
1 0 60
1 0 64 1,273
1 0 61 1,125
1 1 70 1,154
0 3.2
Source: GTEB
Table 26. Region IV Garment Manufacturers Listed in the Top 100 Garment Exporters: 1997 Rank 8
Name of Company Leader Garments
Address Cavite
13 Senga Philippines Cavite 15 Knitjoy Manufacturing Rizal 19 Easy Travel Goods Rizal 21 Marfis Garment Rizal 28 All Asia Garment Industries Cavite 30 Champan Garments Cavite 31 Philippines Jeon Garments Cavite 34 Kay Lee Fashion Inc. Batangas 43 D&A International Corp. Cavite 44 A Grade Garments Mfg. Corp. Cavite 45 V.T. Fashion Image Cavite 65 Cohin Philippines Inc. Cavite 82 Chunji International Phils. Inc. Cavite 83 Chong Won Fashion Inc. Cavite 84 Dae Young Apparel Corp. Cavite 93 Snowdown Phils. Inc. Cavite Table 27. Value of Garment Export By Region (Based on TECs issued): As of December 31,1997 Region
No. of exporters
Value Added
FOB Value
( in US$ million) 620 1,471,720 264 868,890 192 464,150 43 118,120 9 18,270 7 10,720 1 006 5 4,030 2 002 11 480 1,154 2,965,280
NCR Southern Luzon Central Luzon Central Visayas Ilocos Region Central Mindanao Southern Mindanao Bicol Region Northern Mindanao Western Visayas Total
842,930 422,930 255,430 40,130 6,240 4,610 0 06 2,380 002 390 1,574,800
Source: 1997 Annual Report GTEB
Table 28. FOB Value of Garment Exports by Province, Southern Tagalog Region: 1998 Province
Batangas Cavite Laguna Oriental Mindoro
FOB Value
Percent Share
( In US$) 10,898,355.18 303,724,047.19 90,128,517.80 620.00
1.92 53.62 15.91
Palawan Rizal Total
60,636.90 161,573,073.89 566,385,250.96
0.01 8.53 100.00
Source: Bureau of Export Trade Promotion, EDP/IRC Figure 9. Average Number of Workers Workers by Firm Firm Size and Position Micro/Small Company
Medium Company
Large Company
FABRIC INSPECTION
FABRIC INSPECTION
FABRIC INSPECTION
3 Inspector
1 Operator
2Inspector
2 Reviser 1 Inspector
CUTTING SECTION
CUTTING SECTION
CUTTING SECTION
No workers;
1 supervisor
2 supervisors
1 cutter
6 cutters
1 spreader
8 spreaders
Garment come from mother companies
1 pattern marker
BUNDLING SECTION
BUNDLING SECTION
BUNDLING SECTION
1Supervisor/Controller
1 Supervisor
1 supervisor
1 Meto gun tagger
3 bundlers
1 bundler
1 bundler
2 Meto gun tagger
FUSING SECTION 14 fuser
PRODUCTION ASSEMBLY
PRODUCTION ASSEMBLY
2 Line Supervisor
5 line leaders
2 Roving Q.C.
5 assistant line leaders
2 End-line Q.C.
2 Roving Q.C.
70 Sewers
110 Sewers (5 special machines)
10
PRODUCTION ASSEMBLY 15 Line supervisors 15 Roving inspectors 16 End-line inspectors 395 sewers 69 In-line pressers
Handworkers/Markers
9 End-line Q.C.
2 bundle girls
10 Markers 4 Movers
FINISHED GOODS
FINISHED GOODS
FINISHED GOODS
1 Supervisor
1 Supervisor
! Supervisor
13 Final Pressers
8 Final pressers
67 Final pressers
4
Trimmer/Reviser
8 Final Q.C.
22 Controllers
5
4 Final Q.C.
5 Packers
5 Packers
6
5 Packers
6 Packing Utility
Table 31. Number of Establishments by Level of Employment, by Industry Description: 1996
Industry Description
Employment Size 1-4
5-9 10- 20- 50- 100- 200- 500- 1000- 2000- Total 19 49 99 199 499 999 1999 Over 1,458 113 15 15 4 2 0 0 0 0 0 1,592
a)Custom Tailoring & Dressmaking shops b)Ready made 103 clothing manufacturing c)Embroidery 20 estab. d) Manufacture of 158 misc. wearing apparel, except footwear, n.e.c. Total 1,739
236 184
53
24
33
27
15
0
1 676
30
16
4
1
2
1
0
0
0 74
18
1
2
3
7
2
1
1
0 193
397 216
63
30
42
30
16
1
1 2,535
Table 32. Projected Human Resource Requirements, Garments Industry: Southern Tagalog (Region IV) SubSector/Critical Skill
Employment Level
No. of NSO
%Share
Growth 2000 2001
2002 2003 2004
2005
a)Custom Tailoring & Dressmaking shops b)Ready made clothing manufacturing c)Embroidery estab. d) Manufacture of misc. wearing apparel, except footwear, n.e.c. Total for Industry Estimated New Entrants* Critical Skills Sewers Cutter Quality control to include inspectors, supervisors, QC pattern maker Others (knitters, embroiderers etc.) *From previous year
(est.) Estab. 1996 Workforce Forecast (Estimates) (%) 1,399 6,727 5 8,177 8,586 9,015 9,466 9,939 10 10,436
5 670 25 25,242
30,682 32 32,216 33 33,827 35 35,518 37 37,294 39 3 9,159
970
5 1,179 1,238 1,300 1,365 1,433 1,505
193 2,622
5 3,187 3,346 3,514 3,689 3,874 4,068
82
-
-
-
-
-
-
43,225 45 45,386 47 47,655 50 50,038 52 52,540 55 5 5,167
2,344 35 35,561
7,664 2,161 2,269 2,383 2,502 2,627
61% 1.00% 17%
1% 20%
4,675 1,318 1,384 1,453 1,526 1,602 77 22 23 24 25 26 1,303 36 7 386 405 4 25 44 7
77 1,533
22 43 2
23 454
24 477
25 5 00
26 52 5
