Local garment makers are pressing the government to impose additional taxes on imported personal protective equipment (PPE) as a way of leveling the playing field between those made overseas and those made here.
The Confederation of Wearable Exporters of the Philippines (CONWEP) and the Confederation of Philippine Manufacturers of PPE (CPMP) are asking lawmakers to implement a fiscal policy that favors the local PPE industry. This should allow garment firms to improve operations, compete with imports and save jobs in the process, they said.
In a news statement issued on Wednesday, CONWEP and CPMP outlined provisions they want legislators to include in the proposed Bayanihan to Recover as One Act, shortly called Bayanihan 2, which is now being deliberated by the bicameral conference committee.
On top of the list for garment makers is the exemption from payment of taxes, including value-added tax (VAT) on local sales, for medical grade PPEs produced here. They said the industry is just emerging and should therefore be given enough room to grow.
They are also seeking the imposition of duties, taxes and fees, including VAT on local sales, for imported PPEs, as well as for their mandatory laboratory testing in the Food and Drug Administration (FDA) and accredited third-party institutions.
Further, they are appealing for the retroactive application of tax exemptions for the importation capital equipment needed to manufacture PPEs from the time Bayanihan 1 expired on June 24. They said this should as well apply to firms whose operations were retrofitted in order to make medical grade PPEs.
Their final request is for the government, as the purchasing body, to prioritize the procurement of critical products that are produced in the Philippines.
In exchange, CONWEP and CPMP vowed to manufacture PPEs compliant with FDA regulations and certified by international third-party facilities. They also committed to make prices of PPEs made in the country competitive against imports.
“We are aligned to the core objective of the Philippine government to protect the lives of our medical frontliners in this unfathomable war against Covid-19,” they said, declaring they also intend to protect existing jobs in spite of declining demand for consumer goods.
According to CPMP, its members have a combined capacity to make 57 million pieces of face masks and 3 million pieces of coveralls and isolation gowns per month. This repurposing initiative cost them $35 million to carry out and saved the jobs of at least 7,450 workers.
The garments industry, used to be one of the country’s largest exporters, is struggling to cope with competition in the international market, especially in recent years.
Based on data from the Philippine Statistics Authority, exports of apparel and clothing products slipped nearly 5 percent to $927.59 million last year, from $974.44 million in 2018. Likewise, the 2018 figure was a decline of more than 11 percent from the 2017 total of $1.09 billion.
There are many factors, both domestic and global, as to why the industry is falling from grace, but the most pressing, at least for CONWEP, is the uncertainties in fiscal policy.
Mostly operating in economic zones, garment manufacturers are enjoying fiscal incentives that could soon be stripped away from them. As the government looks to cut corporate income tax, it plans to overhaul incentives granted to investors in economic zones in exchange.
Should this be pursued, many industry players are seen to pack up operations here and relocate to another Southeast Asian country, such as Lao PDR, Myanmar and Vietnam.