LOCAL businesses have bigger roles to play to make “change” in the country more tangible and inclusive across all segments.
Ronald Mendoza, dean of Ateneo de Manila’s School of Governance, yesterday encouraged Mandaue City’s business community to continue growing their businesses, pursue market expansions and reinvest in manufacturing not only to generate more jobs but to connect more micro, small and medium enterprises (MSMEs) and poor regions to the system.
“We are in excellent macro-economic shape but the challenge is that many of our MSMEs are not connected to this fast growth. I believe that many of our firms can actually do many things that could connect our people, our poor regions to this dynamic (economy),” said Mendoza, who was one of the speakers at the Mandaue Business Summit held at the Oakridge Pavilion.
He pointed out that amid the easy credit regime, MSMEs remain at the bottom because of the lack of access to credit, rising operational cost, growing competition and slow technology adoption, among other factors.
Mendoza said that part of the reason the six to seven percent gross domestic product (GDP) growth has failed to translate into a massive poverty reduction in the past six years is because of credit.
Lending of commercial banks to MSMEs, for instance, has been progressively going down during this period of easy credit. Mendoza said bankers pay somewhere between P1.5 billion and P2 billion a year in penalties because they don’t want to offer loans to this sector.
“They would rather pay the penalties,” said Mendoza. “One of the potential reasons for this is is that our MSMEs are not packaged well. They lack some entrepreneurial inputs, lack of technology that could have made them more competitive or better investment destinations.”
Mendoza said businesses in the Philippines have more potential to connect with the MSMEs if they venture into manufacturing.
“When you manufacture something, you can outsource many things. You can connect with many more MSMEs. Our conglomerates are not yet into heavy manufacturing, so perhaps the challenge is to rethink their role in this particular sector because it is the missing part of the escalator,” the dean said.
“Foreign direct investments that would boost manufacturing is the single biggest ingredient of the success of East Asian tigers, the reason their growth paths have a big impact on poverty reduction,” Mendoza added.
Moreover, the private sector also has bigger shoes to fill in in terms of helping more Filipinos land jobs.
If the country wants to achieve a balanced economic growth, Mendoza said the ideal target is to generate up to 1.5 million new jobs per year. However, the country’s economy is only creating 600,000 new jobs a year.
There are at least a million new graduates produced per year.
“This challenge falls squarely on our entrepreneurs. You need to build the most competitive firms that will beat the competition coming from other countries. You need to penetrate export markets and keep on expanding your firms. I hope you see that beyond the micro-economic challenges you see in your firms, this is what the country needs to do,” said Mendoza.
Moreover, creating more decent job opportunities can also address the issue on ending contractualization.
“The challenge for this country is not just a legal one, but an economic one. The real challenge for the country is to produce millions of decent jobs and that will end contractualization,” said Mendoza.
The Philippines has almost 35 million contractual workers out of 67.1 million workers as of 2016.
Contractualization or “endo” (end of contract) or “555” is a work arrangement where workers are only hired for about five months without security of tenure, monetary, non-monetary and social protection benefits.
The law requires regularization or termination of those employed for six months.
Mendoza noted that the Philippines is one those that have rigid labor laws, which delay investors from investing in the country.