Speaking before the Sun.Star Economic Forum Wednesday, Aldaba said the government lending programs are directed mainly to micro-enterprises and livelihood programs.

The Magna Carta for Small Enterprises mandates all lending insitutions to set aside eight percent of their total loan portfolio to SMEs (six percent for small and two percent for medium) and the creation of the small business guarantee and finance corporation for SME financing needs.

Gerardo Butardo of the Bangko Sentral ng Pilipinas during the open forum on the other hand reported that based on their monitoring,  banks have exceeded the eight percent requirement. He said as of December 2008 bank compliance reached 18.44 percent and 16.73 percent as of March 2009.

Another issue faced by SMEs is the high cost of raw materials and inputs, caused by infrastructure and communication problems.

Electronics makes up 63 percent of exports, and it is highly concentrated on semi-conductor products, said Rafaelita Aldaba.

SMEs in garments sector don’t have local raw material supplier, and are dependent on imported products.

SME automotive sector remains underdeveloped; only 10-15 percent of parts locally sourced, added Sun.Star Economic Forum speaker Rafaelita Aldaba.

Trainings conducted by groups on SMEs resulted in output, work flow improvements, Aldaba said.

Aldaba said among the things the government can do for SMEs:

• Develop local suppliers/parts: increase value added of MNCs;
• Design complete package for technical assistance, training, access to & availability of finance;
• Promote outsourcing/subcontracting arrangements;
• Increase government subsidies on clustering activities & other public-private partnerships like EBESE in         automotive including technology upgrading & HRD programs;
• Improve all aspects of competitiveness crucial to create linkages, higher value added;
• Create & maintain SME database;
• Government priority on SMEs that have GPN industries, separate cottage industry microenterprises from         SMEs, designate one agency for SME promotion

Wholesale and retail and manufacturing contribute over 40 percent in employment within SME sector.

Siegfried Herzog of Friedrich Naumann Foundation shared Germany’s SME experience during the Sun.Star Economic Forum Wednesday at the Casino Espanol.

He said good infrastructure allows SMEs to grow all over the country. It also developed commercial land cheap and plentiful and lowers transaction costs which is favorable to SMEs.

Efficient property rights, independent judiciary and professional bureaucracy, decentralized administration work to promote strong SMEs, he said.

He added that strong institutions limit political patronage and a strong local government works to the advantage of SMEs.

Herzog said Germany’s anti-monopoly institutions promote competitiveness and provide efficient market for SME goods.

He added the intensity of competition reflects market openness and a strong competition policy.

Herzog said the biggest drag on competitiveness in Germany’s SME is the cooperative tradition between labor and management.

Another contributing factor to Germany’s SME is the business sophistication efficiency where family firms long-term committment play a big role.

Cluster development and combination of enterpreneurship and technical knowledge are important, Herzog said.

He added that science and engineering background key factor in innovative character of German exporters; vocational training is source of cheap SME labor.

Dr. Cayetano Paderanga, UP School of Economics professor quoting a report from the Cebu Investment and Promotions Center (CIPC) said BPO companies based in Cebu employ 50,000 people and there have been no reports of retrenchments in the industry.

Paderanga said the economic downturn has created opportunities for Cebu and the region.

He said it has not restrained Cebu’s fast-advancing BPO industry,  according to regional office of the National Economic and Development Authority (Neda), even if other export industries have stopped expanding and were even forced to downsize operations, the BPO and related industries have continued to expand and remain bullish.

Contributing to this development is the local officials pledged of commitment to support BPO companies in all aspects, even with their immigration concerns.

The cost of doing business in the province is also relatively lower with office space rentals only one-third of the going rate in Metro Manila and electricity rates are approximately 30 percent less than the rate in Metro Manila at P7 per kilowatt-hour.

A labor force with more than 3.7 million members is also present in the province and these workers are fluent in English, equipped with working knowledge, and trainable. Roughly one-fifth of the annual 23,000 college graduates hold engineering and computer-related degrees.

Cebu City also leads the Top 50 Emerging Global Outsourcing Cities according to a recent study released by Tholons, a strategic advisory firm for global outsourcing and investments (2009), he added.

Another driver for Cebu’s growth is tourism, Paderanga said. Cebu posted an 8.51 percent growth in tourist arrivals despite the drop in key foreign markets at the onset of the global economic crisis last year, data from the Department of Tourism (DOT) showed.

A record from the DOT’s Planning and Promotions Department revealed that Cebu generated a total of 321,116 foreign tourists in the first semester of this year and topped the over-all foreign arrival comparative by provinces.

Paderanga said there are also other industries that benefited a spillover of tourism and BPO and these are: Other
banking, construction, power, retail trade, transportation, investments related to tourist accommodations, spa centers and fitness & wellness hubs.

However, the global crisis threatens foreigners’ buying power and the manufacturing industry in the region has been in a “hemorrhagic state” due to the lifestyle change of the province’s foreign markets stemming from the economic downturn.

Paderanga said Cebu’s growth drivers are also being challenged with some problems like the lack of software developers that threatens BPO sector’s growth.

The CIPC also reported that infrastructure is Cebu’s weakest point. Paderanga said water and power supply should be the main focus and it should be privatized to ensure stability of supply. The roads should be improved to address congestion in the streets

He added that strong private-public partnership should continue to be harnessed in view of addressing major challenges, and eventually improving Cebu’s ranking.

Paderanga speaking before the Sun.Star Economic Forum at Casino Espanol on Wednesday said the credit slowdown in the US resulted in economy slowdown, affecting Philippine exports and OFW employment.

OFW deployment and remittances on a downtrend in later half of 2008 but went up by 2.7 percent in 1st quarter and three percent in 2nd quarter of 2009.

Paderanga said the Philippines can only put in place policies and programs to temper the effects of lower exports and remittances from Filipino consumers.

One of the key government policies is the P330-billion Philippine Economic Resilliency Plan. The plan will ensure sustainable growth, save and create jobs, protect the most vulnerable sectors (poorest of the poor, returning overseas Filipino workers, and workers in export industries), ensure low and stable prices and improve competitiveness.

Paderanga said the of P330-billion, P160 billion is for small, community level infrastructure projects and social protection measures;P40 billion for tax cuts and the scheduled cut in corporate income taxes; P100 billion is for for large infrastructure projects and P30 billion is for additional benefits to members by social security institutions.

Another key government policy Paderanga discussed is the increased efforts in the deployment of OFWs. This is done by hiring agreements with some host countries and training OFWs for healthcare, education, power/energy, and real estate sectors.

One key monetary policy needed, Paderanga said is a policy on rate cuts. He said the Bangko Sentral ng Pilipinas (BSP) has already slashed policy rates by as much as two percent since December 2008.

Managing exchange rate level and domestic liquidity are among the other monetary policies recommended for government to take.

Paderanga said other forces affecting the country’s recovery are the continued growth in the OFW remittances and the increase in OFW deployment; government’s pump-priming activities; foreign direct investments in agri-industrial sector, business process outsourcing sector, creative industries (film, design, music), infrastructure and logistics, manufacturing, mining and tourism and election spending.

This year’s economic forum focuses on small medium enterprises (SMEs) with the theme—“Small and Medium Enterprises: Jobs, Economic Growth”

The Philippine economy which has been fuelled by the remittance of Overseas Filipino Workers (OFW) has been criticized for being artificial, becuase once the jobs abroad run dry the flow of the money to the country ends.

But Garcia said this is where the SMEs come in with the development of new enterprises for the growth of the economy.

Economist Cayetano Paderanga Jr., who heads the board of the Institute for Development and Econometric Analysis and the Foundation for Integrative and Development Studies, will provide an overview of the state of the economy
and of how the country will surmount the effects of the global economic crisis.

To speak more on how SMEs can become more competitive and take advantage of the anticipated economic recovery, Sun.Star has invited Siegfried Herzog of the Friedrich Naumann Foundation for Liberty and Dr. Rafaelita Aldaba of the Asia Regional Integration Center.

Herzog will provide a picture of German SMEs. Aldaba, on the other hand, will provide inputs on how Philippine SMEs can become globally competitive.

The economic experts will speak during the Sun.Star Economic Forum on Aug. 26 at the Casino Español de Cebu on Ranudo St., Cebu City.(more)

SMEs comprise more than 99 percent of registered businesses in the Philippines and employ 70 percent of the country’s work force.(more)

Yogesh Malhotra, lead for Accenture’s Philippine Delivery Center Network for BPO, said “glamorizing” the work of a BPO employee is one of the reasons that many leave the industry.

Most of the recruitment advertisements posted by BPO companies usually highlight “fun at work.” (more)

Bonifacio Belen, executive director of the Cebu Educational Development Foundation for Information Technology (Cedf-it), explained that Cebuanos possess the creativity and entrepreneurship skills that are waiting to be tapped by industry players. (more)

Oscar Sanez, Business Processing Association of the Philippines (BPAP) chief executive officer, said aside from major outsourcing players putting up branches in Cebu, there are companies that have chosen to set up their first Philippine operations in the province.

He said that of the 15,066 business process outsourcing workers in Cebu, 10,013 are “voice-based” while 3,943 are “non-voice.” This figure is about the same as Clark and a third of that of Quezon City, he added. Sanez is one of the speakers of the ongoing Sun.Star Economic Forum on “Business Process Outsourcing: Prospects and Challenges for Cebu’s Economy.”

Among the factors that have caused Cebu’s outsourcing industry to take off rapidly are its skilled homegrown workers plus the added ability to attract more from Mindanao and other Visayas provinces and the presence of schools that have been considered centers of excellence for business.

Cebu has over 18,000 college graduates yearly broken down into: Business (8,000+), Engineering and IT (5,600+), Math and Sciences (2,800+), Fine Arts (83), medical services (2,800).

Also, Sanez said, Cebu has put in place the required infrastructure, with its 21 IT parks and buildings. He said this is the largest concentration of IT infrastructure facilities outside of the National Capital Region with its 78.

Major industry players that have put up strong sites in Cebu include Sykes, Convergys, eTelecare, Teletech, IBM, PeopleSupport, and Accenture.

Wipro, on the other hand, has put up its first outsourcing company in Cebu.