Start a new business in Garments

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Hi Asma,

you need to have a registered company first, then apply for export license. Garments have quota for export, so take more information about it..

Well, I trust you have written the business plan already. Any chance to have a copy? Then I tell you what is correct and wrong with it. If no business plan, then you do not know what you are doing and better STOP right away and get some KNOW-HOW first!!!

Your detailed research is very import here.  There are serious questions to be processed and the questions that remain to be asked and answered, prior to starting or even developing a business plan should include the following:

1.  Is India part of the generalized system of preferences (GSP) in the Association of Southeast Asian Nations (Asean) region?

2.  Are you familiar with the Philippine Exporters Confederation Inc. (Philexport)?

3.  Are you familiar with the Foreign Buyers Association of the Philippines (Fobap)?

4.  Are you familiar with the Trans-Pacific Partnership (TPP) agreement?

5.  Are you aware of the pros/cons of a Philippine corp vs a foreign corp and how the above 3 entities could effect your SEC approval?

6. Are you thinking to purchase new "spillover" items from other Asian countries or send used clothes? 

7.  How will your business entity be structured (i.e., corp, LLC, partnership, etc) and have you reached a complete understanding of how to do this as a foreigner?

8. Are you aware that Businesses exporting out of the Philippines must provide the following documents before their goods depart:
-Packing List;
-Invoice;
-Bill of Lading;
-Export License;
-Customs Export Declaration; and
-Certificate of Origin.

9.  Are you aware that Exporters operating out of a special economic zone (SEZ) must register with the Philippine Economic Zone Authority (PEZA) while companies exporting out of free port zones, must register with the specific free port?

10.  Are you aware that Exporters must first register and set up an account within the Client Profile Registration System (CPRS) via the Philippine Exporters Confederation?   

11.  With the above, have you completed your SWAT analysis? (https://www.thebalancesmb.com/swot-exam … ts-2947985)

Best of luck.

Note:  Being one of the founders of a Philippine corporation involved with imports, we only had to deal with some of the above.  This is not a process for an expat acting alone or without locals.

Export is not that document extensive compared to importation. But garments is under quota that needs to be cleared with CBW before exporting. I believe she have a client in India already to sell the garments, so SWOT analysis or business plan will not serve the purpose on her inquiry.  Since she is a foreigner , she can only register as a corporation, or use a Filipino registered company with Export license to export the garments

Calif-Native has put a lot of work in his reply. Take it to heart! Do not enter this business naively. I used to work in Freudenberg, a  company you must know in the garment business; Interlining. Prior to that I worked for Ackermann; Sewing Threads and prior to that, Sinotech, the dealer for Groz-Beckert; Knitting Needles.

You need to be seriously financially backed to compete with China. Then again it much depends what you want to do: A business or a Mom and Pop shop!

renren18 wrote:

I believe she have a client in India already to sell the garments, so SWOT analysis or business plan will not serve the purpose on her inquiry......

@ RenRen18,
I am not aware of your corporate background and or academic achievements, nor would I dream to ask for such.  However, based on my corporate background and academic achievements, I feel my post was very accurate.  Additionally, I will share the following: 

Most of the western businesses use tools developed many years ago which enable planners & decision makers to make the best business decisions.  Just because we are in the Philippines or a person from India is the potential owner, the need for good business acumen does not stop. 

Since the SWOT business acumen tools were first developed by Albert Humphrey's research at Stanford University in California (published in early 70's), and I began using such tools around 1989, it is my view that any business that does not use these principles (in any form they may call them) will not last long in 2018 and beyond.

After retiring from two U.S. corporations as President/CEO and over 35 years in senior aerospace management roles, I only offer my experiences here to help others.   More recent expansion of the SWOT analysis concepts now include:
1. Business Strategy Development and Application.
2. A Clear Understanding of Financial Acumen.
3. Tools, Skills, and Concepts of Marketing.
4. An Understanding of Operations, Supply Chain, and Manufacturing.
5. Business Simulations.

Unless my 18+ years of University studies in California (resulting in 4 degrees, culminating with dual Masters), can be considered a waste and my free advice useless, my posts are to help and should be considered by most as that.  I promise you, I will never post "clueless" responses.

Hello,

How are you?

I have visited Manila many times.  Once i had thought of manufacturing lingerie in a Philippines factory. Now i believe shoes are the best product to wholesale.

We share similar pursuits, however, my focus is footwear. I will move from USA to Manila in March 2019 to invest in a Marikina shoe factory.

Cheers,
Nick

Are you a consultant in Manila?  If so, let us discuss the commercial and economic indicators which lead to beating the odds which confront foreigners who initiate a business in Manila.
The main item that ought to have been suggested to the inquiry is The 3 C's: Cash, Customers & Commitment
You gave a good explanation to her assuming her academic ! experience skills background. Your illustration is of the StartUp 101 thought , which illustrates what mist incubators and accelerators in USA now disseminate. 
I will be relocating from USA to Manila in 2019 to imitate a startup business.

Cheers!

Hi, I am not sure I can classify myself as a consultant (if you are addressing the question to me). I wish to comment as follows;

My comment to your wish to setup in Marikina: "I will move from USA to Manila in March 2019 to invest in a Marikina shoe factory": Do you plan to sell in Philippines or why would you setup in Marikina? The more common approach would be to setup in a PEZA (Philippine Economic Zone Authority / http://www.peza.gov.ph/) zone, namely Cavite (South) or Pampanga (North) or Manila if you plan (for tax reasons) on exporting (ie USA).

In addition I could help you (part-time) to setup because of I have know-how in the following fields:
1) Sewing Machine Needles (not only knitting needles), ie. Titanium Nitrate coated Groz-Beckert needles
2) Needle policy
3) Needle detectors (I used to sell Cintex all over Asia)
4) Sewing Machines and makers (i.e. Siu Fuk in Hong Kong is a friend of mine)
5) Sewing threads (polyster, bonded)
6) Interlining (from Freudenberg)
7) Toe puffs and uppers (Rhenoflex)
8) Packaging software from Tops: Tops and MaxLoad

Cheers!

My visits to Marikina have guided my disposition. The locals in the business there have an existing small operation and my aim is to expand and improve its capacity.

As such, your insights are taken seriously as I am quite sure the current machinery and needles are likely substandard.

Otherwise, I have had a great and extensive relations with 3 of the 4 major casinos in Asia so I may uncover another venture to consider the PI enterprise zone in the future.

Let us seek to maintain a cordial and thoughtful rapport.

Cheers!

mlkjr wrote:

My visits to Marikina have guided my disposition. The locals in the business there have an existing small operation and my aim is to expand and improve its capacity.

@ Mlkjr,  Although your plans seem doable, have you performed any research on the laws that foreigners must follow?  I recently posted on this topic here in expat.
Example:

1.  "Foreigners are not to be involved in retail trade enterprise with a paid-up capital of less than USD 2,500,000" and must follow "Category B" to form an legal enterprise."

2.  Regardless of capital, if you do not comply with the latest Foreign Investment Negative List your business will not be legal.

3.  Maybe, the current business is on a long-term lease that is assumable?  Are you aware of the true owners of the equipment, the building and under what person's name this is all in?

There are many complex issues that you must have a good understanding of that go way beyond just a location in the NCR.  If the above and below listed questions/topics are already reviewed and part of your business consideration, just view this post as a simple review that may help others.  If not, only you can decide what goes into your plan to own/operate such a business as an expat in the Philippines.  See "mikaelarhelger's" point on PEZA?  He is dead on!

Have you reviewed the business status with BIR as follows:?

Reviewed both the current company BIR Forms 2306, 1901, 1903, 0605, 2000 or Form 2303 (DTI Certification ) if you intend to be sole proprietor  (A very expensive and normally illegal status for expats), and your new forms that must be submitted as new owner?

Do you understand your need for filing Form 1904 for your TIN?

Have you reviewed the accounting system in use?  Is it legal, current and was form 1906 recently updated. 

FYI - Each month and qtr that we submit BIR forms for our Philippine Corp (like 1601EQ), the layers of steps and local expectation adds to the nature of doing business.  BTW, I made sure the corp had a BIR approved accounting system and software (another requirement when software is used) and they still look for printed/faxed copies to even make payments at the local bank. 

To be done right and to safeguard your investment, this will take more money, time, very close reviews of all documents and understanding of local shortcuts than it may first seem is needed.  Best wishes.

Hi, looking at all the advice given here, you may want to reconsider doing business in a non PEZA zone. If you are however still interested in starting a garment business in the Philippines I do know of a factory owner (foreigner) wishing (must actually) to retire due to health reasons. It is a running operation in Cavite PEZA. Let me know.

Thanks to all for the incoming mortar of moral merchant ammo. Truly, the missives are appreciated and worthy of praise.

I am very grateful for all data and marching orders.

Cheers!

What type of garments Is the factory making. If owner is retiring and factory is currently for sale what is it's ballpark value?

Is manufacturing of shoes as a wholesale products bring made for wholesale buyers defined as “retail trade?”

mikaelarhelger wrote:

Hi, looking at all the advice given here, you may want to reconsider doing business in a non PEZA zone. If you are however still interested in starting a garment business in the Philippines I do know of a factory owner (foreigner) wishing (must actually) to retire due to health reasons. It is a running operation in Cavite PEZA. Let me know.

Please inform and I will advise my local business partners to visit factory to investigate.

Calif-Native wrote:

mlkjr wrote:

My visits to Marikina have guided my disposition. The locals in the business there have an existing small operation and my aim is to expand and improve its capacity.

@ Mlkjr,  Although your plans seem doable, have you performed any research on the laws that foreigners must follow?  I recently posted on this topic here in expat.
Example:

1.  "Foreigners are not to be involved in retail trade enterprise with a paid-up capital of less than USD 2,500,000" and must follow "Category B" to form an legal enterprise."

2.  Regardless of capital, if you do not comply with the latest Foreign Investment Negative List your business will not be legal.

3.  Maybe, the current business is on a long-term lease that is assumable?  Are you aware of the true owners of the equipment, the building and under what person's name this is all in?

There are many complex issues that you must have a good understanding of that go way beyond just a location in the NCR.  If the above and below listed questions/topics are already reviewed and part of your business consideration, just view this post as a simple review that may help others.  If not, only you can decide what goes into your plan to own/operate such a business as an expat in the Philippines.  See "mikaelarhelger's" point on PEZA?  He is dead on!

Have you reviewed the business status with BIR as follows:?

Reviewed both the current company BIR Forms 2306, 1901, 1903, 0605, 2000 or Form 2303 (DTI Certification ) if you intend to be sole proprietor  (A very expensive and normally illegal status for expats), and your new forms that must be submitted as new owner?

Do you understand your need for filing Form 1904 for your TIN?

Have you reviewed the accounting system in use?  Is it legal, current and was form 1906 recently updated. 

FYI - Each month and qtr that we submit BIR forms for our Philippine Corp (like 1601EQ), the layers of steps and local expectation adds to the nature of doing business.  BTW, I made sure the corp had a BIR approved accounting system and software (another requirement when software is used) and they still look for printed/faxed copies to even make payments at the local bank. 

To be done right and to safeguard your investment, this will take more money, time, very close reviews of all documents and understanding of local shortcuts than it may first seem is needed.  Best wishes.

Why ( if you know) is wholesale products characterized by PI government as “ retail trade?

I PM you

@ Mlkjr,

"Why ( if you know) is wholesale products characterized by PI government as “ retail trade?"

I never said wholesale products are characterized by PI Government as “ retail trade". 

People here in the PI may want to call their business retail or wholesale and sell it to you as such.  Just because a person tells you their business is a wholesale type does not make it a fact in the Philippines.  This is where a perspective buyer's "due diligence" confirms the seller's reported business status.  Nonetheless, it is the SEC and other agencies that will give the final approval and status (after a review of actual business operations or plans) of how a business is categorized in the Philippines. 

If a business is operating as a wholesale business and their historical sales records confirm a certain minimum percent of sales have been performed under "wholesale" requirements, most likely the government will consider the operation to be in compliance with wholesale rules, not the self-reporting business owner's view to a potential buyer. 

Once these facts are proven, the perspective buyer/investor may want to proceed with these know facts.  It is my opinion that this above step is one of the key elements in determining the true purchase value of the investment.

Most understand that a "Wholesaler" performs the intermediate step in the distribution of merchandise.  It is up to you to determine if the business you are interested in has already been established as and is considered a WHOLESALER by the Philippine government.  The due diligence process is well past mere blog postings and reviews. 

If you already understand that:
- The business major and regular client type(s) or status in the distribution process,
- Where their major source of sales is derived from, and
- Their business records support the "Philippine Authorities" views on the above,

..... some of the important parts of your homework are done.   

Some recommended places to get official answers is with a complete read and understanding of:

- RA 8762
- SEC published Opinions from the "Office of the General Counsel".

Note: These SEC opinions will be published as "No. XX - XX" (with the first two characters being the year or 16-09 = 2016, 9th opinion).

Important Note - Ideal and or complete answers to most business questions are not found in a blog and the interested parties must want to do deep research to find the answers they desire.  My posts are not intended to replace individual research and understanding for the best investor decisions.  All investors are individually responsible for their investment decisions and the degree of research they may or may not want to perform to meet their views on "performing due diligence".