Business Bayani PH

The Philippine garment industry has been hit hard by weak overseas demand, leading to retrenchments and forced leaves for over 5,100 workers since the beginning of the year.

Maritess Jocson-Agoncillo, executive director of the Confederation of Wearable Exporters of the Philippines (Conwep), said the soft demand has impacted at least nine factories, including Luenthai Philippines, the country’s biggest exporter of cotton clothing.

Around 4,577 workers have been retrenched, while another 500 were forced to take leave, Jocson-Agoncillo said. This represents about 3% of the workforce employed by Conwep member companies.

Luenthai, a major supplier to international brands like Ralph Lauren and Adidas, bore the brunt of the job cuts, laying off close to 2,000 workers, or 60% of its workforce. The company cited a two-year decline in demand for its products as the reason for the layoffs.

“This action [retrenchment and forced leaves] was taken in coordination with the Department of Labor and Employment to ensure transparency and adherence to legal standards,” Luenthai said in a statement provided by Conwep. The company added that all affected employees received severance packages.

Soft demand and US import restrictions

Jocson-Agoncillo attributed the weak demand to a decline that began in the second quarter of 2023. Export revenues for apparel, leather goods, and footwear have fallen significantly compared to pre-pandemic levels.

By early February, she said, export revenues for these goods were down a steep 34% compared to 2020. The industry has yet to recover to 2019 levels, when export revenues stood at $1.79 billion.

She added that the Uyghur Forced Labor Prevention Act of the United States, which restricts imports suspected of using forced labor from China’s Xinjiang region, has also caused some disruption.

New import rules are making it harder for Philippine exporters to ship goods to the US, Jocson-Agoncillo explained. These rules require companies to provide much more detail about where their materials come from and how their products are made. This extra scrutiny is causing delays in shipments.

The Conwep official clarified that the Philippine garment industry does not source cotton from Xinjiang and relies on suppliers from India and Pakistan.

Government intervention and hope for recovery

The Department of Trade and Industry (DTI) has intervened on behalf of the garment industry, raising the issue with US Commerce Secretary Gina Raimondo during her visit in March.

“Some of the detained shipments were released in April, indicating that the government’s intervention is working,” Jocson-Agoncillo said. “We remain hopeful that the remaining shipments will also be cleared.”

Trade Secretary Alfredo Pascual confirmed that the DTI is following up with US authorities to resolve the issue and help Filipino companies recoup their losses.Ⓒ