The Philippine garments industry is set to gain critical cost relief under the Create More Law, with incentives that reduce power and labor expenses to help protect jobs and restore competitiveness amid rising costs and tighter global competition. The measures were discussed during a recent dialogue of the Department of Trade and Industry (DTI) with garment manufacturers and exporters, held in line with President Ferdinand R. Marcos Jr.’s directive to support job-generating industries.
Under the policy, new projects or registered subsidiaries of existing garment firms may avail of a 100% additional deduction on power-related expenses and a 50 percent additional deduction on direct labor costs, helping lower operating expenses and support job retention. Export-oriented companies may also qualify for value-added tax (VAT) zero-rating or VAT exemption if at least 70 percent of their sales are exported.
Further, the Department will be studying industry proposals aimed at enhancing overall cost competitiveness, including potential reductions in VAT rates to levels comparable to those of other Asean economies, as well as expanded fiscal support for existing firms and subsidiaries.
Aside from cost issues, Secretary Cristina A. Roque noted that the Philippine garment industry must adapt to shifting buyer requirements, particularly in terms of production speed and technology adoption.
“I received direct feedback from buyers abroad that automation is no longer optional; it has become a baseline requirement in the global market. They expressed a clear preference for exporters with modern, automated production equipment, as short lead time is now the deciding factor, especially for fast-fashion brands,” Roque said.
For this reason, DTI will work with government financial institutions, including the Land Bank of the Philippines and the Development Bank of the Philippines, to provide flexible financing for automation, machinery, and production equipment. It added that incentives under the DTI’s Board of Investments will support mechanized and digital garment production, while the Philippine Economic Zone Authority’s incentives will provide a comprehensive package of fiscal and non-fiscal support for export-oriented garment enterprises located within proclaimed Peza Special Economic Zones.
Workforce capability is also being addressed, with training programs to be expanded in partnership with the Technical Education and Skills Development Authority (Tesda) to increase the supply of skilled sewers and machine technicians needed for automated production.
To expand market access, the DTI said garment manufacturers may coordinate with the Department to identify priority export markets, which can be pursued through the Foreign Trade Service Corps’ trade attaché network to link Philippine producers with international buyers and global trading companies.
The DTI Secretary said the dialogue reflects the administration’s push to quickly stabilize the garment industry as a major source of employment. She added that the agency will move on actions within its mandate while coordinating with other agencies on broader policy concerns affecting the sector. PR