The Department of Trade and Industry is lining up tax relief and automation incentives to keep Philippine garment exporters competitive as costs rise and regional rivals move faster.
Trade Secretary Cristina Roque laid out the approach in a January 9 meeting with the Confederation of Wearable Exporters of the Philippines, acknowledging pressures on an industry prized for craftsmanship but squeezed by higher inputs, longer lead times, and uneven global demand.
A key proposal is easing value-added tax burdens. While exporters can qualify for zero-rating or exemption if at least 70 percent of sales are shipped abroad, firms still pay input VAT on local materials, utilities, and services, then wait for refunds.
At 12 percent, the Philippines has ASEAN’s highest VAT rate, versus 7 to 10 percent elsewhere, even as regional garments exports are typically zero-rated. DTI officials are studying rate reductions or faster recovery mechanisms to narrow the gap.
The agency is also promoting incentives under the CREATE MORE Law, including a 100 percent additional deduction on power-related expenses and a 50 percent additional deduction on direct labor costs for new projects and registered subsidiaries. The aim is to blunt operating costs while protecting jobs.
Aside from taxes, Roque stressed automation as non-negotiable. Buyers now demand shorter lead times, making speed as critical as quality, particularly for fast-fashion brands.
To accelerate upgrades, DTI will tap Land Bank of the Philippines and the Development Bank of the Philippines for low-interest machinery loans, complemented by Board of Investments incentives. Training with TESDA will expand to build skills for automated lines.
The strategy signals a pragmatic shift: competitiveness will hinge not just on craftsmanship, but on cost discipline and factory speed in coming years.
