Intra-industry productivity growth analysis of the Philippine garments and textile industries: Prospects for enhanced competitiveness in the domestic and international markets

• Main Authors: Chua, Xavier Patrick, Cruz, Gerardo, Natcher, Brent Ronnel, Opao, Mark Alan
• Format: text
• Language: English
• Published: Animo Repository 2005
• Subjects: Clothing trade; Textile industry; Industrial productivity; Competition
• Online Access: https://animorepository.dlsu.edu.ph/etd_honors/263
• Institution: De La Salle University

On the basis of two separate sets of data collected in the 1998 Annual Survey of Establishments and the 2002 Annual Survey of Philippine Business and Industry of the National Statistics Office (NSO), this study looks at the productivity performance of the Philippine Garments and Textile Industries. Specifically, it involves the estimation of Total Factor Productivity of firms in the two industries using the growth accounting equation, together with a multiple regression analysis on the selected determinants affecting intra-industry productivity growth and differences, with the aim of formulating strategies to attain improved competitiveness in the local and foreign markets. The results are quite fascinating. The study has proven the substantial differences between the two industries, with textiles having a negative average TFP growth, while garments prevailed otherwise. This was consistent with the idea that textiles emerge as a more capital-intensive industry, while the high coefficient for the value share of labor in garments maintain that the industry continues to be labor-intensive. The considerable growth in garments comes from the actuality that the industry engages in subcontracting and direct export activities. In contrast, the Philippine textile industry's poor performance can be attributed to below satisfactory technical management brought about by out-dated machineries and old production technologists, high cost of energy and raw materials, and its very weak link with the domestic garments industry. The multiple regression results show that improved input structures such as upgraded capital equipment together with its utilization, and the conduct of research and development, all contribute to firm productivity in the textiles industry. For garments, internal economies of scale reflected by its employment size, and the skills development of its female laborers are the vital factors that lead to better productivity performance. There are a number of policy recommendations that may emerge from the above findings. First, priority should be given to firms that play the role of an engine of productivity growth in the industry, two of which is the aggressive investment on new technology and the skills education and training of its human resource that fits the need of the fast-changing trends in manufacturing, as well as with the latest drift in fashion design. This in turn implies that government should provide policies that aim to create an innovation-friendly environment and provide adequate incentives for firms. Second, this study suggests that institutions that promote industry development have been very weak, and thus a stipulation of new and highly effective institutions should be consistently pursued further. Lastly, it also suggests that the highly competitive environment in the industry brought about by the current phase-out of the Multi-Fiber Agreement (MFA) has been beneficial to consumers but not to garments and textile firms, mainly because of its poor regulatory environment in the country. But the fact cannot be denied that competition allows firms to be more efficient and productive. Therefore, promotion of competition should be considered as an important part of its restructuring and should be carried out consistently and expanded to the two industries of the economy for them to foster a cutthroat edge both in the domestic and international markets.