Why it matters
The garments sector remains a major employer, particularly for low- to semi-skilled workers, but has been under pressure from higher electricity rates, wage adjustments and tighter buyer requirements.
The incentives are designed to help firms retain jobs, stabilize operations and regain competitiveness in export markets.
The big picture
The measures were discussed during a recent dialogue between the Department of Trade and Industry (DTI) and garment manufacturers and exporters, held in line with President Ferdinand R. Marcos Jr.’s directive to support job-generating industries, the department said.
Under the CREATE MORE Law, new projects or registered subsidiaries of existing garment firms may be granted a 100-percent additional deduction on power-related expenses and a 50 -percent additional deduction on direct labor costs.
These incentives are expected to ease operating expenses and provide breathing room for companies facing thin margins.
Export-oriented garment firms may also qualify for value-added tax (VAT) zero-rating or VAT exemption if at least 70 percent of their sales are exported, improving cash flow and strengthening export competitiveness, according to the DTI.
Between the lines
Beyond existing incentives, the department said it is reviewing industry proposals aimed at improving overall cost competitiveness.
These include possible reductions in VAT rates to levels comparable with other ASEAN economies and expanded fiscal support for existing firms and subsidiaries.
However, officials stressed that cost relief alone will not be enough to keep Philippine garment exporters competitive.
What they’re saying
Trade and Industry Secretary Cristina A. Roque said global buyers are increasingly prioritizing speed and technology over traditional cost advantages.
“I received direct feedback from buyers abroad that automation is no longer optional; it has become a baseline requirement in the global market,” Roque said.
“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.”
How it works
To support automation, the DTI said it 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 machinery and production equipment.
Incentives under the Board of Investments will support mechanized and digital garment production, while the Philippine Economic Zone Authority will offer fiscal and non-fiscal incentives for export-oriented firms located in PEZA special economic zones.
What’s next
Workforce development will also be addressed through expanded training programs in partnership with the Technical Education and Skills Development Authority, aimed at increasing the supply of skilled sewers and machine technicians needed for automated production.
To expand market access, the DTI said manufacturers may coordinate with the department to identify priority export markets, which can be pursued through the Foreign Trade Service Corps’ trade attaché network.
Roque said the dialogue reflects the administration’s push to stabilize the garment industry as a major source of employment, adding that the DTI will move quickly on actions within its mandate while coordinating with other agencies on broader policy concerns affecting the sector. —Ed: Corrie S. Narisma
