Gridlocks and Bottlenecks in Local Business

One needs a complete paradigm change to succeed so that the micro, small and medium enterprises, collectively called MSMEs, can unleash their full potential for growth and development. Two primary laws govern MSMEs in the Philippines; the Go Negosyo Act of 2014 aimed at job creation, and the Magna Carta for MSMEs of 1991 to develop the Filipino entrepreneurial spirit by providing a business environment conducive for MSMEs.

How have local businesses fared?

Entrepreneurship is an economic activity long practiced by Filipinos. Barter trade, where people exchanged prized items, has been a centuries-old enterprise. Entrepreneurship has come a long way until earning profits from buying and selling goods came into existence with capitalist economies. The sari-sari store or jeepney repair shop, for instance, still thrives till today.

Today, entrepreneurship retains the original exchange concept, with money as the medium. It originates from a 13th-century French word, entreprendre, meaning “to venture something” or “undertake.” By the 16th century, the word entrepreneur came to refer to someone who ventures into business. It has since emerged worldwide as an organized economic activity involving the processing, production, packaging and distribution of goods and commodities.

In our country, the Department of Trade and Industry (DTI) is the national government agency for the promotion and development of MSMEs through various assistance and interventions, e.g., financing, marketing, advertising, human resource development, product development, and advocacy. By law, the MSME is any enterprise having from one to 199 employees or workers engaged in industry, agri-business, and services with an asset size (less land) of up to PhP100 million.

At the onset of globalization under President Fidel Ramos, companies came face to face with the call to compete or die: Filipino production should learn to compete against global businesses or stay out of business. Under this new regime, economic policies shifted toward liberalization, deregulation, and privatization. Rising pressures for global competition left mainly big businesses able to compete in the global market. They had the right financing, managers, demand, supply chain, and support. The recipe for success or failure was there. In the end, globalization forced many Filipinos to leave abroad as more and more families felt hungrier and poorer.

Gridlocks and bottlenecks

Practically, anyone can be an entrepreneur. With technology and E-commerce, MSMEs are sprouting everywhere, majority of them unregistered. The DTI reports that 99.51% of the total registered business establishments are MSMEs, and 4,651 0.49% are large enterprises. Last year, the MSMEs contributed 35.7% of the total value-added or gross domestic product. MSMEs generated 5.7 million jobs, or 63.2% of the employment. In short, MSMEs are the biggest employers and help create jobs, albeit temporarily, with workers paid low. They remain the lifeblood of the economy. Unfortunately, the Covid pandemic forced almost 70% of the MSMEs to downscale or shut down. To recover and survive, entrepreneurs who lack financing had to rely on the more accessible lenders than traditional banks.

In small group discussions with owners of MSMEs in Camarines Sur and Albay, a common gridlock that entrepreneurs find ultimately disheartening is the high cost of doing business, with expensive inputs yet low-priced outputs to maintain competition. Electricity and water bills have skyrocketed in the past year is, forcing MSMEs to cut on other expenses, including laying off workers to stay afloat.

On October 21, the DTI with Tabang Bikol Movement will hold a Regional MSME Summit where 300 MSMEs from six provinces gather together to seek solutions to common problems and issues toward recovering and rebounding. Last August 27, the DTI held its National Summit with the President calling for a “multi-dimensional, cohesive government approach” to revitalize and empower the MSMEs under the New Normal with digitalization as a top priority for job creation and poverty reduction.

There should be more strategic intervention on lowering the cost of power, more liberal access to financing, internet access to services and programs, sourcing of raw materials to do away with importation, focus on regional manufacturing, and low transportation and distribution. These are some of the gridlocks and bottlenecks that the national government can help remove with more decisiveness.

The country has had two MSME Development Plans for 2011-2017 and 2017-2022, focusing on the business environment, business capacity, technology and innovation, and access to markets. Studies on both Plans gave us an idea of the usual gridlocks that MSMEs struggle to hurdle old challenges in new forms. For example, an ADB study in 2015 jibed with the MSMED Plan assessments, which included a lack of knowledge to develop business continuity/disaster resilience plans, technology, and support for entrepreneurs and their workers. Many MSME owners do not know what assistance is available for MSME, or if they do could not avail what with mountains of documents needed for application.

Other salient bottlenecks are bureaucratic red tape, corruption, rigid requirements, human interventions and failures, constant brownouts, internet disconnectivity, and operational and management inefficiency. Empowering the MSMEs as envisioned is to make the development plan comprehensive, integrated, and grounded on the needs of the particular regions – their climate, culture, and people. Digitalization is an accelerant and resolution to identified problems.

But more essential is to make life easier for the MSMEs to start up and operate. Start by lowering the electricity cost!