Business leaders are entreating the incoming administration to actively take the reins in promoting inclusive growth, noting that “a passive, trickle-down approach will not work in a country where you have high rates of poverty and joblessness.”
In a recent business presentation by the Philippine Chamber of Commerce and Industry (PCCI) in Mindanao, the group said that, despite the robust economy enjoyed by the country in recent years, prosperity has not penetrated down to the majority of the population.
Citing Philippine Statistics Authority data, it said poverty incidence has improved only slightly, noting that in 2014, poverty levels stood at 25.8 percent compared to 26.5 percent, registered in 2006.
Saying the “lack of good jobs leads to higher poverty,” it pressed the new government to correct the situation by taking a proactive role in resolving longstanding challenges to Philippine productivity and competitiveness, including inadequate infrastructure and a neglected micro, small and medium enterprise (MSME) sector.
PCCI said the government must work on developing an efficient, productivity-enhancing infrastructure system to reduce production and logistics costs, enhance workers’ output, and stimulate a second round of private-sector investments in manufacturing, agribusiness, SMEs, and tourism, among others.
The chamber said infrastructure funding requirement from 2010 through 2020 will be at $127.12 billion (P5.9 trillion), requiring an annual investment of $11.56 billion, based on Asian Development Bank estimates.
The association also batted for greater state support and assistance to MSMEs, particularly by simplifying business regulations to “unleash the full potential of the segment as an important contributor to inclusive growth.”
Referring to the World Bank’s Philippine Economic Update published in October 2015, PCCI said the country registered the lowest labor productivity level in the MSME sector compared to the same sector in the US, Denmark, Ireland, Japan, Sweden, Germany, Singapore, Italy and Malaysia.
“We usually look at how big firms work and they’re very important. They bring technology, they bring knowledge of international markets, but it’s really the SMEs that work with these big firms, that supply them, that provide services to them,” PCCI said.
But it describes the current business environment for SMEs in the Philippines as extremely difficult. “If you just look at the costs and the fees and the time it takes to set up a business, maintain a business, and trade across borders—these costs in the Philippines are very high, and this explains why so many SMEs have difficulties creating jobs,” it added.
The three major stumbling blocks to MSME development, PCCI said, center on starting and maintaining a business, paying taxes and accessing finance. It noted reports from small enterprises of how they allegedly need to “pay bribes or give gifts to obtain permits.”
Additionally, the limited access to credit undermines MSMEs’ chances of success, as doors to banks are closed due to perception of them as high-risk clients. PCCI said the unmet financing needs of small business in the country way back in 2007 were already estimated at between P67 billion and P180 billion.
Small enterprises also have to deal with issues, such as inefficient bankruptcy procedures, lack of information access to payment histories, fragmented land registration and titling, restrictions in land transfer, and costly and time onsuming registration of chattel.
The government’s inability to remove key hindrances to MSME development results in the loss of productivity estimated at P100 billion each year, loss of business opportunity amounting to P40 billion annually, and loss of employment potential for some 60,000 workers per year, PCCI said.
In addition to infrastructure and MSME development, the organization also identified other key interventions to realize inclusive growth, like stabilizing macroeconomic conditions, improving the regulatory and policy environment, optimizing social investments, and increasing agricultural productivity.