PH working to strengthen MSMEs

OUT of 777,687 registered enterprises in the country, 99.6 percent are classified under micro, small and medium enterprises.

Although they account for the bulk of registered enterprises, their contribution to the economy is much less–its value to the economy contributing just 35.7 percent and 62 percent of employment.

The government’s Micro, Small and Medium Enterprises Development Plan aims to increase this segment’s value contribution to 40 percent and generate two million jobs by 2016.

Rhodora Leaño, director of the trade department’s Bureau of Micro, Small and Medium Enterprise Development, said four major challenges face the MSME sector. These are the enabling business environment, access to finance, access to markets, and productivity and efficiency.

These challenges were provided by members of the private sector in a series of consultations held before the crafting of the plan.

Challenges

The MSME Development Plan identifies tourism, business process outsourcing, electronics, agribusiness, logistics, shipbuilding, infrastructure, mining and housing as key industry areas of the country. Potential industries include homestyle products, wearables, construction materials and motor vehicle parts and components.

Stakeholders cited the high cost of taxes and fees; tedious, lengthy and complicated

processes of acquiring licenses; and non-coordination among government agencies as some of the challenges in the business environment for MSMEs.

They also noted the lack of infrastructure and utilities needed to promote business while some regions are prone to disaster and peace and order risks. Enablers were also found to lack the capacity to support the sector.

The smaller businesses also find it hard to have access to funds being offered by financial institutions because of stringent requirements and long processing times for loans. They also found restrictive minimum loan requirements and short repayment periods and lamented the high interest rates and difficulties in loan restructuring.

Startup companies also found that they had no access to funding and venture capitalists while those in rural areas found that financial services are not available to them.

As for market access, many small businesses are not proactive in trying to find other markets for their goods while suffering from stiff competition from unregistered businesses and cheaper imported goods. Leaño admitted these may include those smuggled
from other countries.

Productivity

Their products also have poor packaging and labels, little capacity to come up with designs, market development and make use of modern technology. They also lack access to market information and do not have accreditations and certifications required by some of the bigger international markets.

Regarding productivity and efficiency, they lamented the unsteady supply of power and water, with power rates higher than those of Japan.

Employees also suffer from poor working conditions that do not pass international standards. Pirating of workers from other companies and the lack of programs being offered by vocational and technical schools that cater to MSMEs are among the issues.

Leaño said the objective of having the MSME sector contribute 40 percent gross value to the economy and generate two million jobs has a greater goal of poverty reduction.

She noted that the country would like to be at par with its more competitive neighbors, Vietnam, Indonesia, Malaysia and Thailand, whose MSME sectors contribute larger values to their economy.

Leaño said the role of MSME Development Councils is to form policies, not implement them. They should also advocate programs that they feel aid their cause and for program coordination and integration.

She believes the local MSME Development Councils can help communicate the needs of the sector if they come together and agree on what should be done to address the problems their sector faces.