CCT eyed for subsidy of garments labor pay

THE struggling garments industry is asking for a cut in the P109billion conditional cash transfer (CCT) budget to subsidize the pay of its workers, as firms seek ways to reduce their operating cost and export selling price to compete in the global market.

Robert M. Young, president of the Foreign Buyers Association of the Philippines (Fobap), said one way the government can take part in the revival of the garments industry is by incentivizing firms in their hiring of workers. He argued this will

help the industry that has been suffering from loss of purchasers abroad as a consequence of stiffer regional competition.

Young proposed that the government redirect some of the CCT fund to cover a portion of the wages of those employed in the garments

and textile sectors.

“This is like incentivization of employment, that’s what we call it. Our proposal is to provide and include in the government program cash incentives to cover hiring of garments and apparel workers for factories,” Young said in a statement last week.

However, Young did not specify how much the industry wants from the CCT allocation this year of P108.76 billion, the bulk of which is appropriated for cash grants, including rice subsidy, for poor families registered in the National Household Targeting System for Poverty Reduction.

Figures show declines

Aside from Fobap, the proposal to incentivize employment in the garments industry is backed by the Confederation of Wearable exporters of the Philippines, Garment Business Association of the Philippines, Textile Millers Association of the Philippines and the Garment Manufacturers Association of the Philippines.

Based on data from the Philippine statistics Authority, exports of clothing products after three quarters declined over 6 percent to $700.05 million, from $753.03 million during the same period last year. PsA figures also showed last year’s exports plunged 15.57 percent to $927.92 million, from $1.09 billion in 2017.

“We used to be No. 1 in these items, but not anymore because of our labor cost, power cost and together [with] whatever reason like, for instance, the efficiency of the workers. All these kinds of factors and disturbances are factors that lead to the nonacceptance of the buyers of our prices because it is quite high, it’s really high compared to other countries, such as Lao [PdR], Myanmar and Vietnam,” Young said.

“so we thought that to help the factories, [the government should] assist them so that the cost will be lower,” he added.

According to the Fobap chief, the Philippines can no longer compete with regional rivals in terms of pricing, particularly in basic clothing,

including t-shirts, denim pants, sporting goods and athletic wear. As such, subsidizing garments makers can help trim the export selling price of clothing items produced here, Young argued.

Young admitted his group has yet to reach out to the government about this proposal, but will bring up the matter soon with the labor and trade departments.

“We will still have to consult the department of Labor and employment about this, of course. [The] department of Trade and industry, with dOLe, will have to somehow collaborate and agree on the terms,” Young said.

Fiscal perks uncertainty

Aside from tighter competition in the global scale, garments makers are faced with uncertainty in the domestic level on the government’s move to rationalize fiscal incentives.

Mostly located in economic zones, garments firms will need to give up their incentives once the Corporate income Tax and incentives Rationalization Act bill is passed into law. The measure will bring down corporate income tax to 20 percent by 2029, from 30 percent at present, but will overhaul the set of tax perks granted to firms operating in economic zones.

Among those that will be rationalized is the 5-percent tax on gross income earned paid in lieu of all local and national taxes, which investors find crucial in maintaining their operations in the Philippines.