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Monday, May 12, 2003
Jucutan: Enterprising micro-enterprises
By Sofronio Jucutan
WE SHOULD be thankful mostly to the little ones, the thousands of them who dipped into their own savings or hard-earned assets or loaned from relatives, friends or from the greedy sharks, and tossed the stakes in a lottery-like investment, betting returns against all mounting odds.
Notwithstanding their marginal success and very low productivity, they made food and employment a reality to millions of Filipinos.
Micro-enterprises constitute 91% percent of the total number of firms in the country Monday, and as far as government policy is concerned, they are considered as the engines of growth and development, seedbeds of the countries entrepreneurial talents, providers of sustainable livelihood and development, and potent forces in the war against poverty.
However, in the immediate past, they were also the least likely in the mind of the government when it comes to enhancing their value-adding capability, at least until the Barangay Micro Business Enterprise (BMBE) Law. Or so we hope.
The government defines them as any business entity or enterprise engaged in production, processing or manufacturing of products or commodities, whose total assets including those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, shall not be more than P 3 million.
They are the engines of growth, approximately 747, 000 of them who, along with the small and medium enterprises (SMEs comprise about 8% of the total enterprises), generate 7 out of 10 labor force and contribute 32% of value-added to the economy according to the Department of Trade and Industry (DTI). Moreover, the micro, small and medium enterprises build up 60% of all exporters in the country. As key to economic development, the micro-enterprises contribute to a more equitable distribution of income and disperse economic activities to the countryside where very few of the large and multinational corporations dare go.
Despite the Herculean social responsibilities addressed through their business, the inverse is true when it comes to the viability of micro-enterprises to withstand stiff global competition and the high cost of business. Set aside their substantial contribution to the economy and the livelihood they provide to the people, and what you see from the micro-enterprises is the irony of their vulnerability to changes in the business climate and their inability to introduce value-adding to existing products or services.
Simply put, our engines of growth lack the fuel to spur growth and development. Micro-enterprises are bereft of sufficient capitalization to steer business safely and productively and from here follows a litany of problems confronting small businesses: limited access to information and technology, low productivity, inability to innovate and experiment with existing products and services and near impossibility to expand business and graduate into small or medium enterprises.
Given the vulnerability of the domestic economy to fluctuate with foreign markets, there is a need to stimulate the bulk of economic activity and growth potential in the micro-enterprises. Concrete and measurable interventions should be taken by the government, private sector, NGOs and business development service providers to help address the structural limitations of small businesses.
First, financial instability must be addressed by making it easy and accessible for the micro-enterprises to apply for financing services. It is a relief to note that a new program of the government for micro businesses has recently taken off by virtue of the Barangay Micro Business Enterprises Act of 2002. It is the general objective of the BMBE Law to assist micro-enterprises through the rationalization of bureaucratic restrictions and granting incentives and benefits.
In form, the major incentives provided by the law are tax exemption from income arising from the operations of the enterprise; exemption from the coverage of the minimum wage mandate; and two of its promising highlights, priority to a special window set up specifically for the financing requirements of micro-enterprises and the allocation of BMBE Development Fund of P300 million from Pagcor purposely for technology transfer, production and management training, and marketing assistance which will be made available with the leadership of Department of Trade and Industry and in cooperation with Small and Medium Enterprise Development Councils, DOST, Cooperative Development Authority, Tesda, and other private business development agencies.
The wisdom of the program is indeed laudable in its form but we must not be easily swayed by its promise of success. The reality of its implementation may not be as attractive as its actual results may not be as laudable as its promises. This is not to sound pessimistic but many times we already have been lured by the buzzwords of similar schemes in the past but ended up sighing in dismay during the implementation phase. Take for instance the 10 billion worth SULONG program for SME development: barely a dime of the 10 billion has yet been awarded to the intended beneficiaries because of its fiscal policy inconsistencies.
Mind you, the 6-month pilot distribution of the 10 billion financial assistance will be until the month of June only and I wonder how far we can go as far as accomplishment of its objectives is concerned. The scorecard has been shuffled and the way I look at it, it seems like we are in the verge of concluding the program as yet another political propaganda. We can only hope this vicious cycle will not be spoiling the intentions of the BMBE Law as it has with the preceding programs.
But show us sheer commitment and the rest is history. There is no reason micro-enterprises cannot overcome the structural constraints that are holding back their productivity. Addressing the fundamental problem of capital will eventually open other value-adding opportunities like products and services innovation and development, technology improvement, research and information and all other essentials, which in sum simply define enterprising and highly competitive micro-enterprises.
(May 12, 2003 issue)
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