CONWEP: Gloomy Outlook for Garment Factories

Garment Manufacturers in Dire Straits as Major Buyer Pulls Out and Global Economic Slowdown Hits

In a distressing turn of events, garment manufacturers are facing severe challenges as they continue to implement the retrenchment of workers. A major buyer’s withdrawal, coupled with a punishing global economic slowdown, has dealt a heavy blow to the garment factories in Mactan, Cebu, according to a statement from the Confederation of Wearable Exporters of the Philippines (Conwep).

Maritess Jocson-Agoncillo, the executive director of Conwep, revealed that garment manufacturers have been forced to downsize their operations due to the weak global market that persists even after the pandemic. When asked about the overall industry performance, Jocson-Agoncillo described it as “bad” and pointed out that they have experienced double-digit negative growth since the start of 2023. The soft global demand for apparel, shoes, and bags, coupled with yearly wage increases since 2021, has further exacerbated the situation.

Jocson-Agoncillo explained that in difficult times like these, consolidation is a common business decision. However, she expressed concern that the current situation does not bode well for the industry’s outlook in 2024.

The garment industry as a whole has suffered significant declines from January to July this year, ranging from 27 percent to 4 percent across all categories. Export of travel goods experienced the steepest decline, plummeting by 27 percent to $316.167 million compared to $1.101 billion during the same period last year.

Exports of apparel alone decreased to $489.833 million, marking a 19 percent drop from $397.587 million in the same period last year. Additionally, textile exports slumped by 18 percent to $143.598 million compared to $541.186 million in the same period in 2022. Furthermore, exports of footwear also declined by 8 percent to $52.934 million in the first seven months of this year from $57.591 million during the same period last year.

Highlighting the impact of the pandemic, Jocson-Agoncillo revealed that the Mactan Apparel group, which consists of seven factories, has faced setbacks. These firms have been forced to trim down and retrench workers in an effort to reduce overhead costs after facing a major buyer’s exit this year. The retrenchment process began in the third and fourth quarters of 2020 and continued due to the enduring soft global demand for apparel, shoes, and bags.

Jocson-Agoncillo further informed that, by 2021-2022, four factories of the Mactan Apparel group experienced significant losses in the post-pandemic period, leading to a merger. Currently, the group comprises only two surviving factories, as compared to their peak operations where they employed over 21,000 workers within the Mactan ecozone under the Philippine Economic Zone Authority (PEZA).

The Mactan Apparel group now operates with five factories and employs approximately 14,000 to 15,000 workers, indicating a substantial reduction in workforce due to the ongoing challenges faced by the garment industry.

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