The head of an umbrella group of local exporters called on the new Philippine government to look into a higher budget and more financing options for micro, small, and medium enterprises (MSME), noting that MSME development is the real key to inclusive growth and poverty reduction.
Sergio Ortiz-Luis Jr., president of the Philippine Exporters Confederation Inc. (Philexport), said the Philippines continues to be beaten in competitiveness and foreign-investment inflows by its regional counterparts because the others “bet” on and support their MSMEs.
The executive spoke as one among a panel of reactors at the ADRInstitute for Strategic and International Studies-organized forum on the new administration’s economic priorities, which was held on September 28 in Makati City.
The seeming lack of concern for MSMEs in the Philippines is exemplified by the lapse of the Magna Carta for Small Enterprises, which provided for the mandatory allocation of credit resources to MSMEs, and the continued lack of access by small firms to the credit facilities of the banking sector, said
Ortiz-Luis.
Noting that since past financing programs did not work and the banking sector only serves 1 percent of the business community, he urged the government to consider “unorthodox” methods of empowering MSMEs, which comprise about 99 percent of the business sector and generate the bulk of jobs.
For one, he said, “We have P77 billion allocated for the conditional cash transfer…. Why can’t we allocate part of that to lending to SMEs?”
He also appealed for a bigger budget for export development, especially the agencies involved in this task.
Ortiz-Luis pointed out that in the past, the Department of Trade and Industry has an annual budget of just P4 billion to carry out its numerous responsibilities, including businesses development, export promotion and price stability.
This amount is distributed among its eight agencies, which equates to only P500 million a year for each one. Moreover, he said, 80 percent of the budget is used to pay for the employees’ salaries. This leaves a mere P100 million for export development.
He warned: “Unless we think seriously of how to empower our MSMEs, we will never get out of this
predicament.”
Meanwhile, George Chua, president of the Financial Executives of the Philippines, another reactor, agreed that the country is plagued by noninclusive growth partly because more than “70 percent of Filipinos are not part of the official banking sector.”
MSMEs, in particular, are not able to tap into the low interest rates that the larger companies have access to. He also noted the need to direct greater government attention to the manufacturing sector, as it has the highest multiplier effect in terms of job creation.