Native New Yorker Lee Blumenthal grew up in the hustle and bustle of New York City. He loved the quick pace of life, the verve and the vigor of his surroundings… he even loved the cold weather in winter! Like many a nice Jewish boy from Brooklyn, Lee went into “Jewish Engineering”, the rag trade, and a career manufacturing ladies garments—mostly dresses and blouses. For years he did this, and for years he loved it and did well at it.
Eventually, as does everyone who is in the garment business, Lee came to Asia to try and source out a cheaper source of quality goods, and he wound up in Hong Kong.
“I thought I would LOVE Hong Kong, because it’s so similar to New York! The fast pace of life, the highly urban setting, the “get up and go”, the work ethic, discipline, and devotion to business…but I hated it!” says Lee. “People were very efficient, they produced a good product, but they weren’t particularly friendly to foreigners. Outside of the main part of the city, they didn’t really speak English, and didn’t really want to. I was able to get the product I wanted—needed, but I really wasn’t happy living there.” Lee started looking at other parts of Asia for garment production, and his eye landed on the Philippines.
The year was 1986, and the Philippines had just thrown out the perennial dictator, Ferdinand Marcos, in a bloodless coup. There was a new President, Corazon Aquino, English was the lingua franca of trade and commerce, and nearly everybody in the country spoke it with varying degrees of fluency. For those in the garment business, labor was affordable and the product that was turned out was marketable…and the Philippines had an abundance of a little thing called QUOTA into the United States.
“Quota” is the nickname given in the Philippines to the Multi Fiber Arrangement, or the MFA, which governed the world trade in textiles and garments from 1974 through 2004. The MFA imposed quotas on the amount of garments as finished goods that developing countries, such as the Philippines, could export to developed countries, such as the United States. During that time, factories in the Philippines “owned” quota—in ladies wear, jeans, t-shirts, children’s wear—which allowed them to manufacture and ship goods into the U.S. legally. Without the proper “quota”, goods would find it very difficult to enter their market.
Lee came to Manila and started to source factories that owned quota for ladies dresses. He then went to these factories and started to place orders to produce ladies dresses, which he then exported and sold to the buyers he knew back in the United States. Business was good, and in 1989 he decided to move to the Philippines.
A big part of the attraction in moving here was that English was a common language spoken and understood not just by the elite and educated, but also—in varying degrees—by the guy on the street. A legacy of American colonization, English serves as a unifying language in this country of over 100 different languages and dialects.
“I liked that I could go into a factory,” says Lee, “ and talk to an ordinary sewer about how to make something. Even if she did not respond to me, she would understand what I wanted. She may not answer me because she was shy, or because she wasn’t confident enough in her English speaking skills to answer me in English, but invariably she would understand exactly what I wanted.”
Despite living here for 25 years, Lee has never put up—or had the urge to put up—his own factory to produce the goods he sells. In his case, there was really no need for him to do so. Lee would go (and he still goes) to the associations of factory owners, like the old GTEB (Garment Trade & Export Board), or currently, to the GBAP (Garment Business Association Philippines) or one of the EPZA’s (Export Processing Zone Authority) to get from them a list of factories that produce his sort of product. Lee then goes to the factories and meets either with the factory owner or the general manager.
“Sometimes the owners of a factory would not want to work with me because I was a foreigner; other times, the factory owner would really want to work with me for that exact same reason!” says Lee. In the first instance, it was never a case of discrimination against a foreigner, but more of a factor of intimidation due to language skills (or lack thereof) or an unfamiliarity in dealing with someone from a different culture (Lee being the exotic creature).
“I would go to a factory and ask if they could produce XYZ product, and they would say yes or no. If they couldn’t—or if they didn’t feel comfortable working with me because of my “foreign-ness”, people would still be very nice to me. They would invariably tell me that they had a friend who had a factory that could produce what I wanted, and then they would pave the way with introductions.” Lee says.
A very important point that Lee stresses is that while doing business anywhere in the Philippines, it is polite business practice to engage in any undertaking with a Filipino who works with you. That person could be your Filipino partner or, as in Lee’s case, a highly adept employee whose “face” in the process is to facilitate any transaction and to sort of act as a cultural buffer if and when needed. In the garment business, and no doubt in other businesses in the country as well, sometimes a buying agent who is Filipino can fulfill this role. The important point is to do business with a Filipino at your side.
These days Lee is mostly out of garment production and “in” to the trading of garment overruns. “Overruns” in the garment business generally means that a factory has produced too much product, the order has shipped, and now they need to sell the product that is left over. In some cases, an order might have been been cancelled by the client, and the factory (now stuck with the goods) has to sell that product, usually at a very small profit, in order to recover their production costs. Lee got into the overruns business when an order he placed was cancelled by his client, and he got left holding the bag.
“Overruns are good business…when they are not your overruns.” says Lee. “When I got stuck with my own overruns, my wife’s uncle introduced me to one of the owners of SM department store, who took them off my hands.” Lee notes that in that particular case, the overruns were 30,000 pieces of sweaters! “Amazingly, SM sells a lot of winter garments! It’s jackets and sweaters mostly, not so much hats and gloves, and they sell them year-round, in spite this being a tropical country.”
Lee started buying overruns from the factories that used to make dresses for him. Business was very good for a long time, but as the Philippines priced itself out of the manufacturing of low-cost garments, factories moved to China, Sri Lanka and to Vietnam. Although the garment manufacturing business is picking up here again, the overruns are now from factories that make a higher-end product. The low-end, super cheap garments that the Philippines manufactured in the industry’s heyday are now a thing of the past.
These days, Lee is back into doing a little bit of production again—making blouses—just to see how it goes. He still doesn’t do the manufacturing himself, he places his order with an existing factory and they do the production.
By law, in the Philippines, foreigners cannot own a business (with a few exceptions in particular industries) in its entirety; companies must comply with the 60% Filipino ownership law. A foreigner can maintain control of their business if not its ownership. It may be that that the foreigner only owns 40% of the company, but the remaining 60% may be owned by a spouse who is Filipino, or barring that, it may be owned by a group of Filipino partners, none of whom own more than 10%-20% of the business in an individual capacity, but who collectively own the 60% majority. The company can then issue contracts granting the foreigner exclusivity in particular transactions. It makes doing business a bit more complicated, but not inordinately so. The services of a good attorney, accountant, and auditor answerable to the foreign partner are imperative to successfully maintaining control of the business (NOTE: take a look at the Index of Professionals on this website, under INDEXES, for referrals).
When asked, “Would you go back to the U.S. to retire?” Lee doesn’t hesitate in his answer. “No.” he says. “Life in the Philippines is easier. I never realized when I lived in New York that trying to make a living there is actually really difficult when compared to doing it here. Even though I used to love the winter and the cold, I couldn’t do it any more. Here the weather is good; it’s a lot easier to get cool if I am hot than to get warm when I was cold like in New York.
“The cost of living in the Philippines is low, comparatively speaking, and the quality of life is good. Being able to afford staff to cook, wash, and clean for me is something I could never hope to afford in the States, and because of it, I have the freedom to socialize more and do more of the kinds of things I enjoy doing.”
Lee has found it easy to make friends—good friends—in the Philippines. “People here very friendly, very warm, and very welcoming.”
Lee Blumenthal is home.