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Illegal clothing trade costs Philippines
dear
By Miriam Grace A
Go
MANILA - As Filipinos wrap up their
post-Christmas shopping for clothes - the holidays in
the Philippines end on Tuesday, January 6, with the
Feast of the Three Kings - manufacturers and department
store tenants, traditionally the biggest earners at this
time of the year, are not laughing on their way to the
bank. Quite the opposite, profits are in shreds.
Sellers of second-hand or slightly damaged
branded clothes smuggled into the country have eaten
into their profits. It should have been an expected
competition, especially in the Yuletide just past,
considering how the illegal trade has boomed in the past
five years as the Filipino consumers' purchasing power
grew weaker.
Authorities, however, seem to be
overlooking the problem again, not discussing the
evident connection between the sale of smuggled clothes
that textile producers have been complaining about, and
the sharp drop in manufacturers' output this year.
It is ironic that the problem persists under the
administration of President Gloria Macapagal-Arroyo, who
has vowed to tighten customs security. Arroyo was an
under secretary of trade, assigned specifically to deal
with the textile and garments sector. During her term as
vice president and concurrent secretary of social
welfare, it was Arroyo who formed an investigative panel
that discovered that "a Chinese trader" was behind the
smuggling of huge quantities of cheap clothes -
originally intended as donations to charitable
institutions, but sold in flea markets. The smuggler
remains unnamed - and scot-free.
Openly sold in
bargain stalls and flea markets, the smuggled clothes,
mostly from the United States, are purchased by mostly
middle-class buyers. Many times, they are even featured
in fashion magazines as great finds. Branded clothes in
these stalls carry tag prices of P50 (US$.90) to P100,
which is not even half of the price of locally produced
clothes of unknown brands that are sold in department
stores.
It's called
ukay-ukay
In Baguio City in the north, the
summer capital of the Philippines, the trade is called
wagwag, to dust off. In Cebu, where it is equally
lucrative, it's called ukay-ukay, to sift or dig
in. In Metro Manila, some call it "SM", a playful
allusion to a popular chain of department stores but
which actually means segunda mano, or second
hand. The illegal business also thrives in the cities of
Davao, Zamboanga, Iligan, Dipolog and Bohol.
In
the early years of the ukay-ukay business,
traders bribed non-government organizations (NGOs) to
act as fronts for smuggling used clothing. The NGOs
would get permission from the Philippine Department of
Social Welfare and Development (DSWD)to receive as
"donations" commercial quantities of second-hand
clothes, supposedly for distribution to needy
communities. The DSWD permit served as the NGOs' shield
against heavy customs taxes.
The social welfare
department later became suspicious when some NGOs were
receiving "donations" as much as two 40-foot container
vans of used clothing every week. Officials later
discovered that NGOs were paid a small portion, about 5
percent of the total shipment, to give away in their
charity projects and about P120,000 for fronting for
smugglers.
A number of influential persons also
appeared to be behind some NGOs engaged in the
ukay-ukay syndicate. Whenever department of
social welfare officials refused to give the customs
bureau the go-ahead to release suspicious quantities of
"relief goods" ostensibly for charities, NGOs would
threaten the department with the name of some highly
placed person or warn that the influential person was
upset that his foundation's "work" was being hampered.
For their part, smugglers were earning an
estimated P6.4 million to P9.6 million for every 40-foot
container van of second-hand clothes that they could
sell in the bargain stalls. Starting in 1999, the
department of social welfare stopped giving permits to
NGOs so that they could receive commercial-volume of
used clothing.
Still, what started out as an
insignificant enterprise boomed into a multi-million
industry. In Baguio City, which is becoming the
ukay-ukay capital of the country, the number of
stores seeking permits to sell used imported clothes
grew from "a few stalls" to almost 100 in 1999, the year
NGOs were prevented from receiving shipments of used
clothing. From 100 stalls in 1999, the number of stalls
then increased to 255 in 2002, according to the city
government's business licensing office. The city
government has even built a three-story ukay-ukay
center along its main road.
Local governments
ignore illegal trade
Local governments are
tolerating the illegal trade, and have in fact afforded
some legality to these used clothing stalls by imposing
token taxes on them. In Baguio, such stores are issued
business permits. In the cities of Cebu and Davao, the
vendors - they don't have stalls and put their goods on
huge baskets - are not required to have business permits
but are made to pay alkabala, or token taxes of
P5 to P10 a day.
"I don't care where their goods
are coming from, as long as they bring money to the city
treasury. If these are smuggled, it's for the police to
run after them," Cebu City mayor Tomas Osme had said.
The Baguio city treasurer's office refused to
disclose the annual taxes paid by these stories. In
Cebu, Osme had said that it is difficult to determine
how much "taxes" are paid by the vendors because these
are computed along with the taxes paid by the vendors of
other products, such as such as mangoes and statues of
saints.
The Philippines Bureau of Customs claims
it is helpless in preventing the illegal entry of these
second-hand garments. In the past two years that the
department of social welfare did not issue importation
permits to NGOs, customs officials confiscated only
829.5 bales, or the equivalent of two 40-foot
containers, 641 boxes and 300 sacks of used clothing.
These were turned over to the department of social
welfare.
Customs agents explain that it is
difficult for them to seize all smuggled second-hand
clothes because the smugglers are now employing the
"consolidation" strategy. This is done in two ways.
First, before a commercial vessel reaches the ports, it
unloads the used clothing on to small boats that meet it
offshore. These smaller vessels then dump the goods on
ukay-ukay centers in the cities. Second, a trader
divides his goods among overseas Filipino workers, who
address the boxes of clothes to relatives or to
fictitious names. These are claimed at Philippine ports
by people working for the same trader, and then sold in
the open market.
Economy hurt by illegal
trade
The Federation of Philippine Textile
Industries had complained that sales from the
underground ukay-ukay industry are cutting into
the income of legal garment manufacturers. Although they
have aired their complaints year-around, not just during
Christmas, they have been ignored and the problem
persists. The textile trade federation, however, has
never disclosed how much its members are losing to these
illegal vendors.
Years ago, when lawyer Agnes
Devanadera worked on the panel that looked into the
operations of the ukay-ukay syndicates, she said
that on the surface the used clothing stores were
providing cash-strapped consumers with affordable
products. In the long run, however, the underground
trade would have a worse impact on the economy because
local garment manufacturers, losing out to these
ukay-ukay stores, would eventually lay off
workers or be forced to close shop.
Figures
released by the national statistics office last week
appeared to confirm Devanadera's assessment. The
government's survey of 4,912 factories showed that
manufacturing output dropped by 4 percent in October,
the month when a general rise in production is expected
annually because of the increased demand for consumer
products during the holidays. The factories had lowered
their output in leather products, footwear and wearing
apparel, among other products.
The drop was
steeper than the 3.2 percent in September, a development
that surprised economists. Manufacturing being the
linchpin of the economy, the fall in factory output
dashed the government's hopes that the economy would
register a growth of 4.2 percent to 4.5 percent for
2003.
Initially, needy communities were
considered on the losing end in the sale of second-hand
clothing in the market, because the donated clothes were
not reaching the intended beneficiaries. These days,
however, with the unabated influx of these cheap items
damaging the garments industry, the already struggling
economy is obviously the biggest loser.
(Copyright 2004 Asia Times Online Co, Ltd. All
rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
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