Heldred Export International produces this beaded necklace, which features a mother-of-pearl pendant.

The sector employs steps to enhance the utilization of environment-friendly materials and processes as demand for products adopting such inputs swells.

The fashion accessories industry in the Philippines is promoting organic models to meet increasing demand for sustainable products.

With large brands such as Levi's, H&M and Zara implementing stricter guidelines regarding materials and ethical practices used in making jewelry and bags, local suppliers are encouraged to ensure that their models pass these standards. The southern province of Cebu, in particular, is positioning itself not just as the fashion accessories capital of the country but Asia's primary destination for "green" jewelry.

According to the Cebu Fashion Accessories Manufacturers and Exporters Foundation or Cebu Fame, the use of natural components to create intricate designs and textures allows domestic enterprises to differentiate their models from those mass manufactured by other sourcing hubs.

Together with the Export Development Council, Department of Trade and Industry, and Department of Environment and Natural Resources or DENR, Cebu Fame hosts the annual Bijoux Cebu fair where about 100 exhibitors showcase handmade and environment-friendly items and packaging.

The association likewise encourages its members to participate in Go Green Philippines, a reforestation project established in 2007 by the DENR. For the past seven years, Cebu Fame has been donating and planting mamalis trees, which are the primary source of whitewood and known for malleability and capability to absorb dyes easily. Cebu Fame also supports the SMEs for Environmental Accountability, Responsibility and Transparency or Smart Cebu. This association aims to help makers develop sustainable models, and was established by the EU's Switch Asia Programme and German Federal Ministry of Economic Cooperation.

Challenges

This hat and handbag set from The Native Touch Designare is made of raffia.

The industry is tackling a number of difficulties that hinder its continued growth, chief of which is high production costs compounded by the depreciation of the peso against the dollar.

In spite of the Philippines' economic growth rate of 7.2 percent in 2013, the second-highest in Asia after China, the peso-dollar exchange rate has weakened since early-2014. This development has resulted in bourgeoning costs of imported raw materials, particularly gemstones, cashmere, silk and leather.

This development has compounded the already high manufacturing expenditure of goods brought about by expensive electricity and labor. Cited as the fifth-highest in the world, power costs in the nation will continue to rise by an average of $0.24 per kilowatt-hour this year. This is mostly due to lack of plants to meet the increasing demands of an emerging market. The privatization of the energy industry, furthermore, has limited the national government's capacity to regulate quotes.

Labor cost has also been soaring since September 2013. With the further increase in the daily minimum wage approved by the Department of Labor and Employment in January, the basic salary now stands at about $11. Minimum wages of neighboring sourcing hubs are less expensive with Indonesia pegged at roughly $6 per day and China at $8.

To cope, local suppliers target the midrange and upscale segments, where quotes can be flexible enough to cover expenses. Although most orders are for low-end models, clients often request for discounts for large shipments, preventing makers from further cutting prices without losing profits.

Some manufacturers are heavily investing in skills to create intricate metal- and beadwork, which adds value to costume jewelry and fashion bags. Gemstones are embedded in scarves to make them unique. Companies are also encouraged to attend the annual design workshops organized by the Center for International Trade Expositions and Missions during the Manila Furnishings and Apparel Manufacturers' Exchange trade fairs.

Industry composition & hubs

The Philippine Exporters Confederation lists 115 active fashion accessories makers in the country, the majority of which are sending shipments abroad and privately owned. According to Cebu Fame, about 83 percent of its members are small enterprises and more than one-tenth are midsize.

Cebu in the Central Visayas region is the primary sourcing hub. About 100 enterprises are based in the cities of Cebu, Mandaue and Lapu-Lapu. These areas are surrounded with bodies of water and plantations, providing companies with a stable supply of raw materials. Labor cost is also about 20 percent lower compared with Metro Manila's basic salary rates. Because of continuous support from various trade associations in the area, manufacturers also have access to designing and marketing workshops.

A small number of enterprises are located in Metro Manila and nearby provinces, including Cavite and Bulacan.

This article is an excerpt from Philippines Sourcing Report: Fashion Accessories, published by Global Sources and the Hinrich Foundation. For the full report with complete Industry Overview and 18 suppliers, click here.

This article and its contents are provided by the Hinrich Foundation, a partner of Global Sources in promoting trade across Asia. The products and the suppliers featured in this article are export assistance program beneficiaries of the Hinrich Foundation.