THE United States is seeing massive opportunity in the Southeast Asian market with the Asean integration, pushing public and private sectors in the US to pour in a “substantial” amount of investment for trainings and workshops to boost the competitiveness of small and medium enterprises (SMEs) in the region.
“One of the things that has been recognized by (US) companies is that (they) have Asean business strategies in addition to their local territory. Asean has become a very important bloc for them,” said US-Asean Business Council (US-ABC) senior representative of the Philippines Elizabeth Magsaysay-Crebassa.
US-ABC is a 30-year-old advocacy group composed of 150 companies in the United States created upon the request of Asean ministers to enhance trade and investment opportunities for US companies in the region and increase the 10-member countries’ access to US sources of technology and training.
Among the 150-member companies include Microsoft, Google, UPS, and Mastercard, 70 of which have a presence in the Philippines.
Enhance capacity
Just last year, Crebassa said the US Agency for International Development (USAID), a US government agency responsible for administering civilian foreign aid, signed a three-year memorandum of agreement with US-ABC to create the US-Asean Business Alliance for Competitive Small and Medium Sized Enterprises (SMEs).
The Business Alliance, according to USAID, will combine the efforts of the agency and major US corporations to enhance the capacity of SMEs in Asean by providing trainings, mentorship opportunities and cloud technology.
These will be focused on five key areas: access to finance; access to regional and international markets; human resource development; access to information and advisory services; and access to technology and innovation.
Economic backbone
Mario Masaya, US-ABC SME manager, said the cost of capacity-building activities will be shouldered jointly by USAID and US-ABC. However, he did not disclose the amount.
In the region, SMEs serve as the backbone of the economy, accounting for more than 96 percent of all enterprises, and between 50 and 95 percent of all employment in many member countries.
To date, the Business Council has seen 1,700 SMEs in the region participating in its activities.
Two hundred of these are from Cebu, who participated in yesterday’s workshop on good business practices for competitive SMEs, covering key issues on branding, logistics, and e-commerce. Officials of the Department of Trade and Industry and local players in export, retail, technology, healthcare, and food business among others participated in the workshop, held at the Radisson Blu Hotel.
“The Asean Economic Community (AEC) offers vast opportunities to Philippine firms, as does the expanding global economy. But Asean SMEs can only take advantage of those opportunities if they acquire new knowledge and skills to utilize new business tools and processes,” US-ABC said.
Financial access
While capacity-building is helpful to make local SMEs competitive, DTI-7 Director Asteria Caberte and Philippine Chamber of Commerce and Industry vice president for Visayas Jose T. Ng said financial access among the small players remains a challenge to their growth.
“There is a need for more pushing of our SMEs by coming up with more programs, more access to financial availability to (help them) expand and develop their businesses,” Ng said.
Caberte said financial accessibility is one of the four portfolios pushed by DTI and remains to be the “most challenging.” The three others include access to “productivity and trainings, access to market, and enabling environment for business.”
She said that under Republic Act 9405 or the Magna Carta for Micro, Small and Medium Enterprises, banks are required to allocate 10 percent of their credit portfolio for small businesses.
However, data from the Asian Development Bank Institute published in January 2015 showed that SMEs in the Philippines still cannot rely on banks to expand their businesses.
Working capital
A working paper entitled “Why Do SMEs Not Borrow More from Banks? Evidence from the People’s Republic of China and Southeast Asia” found that over 70 percent of the funds used by SMEs in the Philippines were internally generated. Less than 10 percent of these funds were financed by banks; less than 10 percent by supplier credit; and less than five percent by equity or stock sales.
“SMEs in our sample countries (Philippines, Thailand, Malaysia, Indonesia, Vietnam, China) remain dependent on internal funds, implying that financial access of SMEs in developing Asia is more challenging. This is largely due to a lower level of capital market development, underdeveloped SME financing institutions, and perhaps a greater problem of asymmetric information between SME lenders and borrowers,” the paper said.
Local exporters Mona Padilla of Arte-Cebuana and Venus Genson Hourani of Art n Nature cited shortage of working capital and high interest rates as among the main challenges in running their businesses.
By late this year, the Business Council will be holding a workshop for the automotive industry in Manila. Next month, it will hold an advanced supply chain training in Vietnam.
Before the year ends, Crebassa said they are aim to go around the 10 member-countries. Among the Asean countries, it is only Brunei where no workshop has been held so far.