SMEs still face crucial challenges

ALTHOUGH recognized as the backbone of every economy, the small and medium enterprises (SME) sector faces crucial challenges that hold them back from attaining their full potential, officials said.

In the SME development council forum on Thursday at the 27th Confederation of Asia-Pacific Chambers of Commerce and Industry (CACCI) in Radisson Blu Hotel in Cebu City, CACCI SME Development Council chairman George Abraham said the current global SME scenario is affected by a series of setbacks such as growing competition, manpower issues, rising operation costs, insufficient cash flows, lack of access to business opportunities and financing.

He said the lack of innovative capacity is a major problem with SMEs. He said SMEs need to change operational styles to survive abrupt changes in consumer demands.

He said another problem is the lack of effective partnerships for SMEs which, according to Abraham, can be addressed by the creation of networks of shared resources, services and knowledge.

He also stressed the need to resolve issues on technology and financial management, saying most SMEs are dependent on conventional techniques and have less funding support.

Abraham’s recommendations for SMEs include creating a consolidating body for government resources, setting up a specific financial channel, building SME industrial parks, encouraging SMEs to participate in trade associations and establishing an SME research center to link research institutions and ideas in generating products and services tailored for the market’s needs.

Department of Trade and Industry (DTI) Cebu business development division chief Elias Guia Tecson expressed the same observation for the local context.

Tecson said that despite its major contribution to the economy, Philippine SMEs still face challenges on business environment, access to finance and markets, productivity and efficiency.

He said MSMEs account for 99.6, 62 and 35.7 percent of total firms, employment and value-added sectors in the country, respectively.

Tecson said the percentage contribution of MSMEs is 49.6 in wholesale and retail trade, 14.4 in manufacturing, 12.5 in hotels and restaurants, 6.1 in real estate, renting and business activities, 5.7 in community, social and personal activities and 11.7 in the remaining segments including agriculture, transport and fisheries.

He said the proposed MSME development plan for 2011 to 2016 will help support the sector. The plan aims to propel key industry areas such as tourism, BPO and infrastructure, create two million jobs by 2016 and raise the SME economic contribution to 40 percent of gross value added to level with SME’s GDP share to neighboring countries in the region.