PHILIPPINES COUNTRY REPORT
2017 Ashlee Cruz FASM-420 Global Sourcing Donald Levy
table of contents 01 Country Overview 02 History & Traits 03 Country Stability / PEST 04 State Of Apparel & Textile Export 05 Trade Agreements With U.S. 06 Transporation 07 Shipping Resources 08 Main Suppliers 09 Production / Lead Time 10 Business Etiquette 11 Risks And Benefits
01 COUNTRY OVERVIEW
The Philippines is a country in southeast Asia, commonly mistaken for a Pacific Island. Despite being a democratic republic, it suffered economic loss and political corruption over the dynastic rule of the Benigno Aquino family. It’s current president is known as the “Trump of the East,” who’s trying to cut ties with the US, the country’s main exporter, in favor of China. A developing country with westernized culture (Christian values and high English-speaking population), the Philippines is a beautiful, biodiverse country with a high risk for natural disasters. It also has potential for industrial growth in higher quality apparel and textile.
02 HISTORY & TRAITS
LOCATION Located in the continent of Asia (south of Japan, north of Australia), Philippines covers 298,170 square kilometers of land and 1,830 square kilometers of water, making it the 73rd largest nation in the world with a total area of 300,000 square kilometers. The Philippine Islands became a Spanish colony during the 16th century. They were ceded to the United States in 1898 following the Spanish-American War. GOVERNMENT Philippines is a democratic and republican state. They have three branches of government: Legislative, executive, and judiciary. The president is currently Rodrigo Duterte.
POPULATION In 2017, the Philippines had a total of 103,796,832 residents, being the 13th most populated country in the world. It has been declining since the 1960s. EDUCATION Their education system mirror’s the US’s K-12, with about 10% of the population having a college degree and 20% with a high school degree. ETHNIC BREAKDOWN Tagalog 28.1% Cebuano 13.1% Ilocano 9% Bisaya/Binisaya 7.6% Hiligaynon Ilonggo 7.5% Bikol 6% Waray 3.4% other 25.3% GENDER BREAKDOWN Male 50.1% Female 49.9% MEDIA AGE 24.4 years
IMPORT AND EXPORT VOLUME In March 2017, the Philippines exported $5.579B and imported $7.882B.
TOP EXPORTS (YEAR-ON-YEAR GROWTH PERCENT)
TOP IMPORTS (YEAR-ON-YEAR GROWTH PERCENT)
TOP EXPORT COUNTRIES Japan: US$11.7 billion (20.7% of total Filipino exports) United States: $8.7 billion (15.4%) Hong Kong: $6.6 billion (11.7%) China: $6.2 billion (11%) Singapore: $3.7 billion (6.6%) Germany: $2.3 billion (4.1%) Thailand: $2.1 billion (3.8%) South Korea: $2.1 billion (3.7%)
ECONOMIC OVERVIEW The Philippines economy grew an annual 7.0 percent in the second quarter of 2016, accelerating from a downwardly revised 6.8 percent expansion in the previous three months and beating market consensus of a 6.7 percent growth. The labor force participation rate (LFPR) in January 2017 was estimated at 60.7 percent given the labor force population of 69.4 million. The labor force population consists of the employed and the unemployed 15 years old and over. Unemployment rate in 2017 is 6.6% MAIN INDUSTRIES electronics assembly, aerospace, business process outsourcing, food manufacturing, shipbuilding, chemicals, textiles, garments, metals, petroleum refining, fishing, rice RELIGION 86% Roman Catholic 8% Other Christian 4% Various
NATURAL DISASTERS Monsoons are common in the Philippines, especially during wet season (June and lasts till October). September and October are often the typhoon season in the Philippines. LANGUAGE Tagalog, English, Kapangangan, Thousands of other dialects CURRENCY The Philippines uses the peso (P), which is equivalent to $0.02USD. Budget deficit was P353.4 billion in 2016. Inflation rose 2.7% in 2017, but it is still very low over the last 20 years. NATIONAL HOLIDAYS The Philippines follows Christian holidays (Easter, Christmas, etc).
03 COUNTRY STABILITY
POLITICAL STABILITY FACTORS Social unrest remains a big issue due to the remnants of corrupt political administration under the Aquino family and a high percentage of poverty. The new president, Rodrigo Duterte is known as “the Trump of the East”. RELATIONS WITH THE US AND OTHER COUNTRIES Duterte hopes to flip trade relations and military aid with the US in favor of China. Relations with the US will seem to get worse, but for now they remain cordial. Relations with the Japanese seem to be getting stronger due to higher need for hardware and technology imports. Soon Japan will be a part of the VFA (Visiting Forces Agreement) with the Philippines, Australia, and the US.
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04 STATE OF APPAREL & TEXTILE INDUSTRY
“Philippines no longer has a textile industry or one that can produce textile with world class quality and cost. A healthy textile industry is the basis of a garments industry. Without it, we can’t have a thriving garments industry either.”
Local production and labor are lacking. The industrial sector is concentrated in urban areas, especially in the metropolitan Manila region, and has only weak linkages to the rural economy. Inadequate infrastructure, transportation, and communication have so far inhibited faster industrial growth.
Apparel and footwear increased in current value by 7% in 2016. Various new retail stores opened up in the country. More disposable income is driving sales of apparel and footwear. SM Malls are the most widely known chain of luxury super malls. Growth in middle and high income shows increase in consumer spending, mostly on imported brands, and e-retailing. OFWs (overseas filipino workers) send money back to their families for spending.
The Philippines continues to attract buyers from the US. Gap, Ann Taylor, Polo Ralph Lauren, Victoria’s Secret, Tommy Hilfiger, Levi’s and Jones New York have been boosting their sourcing activities in the country over the past years.
#16 in the world for Apparel and Footwear Export 20,624 SUPPLIERS (Panjiva)
#3 / $5,029,990,340 in Articles of apparel and clothing accessories, knitted or crocheted (HTS 61)
#5 / $3,818,367,732 in Articles of apparel and clothing accessories, not knitted or crocheted (HTS 62)
#9 / $1,388,807,640 in Articles of leather; saddlery and harness; travel goods, handbags and similar containers; articles of animal gut (other than silkworm gut) (HTS 42)
#10 / $1,322,374,581 in Furniture; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings; lamps and lighting fittings, not elsewhere specified or included; illuminated sign illuminated nameplates and the like; prefabricated buildings (HTS 94)
TOP 3 PORTS #1 / Manila 26,768 shipments to US #2 / Cebu 8,244 shipments to US #3 / Davao 3,148 shipments to US
05 TRADE AGREEMENTS
The Philippines has the 1989 bilateral Trade and Investment Framework Agreement (TIFA) and Save Our Industries Act, a US bill providing duty-free or preferential access to imported garments that adopt US-made fabrics. It is projected to boost total exports between $2.7 and $3 billion by 2017. It is also expected to generate 450,000 jobs in the sector over the next five years. The country currently does not have FTAs with the US but aims to establish one. John Forbes, senior advisor of the American Chamber of Commerce of the Philippines, said they will revive its proposal for a bilateral FTA between the US and the Philippines. Forbes stressed this is an opportune time since Trump is not interested in negotiating FTA deals on regional basis, preferring bilateral FTA negotiations. The US, the third largest Philippine trading partner, invested over $5 billion in one year.
06 TRANSPORATION
AIRPORTS 247 HELIPORTS 2 RAILWAYS 995km ROADWAYS 213,151km WATERWAYS 3219km (40 FT CONTAINER) SHIPPING COST SHIPPING COST MANILA TO LOS ANGELES MANILA TO SAVANNAH TRANSIT TIME $1,619.24 - $1,789.68
$2,221.39 - $2,455.22
INTERNATIONAL PORTS • • • • • • • •
Manila International Container Terminal Port Of South Harbor, Manila Cebu Port Authority Mariveles Grain Terminal Port Of Batangas Port Of Davao Subic Bay Freeport Zone Port Of General Santos
1 MONTH
07 SHIPPING RESOURCES
SHIPPING COMPANIES TO THE US APL Limited Regional Headquarters & Asia Pacific 9 North Buona Vista Drive #14-01 The Metropolis Tower 1 Singapore 138588 Tel: (65) 6278 9000 Cosco Philippines Shipping 6th Floor, Carolina Building 2106 Madre Ignacia St.,Malate, Manila, Philippines Phone: +63 2 311-8888 Email: cosco@coscophil.com CMA CGM Philippines Inc. 5th Floor TwoE-comCenter Tower A, Bayshore Avanue, Mall of Asia Complex 1300 PASAY CITY Phone: +63 2 869 3119 Email: mnl.marketing@cma-cgm.com
08 MAIN SUPPLIERS
A significant number of makers are based in Metro Manila, particularly in the cities of Manila, Quezon, Pasay, Muntinlupa and Navotas. Suppliers prefer to operate in these area because of their accessibility to transport systems.
Production hubs are commonly located in Central and Southern Luzon, specifically in the provinces of Pampanga, Bulacan, Cavite, Laguna, Batangas, Rizal and Quezon. Cebu province is the main sourcing center in the Visayas island group. Aside from being proficient in different manufacturing steps such as weaving and sewing, workers in the Philippines are known for their good English literacy. They can also operate computers and large-scale machines. The availability of indigenous materials such as Manila hemp, ramie and bamboo is another advantage enjoyed by the sector. Manila hemp is mixed with cotton or polyester to create denim fabric, while ramie is used as an alternative to linen. Apparel made of these fibers is gaining popularity among overseas buyers because they are perceived as sustainable.
KNIT BOTTOMS
DENIM Hamlin Industrial Corp Clients: Lauren by Ralph Lauren, Elle Tahari, GAP, Walmart, Macy’s, Urban Outfitters, Liz Claiborne, Reebok, J.Jill Specialties: Ladies apparel, knitted, mens and women’s shirts, bottoms, dresses Address: No. 7, Golden Mile Ave., Golden Mile Business Park, Brgy. Maduya, Carmona, Cavite, Philippines, 4116 Contact: +63 46 430 0412 / hamlin.com.ph Closest Port: Manila Sein Together Int’l Philippines, Inc. Clients: Costco, F21, kMart Specialties: Womens woven, mens knit Address: Block 4 Lot 9 Phase Ii Peza Rosario Cavite 4106 Ph Contact: +63 46 437 1223 Closest Port: Manila
DENIM BOTTOMS Somawear Inc. Clients: Old Navy, GAP Specialties: Denim bottoms & jeans Address: 134 Sumulong HiWay Bo Mayamot. Antipolo City, PH Contact: +63 26 45 6665 Closest Port: Manila
Seojin Apparel Co Inc. Clients: BCBG Max Azria, GAP, Prime Apparel, Cato Specialties: Ladies knit apparel, woven apparel, ladies knit tops, dresses, bottoms Address: Bldg. E1 & E2 JY Sons Compound Phase 3, FCIE - SEZ Brgy. Langkaan, Dasmarinas, Cavite, Philippines, 4114 Contact: +63 46 402 0476 Closest Port: Manila
SWIMWEAR & KNIT Daegyoung Apparel Inc. Clients: Kohl’s Specialties: Swimwear apparel Address: Unit 5A-5D Gabriel Building Block 23, Phase 4, Rosario, Philippines, 4106 Contact: +63 4643 71091 Closest Port: Manila
LINGERIE / SLEEPWEAR The Apparel Corp. (FAR EAST) Specialties: lingerie, nightwear, sleepwear, and loungewear Address: 8888 Marian Road 2, East Service Rd South Superhighway, Paraaque 1700 Philippines Phone: +63 (2) 776-1465 Closest Port: Manila
Yuenthai Phils Inc. Clients: Adidas Specialties: Footwear Address: PIPC Building, First Ave Extension, 6th St. Mactan Economic Zone I, Lapu-Lapu City, Cebu PH 6015 Contact: +63 32 340 9434 Closest Port: Manila
LARGE LEATHER GOODS L&T INTL Group Philippines, Inc. Clients: UNIQLO, Liz Claiborne Address: 7500 A. Bonifacio Ave. Corner J. Tinsay St. Clarkfield, Angeles, Pampanga PH Contact: +63 45 599 2256 www2.luenthai.com Closest Port: Subic Bay Marquee Mills MFG Inc. Clients: Ralph Lauren, Giorgio Armani Address: Bldg 2 Dampol 2nd B Puhlan Bulacan PH Contact: +63 44 521 0394 +63 6325 562726 +63 6327 160171 Closest port: Manila
SMALL LEATHER GOODS Superl Philippines Inc. Clients: Kate Spade, Michael Kors Address: Angeles Industrial Park Inc. Special Eco Zone Brgy Calibubut Ph 2001 Pampanga 63 Contact: +64 45 458 0163 Ext. 634545801 Closest Port: Subic Bay
MAIN SUPPLIER LIST
SHOES
09 PRODUCTION / LEAD TIME
MONTHLY MINIMUM WAGE 2016: LOW $180 HIGH $321 MEDIAN LEAD TIME TO EXPORT 2016: 3 DAYS MEDIAN TRANSPORT TIME: 24 DAYS - 1 MONTH
10 BUSINESS ETIQUETTE MEETINGS • Make appointments 3-4 weeks in advance and reconfirm a few days prior to meeting. • Punctuality is expected. • Accept all food and drink. • Remain for social conversation at the end of a meeting. • Face-to-face meetings are preferred over phone. • Business handouts are appreciated. NEGOTIATIONS • To avoid confusion or misinterpretation, get agreements in writing through each stage. • Stick to one representative, unless you want to start over. • It may take several visits to meet the decision-maker. DRESS ETIQUETTE • Do not remove your suit jacket until the most important Filipino does. • Conservative business attire is preferred, especially with women. • Flashy clothing is not appreciated. • Appearance is high priority. Dress well!
11 RISKS & BENEFITS
RISKS
No FTA with the US High poverty rate Unstable political state Frequent natural disasters Limited workforce growth Developing economy Social Inequality
BENEFITS
Strong US relations Several int’l seaports High export volume into the US Growth in textile and apparel Government support in manufacturing industry Low-risk, highly skilled labor English-speaking country Improving infrastructure Loyal business culture WTO member Decreasing inflation rate
Sources: http://www.gov.ph/about/gov/ http://www.worldometers.info/world-population/philippines-population/ http://countrymeters.info/en/Philippines https://psa.gov.ph/business/foreign-trade http://www.tradingeconomics.com/philippines/unemployment-rate http://www.tradingeconomics.com/philippines/gdp-growth-annual https://qz.com/691533/the-philippines-new-president-is-no-trump-of-the-east-but-hes-terrifyingin-his-own-right/ http://www.developingcountrysourcing.com/philippines-garments/philippines-sourcinggarments-industry-overview/#.WRf0_4grLIU http://www.expatfocus.com/expatriate-philippines-business-culture PANJIVA BUSINESS SOURCE Country Reports EUROMONITOR