Nation’s MSM enterprises plan

The 2011 to 2016 Micro, Small and Medium Enterprise (MSME) Development Plan aims to address the key challenges and constraints that continue to prevent the MSME sector from realizing its full potential and boosting the country’s industrial growth.

To develop a vibrant MSME sector, the plan envisions to create an enabling business environment and provide government support not only to improve MSME access to finance and expand market access but also to strengthen MSME productivity and competitiveness and their linkage with large enterprises and value chain networks.

During the consultation process, it was reported that major stakeholders identified four major outcomes for the plan to be a success. These are the Business Environment (BE), Access to Finance (A2F), Access to Markets (A2M), and Productivity and Efficiency (P and E).

In the BE outcome, the main areas of concern include making cost of doing business (taxes, fees, etc.) affordable to MSMEs; placing the necessary institutional support for the development of start-up and existing MSMEs; crafting policies to develop the MSME sector; an MSME development support base that is result oriented, coordinated, harmonized, and sustained by capable stakeholders at the national and local levels; having an entrepreneurial mindset among MSMEs; establishing soft and hard infrastructures for MSME development; making available and accessible the information required by MSMEs; and development of MSMEs that are gender-responsive and environment-friendly.

In A2F, the desired outcome includes making available financial products, services, and support programs for start-up MSMEs at reasonable and affordable cost with reasonable and manageable requirements and simplified and streamlined process; training of MSMEs in financial management; gender-responsive environmentally financial products and services for MSME lending; and available and accessible information needed by MSMEs to access financial resources, and so forth.

In A2M, the intended outcomes are MSMEs that maintain their existing markets and penetrate new and emerging markets locally and globally; MSMEs are competitive locally and globally; MSME marketing support systems are established and are sustainably operating; MSMEs are implementing the value chain approach and are benefiting from it; MSMEs are using information technology and intellectual property system to develop a sustainable market share and gain competitive advantage for their products and services; MSMEs have considerable share in the sustainable development market locally and globally; and government support programs are coordinated to help MSMEs access the local and global markets.

The last, P and E, intends to have government programs and policies on productivity enhancement that are coordinated, effective, and highly satisfactory; MSME workforce which is highly motivated and equipped with the appropriate skills and attitude; MSME working environment that fosters greater productivity and efficiency; MSMEs that use gender-responsive and environment-friendly technologies; MSMEs that are compliant with international quality standards; MSMEs that are using state of the art productivity enhancing technologies; and MSME information on productivity enhancement that are freely available and accessible.

Right now, the Philippine MSME sector is seen as a critical driver for the country’s economic growth, the plan says. The sector serves not only as supplier and subcontractor to large enterprises and exporters but also as part of the support system for logistics services. The most recent data used in the plan shows that the MSME sector accounts for 99.6 percent of total establishments in the country but contributed only 61.2 percent of the country’s total employment and 35.7 percent of total value added. As observed in the plan, growth of the MSME sector has not been vigorous enough to propel the economy. This, I believe, is one of the main reasons many of our people are still in poverty.

Another observation made in the plan is that the firm size distribution in the country has not changed much in the past two decades as the proportion of medium sized enterprises has remained small. This results necessarily in an industry structure which is often characterized by a missing or hollowed middle. In the country, the share of medium enterprises remained miniscule at 0.4 percent while that of small enterprises was almost unchanged at 7.7 percent. In terms of employment and value added contribution, MSMEs registered modest shares of 31.2 percent and 30.8percent, respectively. Micro enterprises meanwhile formed the bulk of enterprises with a share of 91.6 percent. They accounted for a share of 4.9 percent of total value added and 30 percent of total employment.

Many factors prevent the MSMEs from realizing their full potentials as engine of economic growth and surviving and growing in a highly competitive environment. These constraints include the high cost of doing business, lack of access to finance and market information, and low productivity and competitiveness. It is true that the weakened global and national environment have affected the performance and competitiveness of all enterprises but the impact, according to the plan, is more severe for MSMEs. Given their relatively small size and limited resources, many MSMEs are unable to qualify for bank loans because they lack the necessary track record and collateral. Banks also lack the credit information of MSMEs and this deters them from lending to needy MSMEs. Because of limited management and financial capabilities, many MSMEs also remained domestic in their orientation. The export market is out of the question. Finally, MSMEs have low productivity due to lack of access to new technology, weak technological capabilities, and failure to engage in innovation and research and development activities.

Are LGU officials reading the 2011 to 2016 Micro, Small and Medium Enterprise (MSME) Development Plan? What are your corresponding plans to develop your MSMEs? Are you not hurting them with the many requirements when they get their licenses? How do you help them financially? Do you have a small loan window for MSMEs? In other words, are you attracting and helping more business in your locality to locate and survive?