Industry Study On Garments

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 materials were used, but even then, garments were bartered for other goods with other Asian countries, particularly with China. When the Spaniards came, better weaving materials such as needles for fine embroidery were 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 of the foreign exchange and import control. The passage of RA 3137 ( otherwise known as the Embroidery Law) in 1961 brought about tax-free importation of raw materials and capital goods and attracted more garment producers to venture into the export market. This was further enhanced by the government incentives granted under the Export Incentives Act (RA 6135) of 1970 and the creation of the Export Processing Zone Authority (PD66). Two distinct types of firms availed of these 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 materials, export activities of the operating firms grew and new garment factories were established. Export quota allocations from the country’s major trading partners, namely, the United States, the European Economic Countries and Canada 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 manufacturers in Metro Manila catering to the export market. In order to fill in the voluminous volume of orders from importers, garment manufacturers in Metro Manila delegated the most labor intensive part of production like embroidery, 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 largest export industry in the country, generating export sales of $2.26 billion in 1998, which was 7.6% of total exports during the year. The garment sector consists primarily of subcontracting operations for international brands. Over the last few years, the growth of garment export has been marginal and its contribution to total exports has been on a decline. The 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 contribution to the manufacturing sector ranged from 5.3% in 1991 to 5.8% in 1995. 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 time, over-all growth rate in gross value added (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

Philippine garment imports reached $2.2. billion in 1995 at an 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 fabrics of almost 78% from 1991 to 1995. As shown in Table 2, this trend was however reversed in the following year when imports from the US registered a decline of almost 78%. Recent imports were from Hong Kong, China, Italy 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 blouses. Although there had been an influx of cheap apparel from neighboring

ASEAN countries such as Malaysia, Indonesia and Thailand, there were no official figures to be obtained as these entered the Philippine market through untraditional channels. Table 3. Cotton Shirt/Blouse Imports (Jan.- June 2000) 1.2.2

Exports

Garments made up 17.7% of the total Philippine exports of US$15.7 billion in 1995. In the following year, its contribution to total Philippine exports dropped to 13.37% brought about by a reduction of exports to only US$2.74 billion (Table 4). A total of 1,200 export 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 exports in the same period. As seen in Table 5, the Philippines was among the top suppliers of garments to the U.S from 1990 to 1996. In terms of value of apparel exports, it ranked 5th in 1990 to 1991 but ranked 6th in 1992 and 1993 and 7th in 1994 and 1995. In 1996, it rebounded and climbed up to the 6th ranking with its exports of US1.293 billion. The country assumed almost the same ranking in terms of volume of apparel exports, except in 1996 when it ranked only 8th, ahead of just two countries, Indonesia and India. Despite the lower volume, however, it managed to stay in 6th place presumably because of the higher value garments that the country was producing for the U.S. market. Among other export destinations of Philippine garments were Great Britain and West Germany which had comparative shares of almost 30% each of the $390.08 million exports. Benelux and France were likewise top export destinations accounting for 15.6% and 11.4%, respectively. Table 6. presents the major importing countries of Philippine garments. Table 6. FOB Value of Exports to the U.S. and E.U Markets as of December 31,1997 (in US$ million) While Philippine garment export has grown faster than the world average, its growth is slower than those from other ASEAN and South Asian countries. Relative to other subcontractor countries in Asia, wages in the Philippines have gone up and continue to rise. The gradual phase-out of the Multifiber Agreement (MFA) until 2005 will erode whatever comparative advantage the Philippines has established vis-à-vis

its competitors. The future of the garment industry will depend mainly on quality and value upgrading. The industry is largely reliant on imported fabrics because of limited textile production, especially fine woven fabrics. While local value added has 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 reported that as of December 2000, exports grew by 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 to November in 2000 from $2.610 billion during the same period in 1999. The Philippine reputation can be credited to those making quality apparel for global brands such as GAP, Polo, Ralph Lauren, Ann Taylor, Liz Claiborne, Jansport, Nike, Sears and Disney. Aside from adhering to their strict quality standards, Philippine garment makers have shown their strict compliance with ethical manufacturing standards such as regulations against child labor and the mandatory installation of clean and safe working conditions in factories. Foreign buyers conduct surprise visits to factories to check the garments makers’ compliance with ethical standards, including the availability of fire extinguishers and fire escapes, cleanliness of shopfloors, 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 $2.097 billion in 1999. Non-apparel exports climbed by 14.35 percent to $481.571 million in the first 11 months in 2000 from $421.123 million a year ago. Textile exports fell 7.18 percent to $84.098 million in the 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 by 28.31 percent to $63.38 million in 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 ready-made clothing manufacturers. There were 1,307 exporters and 300 local manufacturers. At the micro level, some 3,000 tailoring and dress shop operators served the made-to-order market. Four hierarchies exist in the industry value chain. Level 1 consists of textile mills that provide the fabrics and trimmings. These are available in open stock inventories or made to order specifications. Level 2 refers to apparel manufacturing which performs the marketing, merchandising and production of garments. Two structures exist: integrated manufacturing and contracting of services. Level 3 or the retail level consists of traditional retailers and integrated manufacturers. The wholesale channel is created if the manufacturer or retailer is not vertically

integrated. Level 4 or the 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. Short fashion cycles, labor intensive production and the fragmented nature of the market interplay to create a complex environment of competition and a highly demand driven market. Within the value chain, manufacturers or retailers compete as suppliers and users. From 1995 to 1996, domestic production, net of $2.5 billion of export garments, provided goods worth $9.7 billion representing 32.5% of the total gross revenues of large wearing apparel establishments amounting to $29,864,723. Half of these were manufactured in the NCR. Direct exports made up a significant 64% with its gross revenues of $19,239, 332. An additional 4% were generated by export subcontractors resulting in a total of 68% of total revenue accounted for by the export market. As seen in Table 7, the women’s, girl’s and babies garments segment accounted for the biggest amount of revenues equivalent to almost 50%. This was followed closely by ready clothing manufacturing, not otherwise classified, totaling $10,184,844 or 34%. Men’s and boy’s garments manufacturing comprised only 10%. Custom made clothing added up to less than 1 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 P14.103 million. Firms engaged in the manufacture of ready-made clothing generated the biggest revenue equivalent to 49.2% of the total reported for the 218 large garment companies. Likewise, this group of companies registered the biggest assets 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 for the domestic and export market. A wide variety of product classes are offered in the market in terms of material fabrication, product usage and user demographics. User classification as to age and gender consists of men, boys,

women, girls and infants garments. Product usage category refers to shirts, blouses, coats, jackets, nightwear, etc. Textile material fabrication classifies products into knits and woven apparel. Table 9 presents the general classification of the wearing apparel segment Table 9. Garment Industry Wearing Apparel Product Chain

Different product offerings in terms of styling, (basic and fashion) and other intrinsic values as to fit, care, and sizing compete in the marketplace. 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-made services are provided by tailors, dress shop operators or designer houses locally. Production of garments in larger volume has made outsourcing or contracting of manufacturing at various stages of production cycle widely practiced. This offers flexibility, specialization, and augments seasonal requirements of the industry. Contractors are normally located in countries with inexpensive labor supply. Services contracted include sewing, embroidery, smocking and others. They are either independent entities or satellite operators of larger firms. Specialty services such as product design, 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 output, for both domestic and export market. The industry is generally demand driven, with big wholesaler and retail group oftentimes vertically integrated engaging in cut-throat competition. Having the financial and market muscle, they dictate purchase price leaving little margins to volume greedy 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 made importation attractive to the apparel makers. However, new players 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 consist of domestic and export buyers. Up to 80% of the 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 fragmented local market. Specialty shops comprised of retail 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 goods. It employed 148,000 workers in 1995 or 20% of the Philippine total employed labor force. Sourcing of labor is not difficult. Workers are highly trainable and flexible in skills. The Philippine labor force totaled 900,000 as of 1995, half of which were in the NCR. The Philippines is still considered an inexpensive source of labor, with skilled labor contracted by foreign firms. However, low productivity due to lack of technological investment and competition from labor-rich neighboring countries threatens this competitive advantage of the Philippine apparel industry. Channels of distribution are the traditional retailers, outlets, franchisers, wholesalers’ mail order or personal direct selling. Corporate accounts are normally handled by internal personnel or through service sales representatives. A basic salary, fixed commission rate or mixed scheme is generally offered as compensation methods. Selling skills and relationship building are normal hiring concerns. Fashion trends and technical knowledge are left to designers and production personnel. However, garment selling is highly related to fashion. It involves a deeper 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. Customer check rediscounting and advance payments offer alternative sources. Restricted credit access especially to small and medium players poses as a major concern for expansion. Lack of working capital had led 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). GTEB, together with the Bureau of Customs and Bureau of Investments (BOI) oversees the operation of bonded manufacturing warehouses, regulates raw material importation and monitor s 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 and 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 garment exporters in 1997 located in 10 regions all over the country contributing little individual shares in the market and exercising little control over the total industry 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 accounted for the second biggest share of the total output with US$ 868,890M (29.3%) followed by Central Luzon controlling 15.65 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 Promotions (EDP-IRC) show that garment exporters in the province of Cavite controlled the biggest share of the total output of the Southern Tagalog Region in 1998. Firms in the province of Rizal accounted for the second biggest share with 28.5 percent. Laguna contributed almost 16 percent of the total value of exports amounting to US$90M (Table 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, 13.19 percent and 2.06 percent, respectively. Japan maintained its lead as the major non-quota buyer’s market with purchases of 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 (Table 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 the detailed 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 can be 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, 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 of financing of garment manufacturers are banks/financing institutions. Some other entrepreneurs use their own money while manufacturing sub-contractors and satellites depend on their mother companies to finance their operations.

4.0 The Competitive Advantage of the Philippine Garments Industry 4.1

Factors Affecting Competitiveness

Backward linkage with the textiles industry. Due to the weak backward linkage with the textiles industry, the garment manufacturers are forced to import raw materials. On the average, the garments industry imports up to three quarters

of their input requirements. The need to import raw materials leads to longer turnaround time. The average turnaround time for the Philippines is from 120 to 145 days. Since fashion has a short cycle, like six to ten months, a long turnaround time makes one uncompetitive. In order to compete in the higher end market that 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 in terms of price and quality. The industry has had a long period of protection from the government. The Philippines is uncompetitive in materials costs in yarn production because of the high cost of cotton which is mostly imported. Protection drives prices up. To reduce costs, producers source their input requirements from the illegal 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. The rising wage rates in the Philippines makes the garments industry vulnerable to fierce competition from lower wage countries. This has driven the Philippines to go up to 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 concerning labor relations. The period was 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 rates are practiced to reduce labor costs which include the minimum wage and other benefits. Contractual hiring also keeps the labor force from being unionized, diminishing the possibility of strikes. Industry 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) Investments in new machineries. Part of the explanation of the decline in labor productivity was traced to technological backwardness – too many old machines that were in need of replacement. It was noted, however, that the Philippines had taken steps to address this problem. From 1989 to 1995, the total value of imported textile machinery by the Philippines increased by 121% over the previous nine years. While organizational set-up is efficient, the garments industry is plagued with either technological backwardness or inability to adapt to imported new technology. Technical efficiency, however, while positive has not been growing at an encouraging pace. Product development and market diversification. Firms that are inefficient with geographically concentrated markets and lacking in 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 the market share of the Philippines. Mexico has even surpassed China as the number one garment supplier to the United States as of 1995. Therefore, for competitiveness, firms would need to diversify product 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 production are intermediate 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 local firms. This, together with the consignment arrangement, greatly constrains the local firm’s ability to manage the value chain. Protection drives prices of textiles to increase. To reduce costs, as already noted, producers source their input requirements from the illegal market. This explains the lack of incentive for the garments industry to integrate backward. Energy costs: infrastructure neglect. The energy 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 industry. Financial costs. Amidst the financial 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. Technology. Going to the upper end market necessitates the feel for the changes in fashion. In order to do this, the structure of production 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 in the low-end market. The equipment most suitable would be the basic, inexpensive reliable equipment that is easy to maintain. However, higher quality fashion and designs clothing demand production flexibility, semi-skilled and highly skilled workers, managers, and experts. Technological innovations enhance the possibility for the Philippines to move into the higher quality market segment. Output factors. While it is price competition that drives the lower value-added segment of the garments market, it is product differentiation or market niching that characterizes the higher end segment. However, as more and more countries move up the higher value segments of the market, innovative designs and quality are given 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. This requires information, foresight, flexibility in production 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 customer should not only be satisfied with the products of garments manufacturers, in terms of price and quality, but also with the services provided for by manufacturers.

4.2 Industry

Analysis

of

the

Competitive

Advantage

of

the

The garments industry is 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 (GVA) and 1.4 percent to gross Domestic Product (GDP). Its GVA grew by an average of 5.3 percent per year. The sector remains a top dollar earner, contributing more than 13 percent to the national export coffers. Region IV contributed US$ 479M in 1995 representing 17.23 percent of the total garment exports of the country. However, 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 total 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 from the USA, ECC and 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 the existing quotas in year 2005. This would mean that competition among garment manufacturers of developing countries would be more intense after five years.

4.3 Industry

Forces

Affecting

Competition

in

the

Garment

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

do not have difficulties in sourcing out their raw materials such as fabrics/textiles and garment accessories. These are either imported directly by garment producers, consigned to producers by their mother companies or sourced out from local suppliers. Threads and packaging materials can be 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 is composed of many institutional buyers located in 103 countries. Due to 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 to low-cost 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 or services is both low and high. The threat is high when it comes to the manufacture of low-end garment products. The threat comes from competitor countries due to their lower labor cost. However, when it comes to high-end garments, the Philippines is very competitive. It also has an advantage when it comes to designs with intricate patterns. In this case, the threat of substitute products is low.

4.4

Strategy, Structure and Rivalry

4.4.1

Strategy

The Philippine garment industry has to brace itself for the impact of the current liberalization of apparel quotas or the dismantling of the Multi Fiber 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 one. However, the foreign-owned firms lead in terms of investment and exports having the capital, technology and market advantages (The Philippine Garment Export Industry, GTEB, 1997). These foreign-owned garments firms are mostly 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 located in the countries of the owners. In this case, product designing 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 industry is basically labor intensive in view of the unique production 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. Other US foreign suppliers of garments are also having political/internal 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-skilled and non-skilled workers are highly trainable, intelligent 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 Consultancy for Product Development Program is a step to improve the situation. Targeting the medium to high-end markets, the 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

Increases in production level required investments in state of the art machines and equipment. The use of barcodes, CAD, EDI and other computerized machines improved the manufacturing processes and lowered the manpower requirements and supervising time needed in each production process. Product delivery has also been improved through the use of containerized shipping 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 and grooming. Total family expenditure for 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 telecommunications, transport/shipping and government processing. The government is providing all the support to respond to the needs of the industry. Information Technology. The installation of the GTEBNet, an electronic 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. Training Infrastructure. A welcome development to the industry is the 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 and labor price. Whereas the Philippines used to compete with low labor costs in the world market, the other Asian countries –China, Vietnam and Indonesia offer lower wages. Moreover, these Asian countries were able to speed up the growth of a vertically integrated clothing industry with government support and a more liberalized policies. Coupled with low productivity and low long-term technological investment, a shift to the upper end market was noted. Influx of cheap imports pose a major concern to apparel makers and retailers. Continuous 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 ratio of 0.08 in 1990 compared to 0.16 in 1980, lack of technical personnel, 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 that hampers the growth of the textile industry. These issues should be addressed by forming international joint ventures to improve our technical knowledge, focusing on high-value added items and 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 in fabric dyeing, printing and finishing is planned to boost garment production by 1997. This hopes to increase the 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 incremental growth to achieve the US$50 billion export 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)

•

Product is under performing: Product’s export growth is lower than market growth rate or industry capacities or under-optimized.

•

There is high and increasing world market demand for product.

The Export Development Plan of the Philippines places particular focus on Philippine exports of men’s and women’s clothing, which have managed to grow at higher than market rates for the past six years. This implies some level of competitiveness for these specific products, which has translated into higher market shares. Other quota categories could be given special attention, 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 (MFA) is still in place, it shall be optimized to the country’s advantage. DTI shall identify non-performed and substantially under-utilized quota allocations. Investors and locators will then be invited to avail of these quotas. Particular emphasis shall be given to those which can bring in new technologies to upgrade and diversify production. Upgrading of plant facilities and skills. Both DTI and the industry shall promote the upgrading of plant facilities and skills to improve quality and productivity. This shall be accompanied by assistance in sourcing funds. The thrust of upgrading the industry and establishing more sustainable bases for competitiveness will be a strategy to attract investors and keep them beyond the MFA. Aggressive promotion of Philippine designer clothes. DTI and industry associations shall initiate and promote Philippine designer clothes in men’s and women’s fashion. Initiatives such as the Fashion Design Institute developed with the Philippine Trade Training Center (PTTC), Natori and Philippine fashion designers must be expanded and intensified. The “gurus” of international fashion shall be sought to look into the Philippine fashion landscape to identify potentials and strengths. This had been done for furniture where world famous designers were brought in under a Product Specialist Program. Promotion of industrial peace and more pragmatic work schedules. The implementation of the New Social Accord must be intensified in the garments sector. Moreover, the introduction of more pragmatic work 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 University of Asia and the Pacific (UAP) confirmed that footwear and wearing apparel were considered as fast-growth industries, posting a 24.6% growth in value from January to September 1998. During the same period, footwear and wearing apparel increased by 10.9% in volume. As a whole, the industry chalked up a 6.5% growth in 1998 and was expected to 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 products. Improvement in the consumer market will boost the sector’s growth in 1999. The following table illustrates the industry’s performance as compared to other industries based on selected economic indicators:

Future prospects look 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 reductions. The phase-out of the Multi-Fiber agreement which administered quota agreements between countries for 20 years started 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 cooperation in the ASEAN provides better access to these markets. A full trade agreement of common effective preferential tariff reduced rates from 50% to 5% by 2003-2008. Although still competitive, better 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 Tagalog region. These represented around 20 percent of the total number of establishments. The remaining 80 percent were custom tailoring and dressmaking shops. The number increased to 473 in 1993, 137 of which were involved in the export trade. As a whole, the number of apparel making establishments rose by a minimal rate of 1.4% a year. This was mainly brought

about by the slight increase in the number of ready made clothing manufacturing establishments averaging 7.8% a year. A decline equivalent to –2.3% was noted among establishments engaged in the manufacture of wearing apparel, not otherwise classified (Table16).

Table 16. Number of Garment Mfg. Establishments , 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 average, a total of 34,946 workers, or 19.8% of the total employed in 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 biggest group of 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 and custom dressmaking shops employed the smallest number of workers aggregating to less than 500.

Size and Location In 1996, the NSO identified 2,005 establishments engaged in wearing apparel manufacturing in the region. Of this number, 385 or 19.2% 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 numbered almost equally at 45 and 42, respectively. Medium sized firms 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 firm was Capital Garment Corporation 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 Industries, Inc. located in Bauan, Batangas with more than 1,000 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, Cavite; G&B Export Corporation in Imus, Cavite; and Les Grants Phils. Inc. in Dasmarinas, 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 with 10 each. Batangas had only two large 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 by garment workers and employees in 1994. This figure represented 11.8% of the total compensation received by workers in all manufacturing establishments in the region amounting to P13.563 billion. The bulk (53%) of the compensation amount for garment workers went to the women’s, girl’s and babies garment manufacturing division and the ready made clothing workers (24%). Average 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 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. Workers in the embroidery subsector 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 Compensation 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 and supervisors. Embroidery shops and custom dressmaking shops, however, provided bigger proportionate shares of more than 90% of the compensation amount to production workers, 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 by each production worker, production workers in the 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 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 Sold

The wearing apparel sector generated products valued at P5.633 billion in 1994, more than three-fifths (62.3%) of which were generated by firms engaged in women’s, girls and babies garments manufacturing. Another 25% 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 following Table 20, the bulk of wearing apparel products were sold to the export market. This mode of sale made up 77.4% of the total while an additional 1.6% were sold to exporters. The domestic market absorbed 17% and interplant transfer corresponded to 3.45%. Custom tailoring and custom 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 establishments reporting the second biggest proportionate share of products catering to this market. On the other hand, the bigger proportion 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 less than 10 workers numbered 2,043 or 15% of those employed in other manufacturing firms with less than 10 workers in the region. These firms employed a total of 7,344, with 58% paid workers and 42% as unpaid workers. This could be attributed to the small operations of these firms where workers usually include family members. Employment 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 apparel sector 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 employment in other manufacturing sectors in the region. Paid female workers accounted for 63% while unpaid female 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 portion (81%) of the 2,005 wearing apparel firms consisting of 1,620 establishments were micro-enterprises with less than 10 workers. Custom tailoring and dressmaking dominated the micro sector with 81% of the total belonging to this category. Laguna had the biggest concentration of custom tailoring and dressmaking shops with Quezon, Cavite and Batangas ranking second to fourth in this category. Rizal, on the other hand, lorded it over in the ready-made clothing segment with 168 firms. Embroidery work was mainly confined to Laguna and Batangas with Rizal and Cavite having only three firms each in this category. Laguna also had dominance 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 tailoring (969) and custom dressmaking (500) shops, and women’s, girls & babies wear (210). Total compensation amounted to P86,592,000 in 1994 which came 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 were into export. Majority of these establishments were in Cavite, Laguna and Rizal. From 1993 to 1997, the number of garment exporters increased by some 5.2% a year. Laguna which registered 34 establishments in 1997 reported the highest average increase of 12.2%. Cavite and Rizal which contained the bulk of garment 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 Philippines with four of them classified among the top 20 garment exporters. Thirteen of the top garment exporters in the 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 be traced to Cavite with its garment exports amounting to US$303.724 million. The two other major exporting provinces of Laguna and Rizal accounted for the two other bigger shares of the total at 15.9% and 8.5%, 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 inspections constitutes the heart of garment manufacturing 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 Imported fabrics from Hongkong and Thailand are inspected 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 is the checking of the actual quantity of raw materials against 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 purchase order, per style and chronologically according to the shipment 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 Cutters measure the fabric in order to determine whether the supplier 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 are placed on top of the layers of the fabrics. These 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 order, some styles require fusible liners normally on collars and pockets. These issued to the fusing section where a fusible liner together with the cut parts, placed in the Kanneglesser Fusing Machine where heat is applied to fuse together fabric and the liner.

the are are the

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 sewing machines. The sewing operation includes pocket preparation, 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 check on seam allowances, proper labels/pocket/button placement, 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 assisted by trimmers who trim unnecessary or excess threads on seem and hemlines. 7.1.4

Finishing Operation a. Pressing

Depending on the requirements, some style require steam pressing while others require hard pressing. This is where the final cosmetics features of the garments are enhanced. The collars must stand firmly, side seams should 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 industry in the Philippines. The study covered the period from 1992 to 1994. As seen in Figure 8, the industry 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, appeared 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 ratio of operating expenses to sales. The cost of money has gone up considerably in 1994 which brought about the steep climb of the interest expense to sales ratio of up to 0.0196 as against the 0.0115 in 1993. As a whole, the 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 presents financial data on two large firms, All Asia and A Grade, two medium enterprises, Kay Lee Fashion and Andrew Apparel and two 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 sized firms compared to the two large firms. As seen in Table 30, Kay Lee Fashion and Andrew Apparel registered inventory ratios of 51.7% and 40.2%, respectively, as compared to the 3.0% posted by All Asia and A Grade. In the same manner, average accounts receivable period was also a lot shorter with the two medium firms at less than 10 days. On the other hand, the two large firms had accounts receivables of more than 100 days or three months. This means that the smaller firms had less receivables and did not hold big inventory at any given time. The larger firms, on the other hand, because of the nature of their 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 level of establishments engaged in the wearing apparel sector. This was done by assuming an average employment size and multiplying 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 owing to the industry’s positive performance in the last two years. The 2000 third quarter economic performance report of the NEDA which came out In November 2000 indicated that manufacturing 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 in 1999. Footwear and wearing apparel was one of the 20 manufacturing sectors that showed positive growth 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, Philippine exports as a whole remained strong (18.3%) as merchandise receipts increased by 22.9 percent. Garments, the 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 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 the industry. The University of Asia and 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 Philippine export level of US50.0 billion in 2001. This study therefore assumes a conservative 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 up to the year 2005. Table 30 presents the employment data for the garments industry.

9.2

Critical Skills

The Regional Investments Priorities Plan of TESDA has identified the following critical skills in the garments sector: sewers/sewing machine operator, cutter, quality control, knitters, flast sewing, pattern maker and CAD designer. Based on the profile of manpower complement presented in this 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 (61%) of the human resource would be sewers sewing machine operators. An additional 17% would be involved in supervision and quality control and 20% would be into other forms of work such as knitting, embroidery, etc. About 2% of the workforce would be into 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

41.3 43.4 56.2 31.3 52.6 77.8 45.6 42.0 33.4

19951996 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 24,240 1,880 16,794 156,757 104,633 8,605 1,701 810 18,287 1,770 7,638 60,055

102,629 20,759 13,109 309,244 166,190 145,867 51,603 39,527 11,990 12,969 4,305 30,226 37,976

% 8.0 2.0 1.0 24.0 13.0 11.0 4.0 3.0 1.0 1.0 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

1998

Table 4.

Total Export Contribution of the Garment Industry: 1995-

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

1 2 3 4 5 6 7 8 9 10 11 12 13 14

Country USA European Countries Great Britain West Germany Benelux France Italy Spain Denmark Austria Ireland Greece Sweden Portugal Finland Total

Value of Exports Union

% Share

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

Custom tailoring shops

Total

Sold to Interplant domestic transfer market 96,699 96,199

145

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 Apparel Product Chain Gender and Size Men

Product Usage Top

O pro

Materials Knitted

Fiber Content Natural

1

1

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 Revenues 1996 31,690,712 47,392,223

Net 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 VALUE*

EXPORT-ERS TOTAL

LOCAL 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

43

118,820

40,130

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

VII Central Visayas I

Ilocos Region

Bicol Region

X Northern Mindanao VI

Western Visayas

* In million US Dollars Source: 1997 Annual Report, 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 Garment & Textile Industry GTEB, 1997

the

Table14.

Labor Productivity in Textile and Garments Industries in

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 Mundo

Table 15.

US$34 Billion Target for 1999 and Projections for 2000 and 2001 Product

1998 Value

1999 Value % Change

2000 Value %

2001 Value % Change

Change Total Phil. 29,496 34,982 18.60 41,813 19.53 50, 00019.58 Exports Garments 2,260 2,314 2.39 2,430 5.00 2,551 5.00 % to Phil. 7.7 6.6 5.18 5.1 Exports 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 , Southern 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 16 3.24 19 4.02 23 5.74 7.8

309

8.53

391 83.55

420 85.02

402 84.99

34

8.97

34

7.26

38

7.69

36

19

5.01

22

4.7

20

4.05

16

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 1-4

5-9

10-19

20-49

Employment Size 50-99 100-199 200-499 500-999 100

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

1,458

113

15

4

2

0

0

0

103

236

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

401

Custom tailoring shops

13

Custom dressmaking shops

10

Men's and boy's garment mfg.

34

Women's, girls' & babies garment

192

Manufacturing Ready-made clothing mfg.n.e.c.

102

Embroidery establishments

31

Mfr. of hats, gloves, handkerchiefs

19

Employment Compensation (Average) Total Employees 34,946 259 202 2,499 18,218

8,452 1,066 4,250

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

Neckwear, (except knitted & paper) & apparel belts regardless of Materials Source: NSO Census of Establishment

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

R

8

5

1

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

Mfr. of wearing apparel except Footwear

No.of Est.

401

Total Empl.

34,946

Unpaid Works.

432

Paid Employees Total Mgrs.,exe. Prod. & Sup. Works. 34,514

1,002

30,751

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

13 10 34

259 202 2,499

18 13 30

241 189 2,469

4 2 71

218 173 2,121

192

18,218

217

18,001

542

16,020

102

8,452

91

8,361

220

7,444

31 19

1,066 4,250

49 14

1,017 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

No. of 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 neckwear, (except knitted & paper) & apparel belts regardless of materials

Value of Products/By-Products Sold (P'0 Total Sold to Interplant Direct Dom.Market Transfer Export 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

Table 21. Percent Share of Value of Products/ByProducts Sold By Mode of Sale: 1994 Industry No. Description of

Total

Sold to

Interplant Direct

Sold to

Other

4,383

188 2,924

941 15 314

Est.

Dom.Market Transfer

Mfr. of wearing apparel except Footwear 401 5,663,195

17.0

Export Exporters products

3.46

1.6

0.06

100.0

0.0

0.00

100.0

0.0

0.00

77.4 Custom 13 12,287 tailoring shops Custom 10 16,452 dressmaking shops Men's and 34 256,022 boy's garment mfg. Women's, 192 3,530,898 girls' & babies garment

25.7

73.5

0.6

0.09

14.8

82.8

2.4

0.00

#DIV/0! Manufacturing Ready-made 102 1,400,786 clothing mfg.n.e.c. Embroidery 31 33,600 establishments Mfr. of hats, 19 383,150 gloves, handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of materials

#DIV/0! #DIV/0!

18.5

14.0

#DIV/0!

67.2

0.3

0.03

45.8

45.3

0.0

8.93

18.0

82.0

0.0

0.00

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. 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,

No. of Est. 2,043

Total Unpaid Empl. Workers 7,344 3,102

949 500 58 210

2,489 1,401 549 1,621

87 60 179

548 381 355

Paid Workers 4,242

1,431 721 86 301

1,058 680 463 1,320

143 165 255

405 216 100

handkerchiefs neckwear, (except knitted & paper) & apparel belts regardless of Materials 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 Description Mfr. of wearing apparel except

No.of Total Salaries Empl.Cont. Estab. Comp. & Wages (SSS,etc.) 2043 86,592 1,139 85,454

Footwear Custom tailoring shops

949

20,773

Custom dressmaking shops

500

10,146

20,552

221 231

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

Embroidery establishments

60

Mfr. of hats, gloves, handkerchiefs

179

10,564

362

10,203

2,898

2,889

1,770

1,743

9 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 13 15 19 21 28

Name of Company Leader Garments Senga Philippines Knitjoy Manufacturing Easy Travel Goods Marfis Garment All Asia Garment Industries

Address Cavite Cavite Rizal Rizal Rizal 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

NCR Southern Luzon Central Luzon Central Visayas Ilocos Region Central Mindanao Southern Mindanao Bicol Region Northern Mindanao Western Visayas Total

FOB Value

620 264 192 43 9 7 1 5 2 11 1,154

Value Added

( in US$ million) 1,471,720 868,890 464,150 118,120 18,270 10,720 006 4,030 002 480 2,965,280

842,930 422,930 255,430 40,130 6,240 4,610 006 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 Palawan Rizal Total

FOB Value ( In US$) 10,898,355.18 303,724,047.19 90,128,517.80 620.00 60,636.90 161,573,073.89 566,385,250.96

Percent Share

1.92 53.62 15.91 0.01 8.53 100.00

Source: Bureau of Export Trade Promotion, EDP/IRC Figure 9. Average Number of Workers by Firm Size and Position Micro/Small Company

Medium Company

Large Company

FABRIC INSPECTION

FABRIC INSPECTION

FABRIC INSPECTION

2Inspector

3 Inspector

1 Operator 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 Handworkers/Markers 2 bundle girls

9 End-line Q.C. 10 Markers 4 Movers

PRODUCTION ASSEMBLY 15 Line supervisors 15 Roving inspectors 16 End-line inspectors 395 sewers 69 In-line pressers

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 4 2 0 0 0 0 0 1,592

a)Custom Tailoring & Dressmaking shops b)Ready made 103 236 184 clothing manufacturing c)Embroidery 20 30 16 estab. d) Manufacture of 158 18 1 misc. wearing apparel, except footwear, n.e.c. Total 1,739 397 216

53

24

33

27

15

0

1

4

1

2

1

0

0

0

2

3

7

2

1

1

0

676

74 193

63

30

42

30

16

1

1

2,535

Table 32. Projected Human Resource Requirements, Garments Industry: Southern Tagalog (Region IV) SubSector/Critical Skill

a)Custom

Employment Level No. of NSO %Share Growth 2000 2001 2002 2003 2004 2005 (est.) Estab. 1996 Workforce Forecast (Estimates) (%) 1,399 6,727 5 8,177 8,586 9,015 9,466 9,939 10,436

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

5 670 25,242

30,682 32,216 33,827 35,518 37,294 39,159

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 45,386 47,655 50,038 52,540 55,167

2,344 35,561

61% 1.00% 17%

1% 20%

7,664 2,161 2,269 2,383 2,502

2,627

4,675 1,318 1,384 1,453 1,526 77 22 23 24 25 1,303 367 386 405 425

1,602 26 447

77 1,533

22 432

23 454

24 477

25 500

26 525