More retrenchments seen in the garment industry—CONWEP

More jobs in the garment industry are in peril in the coming months, as the Confederation of Wearable Exporters of the Philippines forecasted that about 3.5 to 4 percent of workers will lose their jobs.

This is on top of the sacking of 4,000 workers in five major garment companies at the Mactan Economic Processing Zone in Lapu-Lapu City in September.

In a virtual presser on Wednesday, Marites Jocson Agoncillo, executive director of CONWEP, said workers in the wearables export sector will feel the wrath of the slowing global demand for consumer goods.

“Currently we are experiencing around 3.5 to 4 percent workers affected with a base of 270,000 workers covering wearables (apparel, travel goods, footwear). It might reach a maximum range of 8 to 10 percent, if the current trend extends longer or global demand conditions worsen,” Agoncillo told reporters.

“What happened to our Mactan, Cebu-based member should not be singled out at this moment. This will be a trend for some factories whose customers are starting to cut down on their projections, so we expect temporary closures or partial retrenchment of the workforce in the next few months,” she added.

According to Agoncillo, the looming retrenchment is due to many reasons, including the spending situation of consumers in the United States, the country’s top export market.

“Their monthly consumer confidence index in August 20221 stood at 96.18. This is an indicator that the average US consumer is not confident to spend as they are worried about another possible recession, so they would rather hold back spending in the next 12 months. Note that this is already happening as global giants in Silicon Valley have already started cutting down costs,” she said.

Besides this, she said the continuing downturn of the global consumer confidence index clearly reveals the softening of the global apparel market, brought about by the current global trend where consumers tend to spend less and hold back on discretionary spending such as apparel and other consumer goods.

Also, she said the uncertainty of the war in East Central Europe, rising fuel costs, the disrupted supply chain, and trepidation over another pandemic directly impact consumer behavior across the globe.

“On top of this, global sourcing linchpins such as labor cost, speed to market, logistics, access to raw materials, production flexibility, and compliance risks are some of the key factors for buyers to deviate portfolios out of the Philippines and into dominant favored ASEAN suppliers such as Vietnam, Cambodia, and Indonesia. The recent wage order hikes further aggravated the competitiveness of our export sector,” she said.

Work with government

She said collaboration between the Philippine government and the industry sector is very critical at this juncture.

“We are grateful to the DSWD for extending support to our 4,000 workers laid off in Cebu recently. We appeal to the DSWD to extend the same support to our workers in other parts of the country as we foresee more temporary closures and retrenchments coming our way,” according to Agoncillo.

To avert this, Agoncillo’s group suggest that the government, particularly lawmakers, should address issues on logistics and seek amendments to certain provisions of the CREATE (Corporate Recovery and Tax Incentives for Enterprises) Act. The “lifespan of incentives was cut short (window of 7 years) and even if there are provisions to extend this, the rules of engagement from an investor perspective may sound too cumbersome and we fear that we may really lose out investments; VAT on constructive exports is a pebble on our shoe, considering our margins are really thin.”

“CONWEP will continue to work with the government under the direction of the Department of Trade and Industry, which has expressed its interest to support the industry to work on innovative modes of treaties, sectoral or comprehensive trade agreements with the US to drive the wearable export sector sustainability,” said Agoncillo.

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