SMEs are missing out on export opportunities

In Photo: Agnes Asuncion, an entrepreneur from Barangay Pias, Currimao, Ilocos Norte, participated in a three-day seminar on product development and marketing in Bangkok to develop products for exports.

Big companies will continue to dominate the Philippine export industry as the majority of small and medium enterprises (SMEs) do not intend to export in the future, according to a survey by the Rizalino S. Navarro Policy Center for Competitiveness at the Asian Institute of Management.

SMEs believe the exports trade is a risky venture, and the domestic market still gives them enough profit, the survey added.

Among the SMEs surveyed, only 21 of the 480 respondents, or 4.4 percent, are currently exporting, and only 30, or 6.3 percent, intend to export in the next two years.

Further, of the 459 SMEs that are not current exporters, only eight are determined to venture into exports in the future. The reason cited was that most of them are contented with the present state of their operations.

“Based on a scale of 1 to 5, the top reasons for not exporting or even planning to export are related to the entrepreneur and the business environment, specifically the government. The owner or manager being content at the current state of the business [3.6] is the top-ranked reason for not exporting, followed by risk aversion [3.4],” the report read.

“This is closely followed by high tariff rates for the export market, also rated with a score of 3.4. The next two reasons, also related to the environment, with a score of 3.2, point to government regulations on complicated process for exporting and corruption and bureaucracy,” it added.

At the enterprise level, the insufficient or difficult access to finance was also listed as a hindrance.

On the other hand, the 30 firms that are either currently exporting or are planning to export in the next two years said the growing global demand for their product or service is one motivation for the activity. Some SMEs are also positive about exporting to have new markets.

Moreover, they argued that exporting brings in higher revenues. Some of them also found the domestic market getting crowded, so they have to venture out of the country.

“In terms of distribution, 15 out of 30 firms [either exporting or planning to export] are highly motivated to export ‘to have new markets’ and as a response to growing global demand for their product or service. Notably, an ample proportion of the respondents [43.3 percent] are exporting or planning to export to look for new markets because the domestic market is small,” the survey said.

“This suggests that a sizable proportion of the SME respondents are exporting out of necessity than opportunity. Moreover, only more than a quarter of the respondents [26.7 percent] engaged or plans to engage in exporting to have higher revenues, which is a more assertive motivation behind exporting,” it added.

 

 

Image Credits: LEILANIE ADRIANO/PNA

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