STRENGTHENING CAPABILITIES OF PHILIPPINE SMEs FOR DOING BUSINESS WITH EU COMPANIES

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STRENGTHENING CAPABILITIES OF PHILIPPINE SMEs FOR
DOING BUSINESS WITH EU COMPANIES

• Prof. Melito Salazar, Jr.
• Prof. Quintin Tan

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Session Flow

• 1. The Overall Situation of Philippine SMEs
• 2. Identifying the Philippine SMEs and needs
• 3. Characteristics of the Filipino Entrepreneur
• 4. Philippine SMEs needs at national and firm
  level
• 5. Strengthening SMEs

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The State of Philippine SMEs

• Umbrella of Support

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Legal and Institutional Framework

• The Magna Carta for Small Enterprises
• Defines SMEs
• Creates the SMED Council
• Stipulates mandatory lending to SMEs
• Sets up four guiding principles for SME
  development
• -minimum set of rules and
  simplification of procedures and
  requirements
• -encouragement of private sector
  participation
• -coordination of government efforts
• -decentralization

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Other Relevant Laws

• Barangay Micro Business Enterprises Law
• Special Economic Zones Act
• Clark and Subic Special Economic And Freeport
  Zone
• Tax Reform Act
• Omnibus Investment Code
• Less Developed Areas Act
• Local Government Code

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Institutional Framework

• The SMED Council
• Department of Trade and Industry
• National Economic Development Authority
• Department of Labor and Employment
• Department of Science and Technology
• Department of Agriculture
• Department of Environment and Natural Resources
• Small Business Guarantee and Finance Corporation
• Monetary Board of the Bangko Sentral ng Pilipinas
• 3 Private Sector representatives from Luzon,
  Visayas and Mindanao
• Secretariat DTI Bureau of Small and Medium
  Enterprise Development

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DTI SME Core Group

• BSMBD coordinates SME policies, programs,
  projects
• SBGFC financing services
• Philippine Trade Training Center- development and
  implementation of SME training
• Product Development and Design Center of the
  Philippines- product development initiatives
• Cottage Industry Technology Center (technologies)
• The Regional and Provincial offices of DTI
  provide services to SME associations and SMEs

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Other Support Institutions

• Other Government agencies (DOST, DOLE, DA, DENR
  and DILG)
• Local Government Units
• Private Sector
• Chambers of Commerce and Industry
• Professional Organizations
• Business Sector organizations
• Other NGOs

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SMED Council Definition of SMES

• Micro P3 million Assets and up to 9
  employees
• Small not exceeding P15 million Assets
  and up to 99 employees
• Medium not exceeding P100 million
  Assets and up to 199
  employees
• 
  January 2003

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2006 SME Statistics

• Philippine SMEs are 7.6 of total establishments
  and account for 33.2 of employment.
• 25, 347 Philippine SMEs are in the National
  Capital Region, 7,319 in Calabarzon, 5,338 in
  Central Luzon, 4,156 in Central Visayas and 3,213
  in Western Visayas
• Philippine SMEs are mainly in Wholesale and
  Retail Trade (373,721), Manufacturing (105,083)
  and Hotels and Restaurants (97,936).

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Understanding the Filipino Entrepreneur

• 2006 Global Entrepreneurship Monitor (GEM)
  Research Consortium

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Significant Findings

• Four out of Ten Adult Filipinos engaged in
  business
• About half are in early-stage entrepreneurial
  activity (TEA)
• 19.7 (9.5 million) comprise the countrys
  established businesses.
• Mindanao has the highest TEA at 73 while
  Northern Luzon has the lowest at 30.
• Most of the businesses (53.3) are in
  consumer-oriented with 35 of established in
  extractive.

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More Findings

• Motivated by necessity (54) and opportunity
  motivations (37).
• Face stiff competition (75), lack novelty (71),
  lack new technology (67), not employing (63)
  and not exporting (77).
• Only 8 out of 100 have discontinued a business in
  the past 12 months.

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More Findings

• Only 34 have dealings with banks.
• Only 17 who receive remittances use them to
  finance business
• Only 1 are non-owner investors

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Professionals Entrepreneurs Views

• Financing most major concern.
• Need to improve formal and informal education and
  training towards entrepreneurship and
  technological infrastructure

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SMES Ripe to do Business

• Export-oriented Philippine SMEs
• Golden Shell Awardees
• MPEX participants
• Philippine Trade Training Center trainees
• Availees of Product Development and Design Center
  of the Philippines services
• Participants to shows of the Center for
  International Trade Expositions and Missions
• Members of Chambers of Commerce
• Those already doing business with EU companies

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• Domestic Market Philippine SMEs
• Members of the Sector Chambers
• Clients of the Bureau of Domestic Trade and
  bureau of Small and Medium Business Development
• Clients of Planters Development Bank

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Potential Business Relationships

• Philippine SMEs as subcontractors
• Setting up of common service facilities
• Financial linkages
• Technology transfer
• Food service and information techonogy sectors
• EU companies as consolidators
• High value products from EU

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Facilitative Environment for Philippine SMEs to
do Business Globally
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Government Support

• Establishment of stable macro-economic growth
• Liberalized trade environment
• Increased access to financing
• Collective support systems to reduce transaction
  costs
• Facilitate and develop infrastructure for
  standardization and quality improvement of SMEs

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Other Support Programs

• Dissemination of information on foreign markets
• Aggressive export promotion abroad
• Incentives for product design development,
  especially those utlizing local materials
• Reduction of bureaucratic red tape

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What SME owners and managers must do to be
prepared for doing business globally
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Have an Environmental Mindset
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Align Products and Processes with Standard
Nomenclature and Tools of International Trade
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• Assure that customer needs and requirements fully
  understood and translated into correct product
  specifications and standards.
• Align with international quality standards, ISO
  9000 series.
• Continuous benchmarking

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Improve Quality
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Build up capability to choose, utilize and
develop technology
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Actualize Productivity
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• Competitive and continuous improvement mindset of
  entrepreneurs
• Quality and productivity work culture
• World class technologies
• Benchmarking
• Innovation and agility
• Partnership
• Use of information techonogies

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Fully Utilize E-Commerce
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Deal with Recurring HR Issues

• Family Related Difficulties
• High labor Turnover

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Preparing Philippine SMEs

• Help the Philippine SME entrepreneur to deal with
  all the issues raised earlier- environment,
  quality, etc.
• Help them to be familiar with EU business
  practices
• Help them put together factual track records
• Help them get their products and processes to
  meet EU standards
• Help them get a working knowledge of EU market
• Help them hone skills in negotiations.
• Help them revise business plans to incorporate EU
  business dealings
• Help them by ensuring the EU companies are
  acclimatized to the Philippine Business
  Environment

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The Chamber of Commerce of the Philippines
Foundation will help

• 1. Advocate for a Philippine business environment
  conducive for Philippine SMEs to do business with
  EU companies and vice-versa.
• 2. Provide information through seminars and
  resource persons
• 3. Conduct training on needed skills, i.e.
  negotiation and planning skills.
• 4. Facilitate business matching
• 5. Provide business mentors

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May the Philippine SMEs and EU Companies Harvest
the Fruit of Our Efforts!
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Maraming Salamat!Thank You!
Chamber of Commerce of the Philippines
Foundation, Inc.