The Philippine garment industry, a crucial source of employment, is poised to receive significant financial relief through newly detailed incentives under the CREATE More Law. This move aims to shield the sector from rising operational costs and intense international competition, ultimately working to protect Filipino jobs.
Financial Relief and VAT Benefits for Garment Firms
During a recent dialogue with manufacturers and exporters, the Department of Trade and Industry (DTI) outlined key provisions. New projects or registered subsidiaries of existing garment companies can now avail of a 100% additional deduction on power costs and a 50% additional deduction on direct labor expenses. This direct intervention is designed to lower operating costs and support job retention.
Furthermore, export-oriented enterprises stand to gain substantial tax advantages. Companies that export at least 70% of their sales may qualify for value-added tax (VAT) zero-rating or a complete VAT exemption, enhancing their cash flow and price competitiveness abroad. The DTI is also evaluating industry proposals to potentially reduce VAT rates to levels seen in other ASEAN countries.
Automation: A New Market Requirement
DTI Secretary Cristina A. Roque emphasized that adapting to global buyer demands is non-negotiable. She revealed direct feedback from international buyers stating that automation is now a baseline requirement, not an option. "Short lead times are the deciding factor, especially for fast-fashion brands," Roque stated, noting a clear preference for exporters with modern, automated equipment.
To address this, the DTI will collaborate with government financial institutions like the Land Bank of the Philippines and the Development Bank of the Philippines to offer flexible financing for automation, machinery, and production equipment. Additional support will come from the Board of Investments for mechanized production and from the Philippine Economic Zone Authority (PEZA) for firms in special economic zones.
Building a Future-Proof Workforce and Market Access
Recognizing that new technology requires new skills, the DTI is partnering with the Technical Education and Skills Development Authority (TESDA) to expand training programs for skilled sewers and machine technicians. This initiative aims to build a workforce capable of supporting automated production lines.
To help manufacturers find new buyers, the DTI will leverage its Foreign Trade Service Corps' network of trade attachés. Garment firms can coordinate with the department to identify priority export markets and connect directly with international buyers and global trading companies.
Secretary Roque affirmed that these measures reflect the Marcos administration's directive to stabilize job-generating industries swiftly. The DTI will implement actions within its mandate while coordinating with other agencies on broader policy issues affecting the sector.
