The local garment industry of Philippine has expressed concerns over its ability to reach the ambitious $1-billion export target this year, citing challenges posed by the stringent rules of origin (ROO) enforced by the European Union (EU).
Robert Young, President, Foreign Buyers Association of the Philippines (FOBAP) and Trustee-Textile Sector, Philippine Exporters Confederation Inc, highlights, the industry players may achieve only 80 percent of their garment and apparel exports target due to the EU's ROO enforcement.
Philippine-made wearables exported to the EU currently benefit from the Generalised Scheme of Preferences+ (GSP+), allowing duty-free entry. However, the EU's strict ROO imposes a 12 per cent duty on these exports, creating hurdles as it limits the value-added inputs sourced from non-GSP beneficiary countries like China, a major textile source. With no domestic textile manufacturing industry, the Philippines relies on imported fabric, which doesn't meet EU's ROO criteria.
Young warned of the industry's underperformance due to these restrictions and advocated for alternative solutions, such as purchasing from Free Trade Agreement (FTA) countries with bilateral agreements with the Philippines. Despite the EU accounting for only 10 per cent of the country's total export receipts for garments and textiles, Young urged the government to get garments included in the proposed bilateral free trade agreement with the EU to extend benefits to local manufacturers.
Furthermore, garment exporters advocated for the establishment of more garment factories to meet export demands, particularly from the EU. Young proposed the construction of a pilot commercial-scale textile factory, citing its potential to attract foreign investors and boost the economy, similar to the success seen in countries like Bangladesh and Vietnam.
Young emphasised on the need to produce own fabric to meet EU preferences, underscoring the importance of building a pilot factory to ensure compliance with potential ROO requirements in future bilateral trade negotiations. In 2023, the industry exported approximately $1 billion worth of soft goods and $400 million worth of hard goods, showcasing its significant contribution to the country's export sector.
