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Philippines Micro Small Medium Enterprises (MSMEs)

ME 201 Strategic Management for an Engineering Enterprise
Pangasinan State University
Urdaneta City

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Philippines Micro Small Medium Enterprises (MSMEs)

  1. 1. Micro, Small,and Medium Enterprises (MSMEs) Presenter: Engr.Eufemia A. Santos DM 201 Strategic Management of n Engineering Enterprise Professor: Jo B. Bitonio, DPA
  2. 2. MSMEs DefinedMicro, small, and medium enterprises (MSMEs)are defined as any business activity/enterpriseengaged in industry, agri-business/services,whether single proprietorship, cooperative,partnership, or corporation whose total assets,inclusive of those arising from loans but exclusiveof the land on which the particular businessentitys office, plant and equipment are situated
  3. 3. Recently, Republic Act No. 9178, otherwise known as theBarangay Micro Business Enterprise (BMBE) Act of 2002has redefined the categories. Hence, the present structure,by law, is as follows :By Asset Size
  4. 4. Republic Act (RA9501): Magna Carta for Small Enterprises of 2008•a law to promote, support, strengthen and encourage thegrowth and developments of MSMEs in partnerships with theprivate sector.•Banks be it private or government are mandated to increasetheir loan portfolios from 6 to 8 percent for micro and small andmaintain the 2 percent allocation for medium-sized companies.The penalty for non-compliance is not below P500,000.•To avail of this financial assistance, these enterprises must beregistered first with appropriate government agencies (DTI, SEC,CDA, LGUs).
  5. 5. RA No. 9178: Barangay Micro Business Enterprises Act of 2002 Provided a business capital or assets do not exceed P3 million, a registered enterprise is entitled to the following: (a)guaranteed registration approval within 15 working days (b)reduced local taxes and fees (c) exemptions from income tax and minimum wage (d)availability of special financing and credit guarantees windows under DTI’s SME Unified Lending Opportunities for National Growth (SULONG) program (e) technology transfer; product and management training, and marketing assistance.
  6. 6. Role and Importance of MSMEs
  7. 7. MSMEs play a major role in the countryseconomic development through theircontribution in the following: • rural industrialization • rural development and decentralization of industries • creation of employment opportunities and more equitable income distribution • use of indigenous resources • earning of foreign exchange (forex) resources • creation of backward and forward linkages with existing industries • and entrepreneurial development.
  8. 8. •They are vital in dispersing new industries to thecountryside and stimulating gainful employment.•MSMEs are quick in assimilating new design trends,developing contemporary products, and bringingthem to the marketplace ahead of the competition.•MSMEs are quick in assimilating new design trends,developing contemporary products, and bringingthem to the marketplace ahead of the competition.
  9. 9. •MSMEs are notably skillful in maximizing the use ofscarce capital resources and are able to partner withlarge firms by supplying locally available raw materialsin unprocessed or semi-processed forms•MSMEs can act as the seedbed for the developmentof entrepreneurial skills and innovation.
  10. 10. MSMEs Contribution to the Economy
  11. 11. •MSMEs contribute to the creation of wealth, employment, andincome generation, both in rural and urban areas, thus, ensuringa more equitable income distribution. •MSMEs provides the economy with a continuous supply of ideas, skills, and innovations necessary to promote competition and the efficient allocation of scarce resources.
  12. 12. •As of 2009, the MSME sectoraccounted for about 99.6% of theregistered businesses in the countryby which 63% of the labor force earna living. Around 35.7% of the totalsales and value added in themanufacturing come from MSMEs aswell
  13. 13. Statistics
  14. 14. These types of businesses account for 99.6 percent of allregistered businesses in the country and employ 70percent of the countrys workforce. MSMEs also produceabout 30 percent of the Philippines total output. employs 70% of the workforce (Benel P. Lagua )
  15. 15. “MSMEs are the real backbone of our economy.People do not realize that your businesses have greater direct impact on Filipinos lives than do big players,” Senator Edgardo J. Angara during the launch of the Philippine Home-Based Business and Career Summit Expo 2011 last August 12 at the SM Megatrade Hall.
  16. 16. But more than this, MSMEs provideopportunities to those who could not havestarted businesses otherwise. Studies haveshown that through MSMEs, disadvantagedmembers of society, like the elderly anddisabled, are able to earn income. In fact,about 30 percent of the poor in our countryhave turned to entrepreneurship to get by
  17. 17. An Asian DevelopmentBank (ADB) study showsthat 50 percent ofinnovations during the20th century weregenerated by new andsmall firms
  18. 18. Number of EstablishmentsAs of 2009 count, there are 780,437business enterprises operating in thePhilippines. Of these, 99.6% (777,357)are micro, small, and medium enterprises(MSMEs) and the remaining 0.4% (3,080)are large enterprises. Of the totalnumber of MSMEs, 91.4% (710,822) aremicro enterprises, 8.2% (63,529) aresmall enterprises, and 0.4% (3,006) aremedium enterprises.
  19. 19. Sectoral DistributionMajority of the 777,357MSMEs in operation in 2009are in the wholesale andretail trade industries with385,610 businessestablishments; followed bymanufacturing with 111,987;hotels and restaurants with97,298; real estate, renting,and business activities with47,654; and othercommunity, social, andpersonal services with 44,313.These industries accountedfor about 88.4% of the totalnumber of SMEestablishments.
  20. 20. Geographical Spread of MSMEs Top Five (5) Locations of MSME Establishments in the Philippines 1.National Capital Region 2.Region-4A CALABARZON 3.Region 3 4.Region 7 5.Region 6
  21. 21. Geographical Spread of MSMEsMajority of the MSMEs inoperation in 2009 can be foundin the National Capital Region(NCR), with 210,648 businessestablishments; Region 4-A(CALABARZON) with 114,676;Region 3 (Central Luzon) with79,445; Region 7 (CentralVisayas) with 45,427; andRegion 6 (Western Visayas) with45,382. These top five (5)locations accounted for about63.7% of the total number ofMSME establishments in thecountry..
  22. 22. EmploymentMSMEs generated a total of 3,595,641 jobsin 2009 versus 2,094,298 for the largeenterprises. This indicates that MSMEscontributed almost 63.2% of the total jobsgenerated by all types of businessestablishments that year. Of these, 30.4%or 1,731,082 jobs were generated by microenterprises; 25.5% or 1,449,033 by smallenterprises; and 7.3% or 415,526 bymedium enterprises.
  23. 23. Employment By industry sector, MSMEs in the wholesale and retail trade generated the most number of jobs (with 1,250,453) in 2009 followed by MSMEs in manufacturing, 637,524; hotels and restaurants, 482,357; real estate, renting, and business activities, 284,406; and education, 225,016Majority of the jobs are generated by MSMEs inthe National Capital Region (NCR) with1,360,440 jobs; followed by MSMEs in Region 4-A (CALABARZON), 466,648; Region 3 (CentralLuzon), 319,340; Region 7 (Central Visayas),235,091; and Region 6 (Western Visayas)193,543.
  24. 24. Exports Contribution of MSMEs MSMEs account for 25% of the country’s total exports revenue. It is also estimated that 60% of all exporters in the country belong to the MSME category. MSMEs are able to contribute in exports through subcontracting arrangement with large firms, or as suppliers to exporting companies.
  25. 25. Loans lent to SMEs All lending institutions are required to lendset aside at least 6% of their total loan portfolioto small enterprises and at least 2% to medium-sized enterprises. The Republic Act 6977 enacted in 1991 (theMagna Carta for Small Enterprises) required10% more to be diverted to SME’s. Then, it wasamended in 1997 under the Republic Act 8289to extend the applicable period to 2007 andlower the minimum level to 6% and 2%. The Bangko Sentral ng Pilipinas ismandated by law to monitor this initiative.
  26. 26. Sales and Census Value-Added •MSMEs contribute around 35.7% of the total sales and census value- added in the manufacturing industry, according to the National Statistics Office (NSO - 2009) .
  27. 27. Tradeline Philippines Tradeline Philippines is an online database service that provides product search listing thousands of manufactured exported Philippine products complete with product specifications and is a business search allowing users to contact Philippine exporters, suppliers and local/foreign buyer details and the products/services they manufacture / provide and export
  28. 28. 5. Exponet The Bureau of Export and Trade Promotions (BETP)Export Assistance Network (EXPONET) helps exportersand prospective exporters’ access information andresolve specific problems related to exporting Exponet provides information on export seminarschedules, export organizing, export procedures anddocumentation, import facilities for exporters, buyerlinkages, export financing and incentives, product rawmaterial sourcing and other statistical information. Theagency also assists exporters in export-related problems/ trade complaints.
  29. 29. Deficiencies in the present system of SME statistics1. TimelinessStatistics on the census of establishments (done every 5 years) and the annual survey of establishments are usually released 15-24 months after the year. This makes the data more or less an imprecise tool for analysis and decision-making. In the same manner, BSP collects information on the loans lent to SMEs (in compliance with the Magna Carta for Small and Medium Enterprise) every quarter. The data athered is usually released only after 3 months.
  30. 30. 2. Cross compatibility with other countries for cross country comparisons The major classification used by most countries todefine SMEs is through assets and employment size.However, the size ranges of their classification differ,since developed countries have large industries thanthe less developed ones. Hence, what might be considered as “small” bydeveloped countries will already fall into the“medium” or “large” category for developingcountries like the Philippines. Thus, crosscompatibility with other countries for cross countrycomparison, is sometimes inappropriate or could notbe used as basis for a policy recommendation.
  31. 31. 3. InadequatenessThe scope and coverage of SME statistics arelimited to:1)the number of establishments,2)employment contribution, and3)regional distribution. More important data which willhelp policy makers and businesses to reactquickly in a competitive environment areusually not available. These statistics include:
  32. 32. 4. Availability There are confidentiality clauses in census for firm level data. This cannot be accessed at the National Statistics Office because their agency has to comply with the rules of confidentiality. In similar ways, banks also ensure that access to customer information is limited to selected bank employees and are very conservative in disclosing client information.
  33. 33. 5. Coverage The Philippines has a large section of small business constituting the so-called underground or informal economy. This refers to the small scale units in the national economy, which produce and distribute goods and services without the benefit of official sanction or control. They dont register, dont keep books and dont pay taxes. They operate beyond the reach of the law. They have little or no access to organized markets, credit institutions, educational or training centers or public services. Although efforts are being made by the government to bring the underground economy to the surface, the nature of this sector makes it very difficult to gather and process statistics on them.
  34. 34. What are the current initiatives to develop SMEstatistics?1. National Business Registration (NBR) ProjectThe NBR project aims to address the growing concern of having consolidated information on all the registered businesses in the country. Currently, no government agency has a complete record of all registered businesses since registration is being done by various agencies. It is the objective of the NBR project to integrate the information contained in the various agencies and have a single consolidated database containing basic information of all registered businesses.The NBR project is considered a “timely” project for the country in this day and age of global economy. The NBR will not only enable Filipino entrepreneurs to find business ventures with fellow Filipinos but with foreign investors as well.
  35. 35. The SME Database (headed by the DTI SME-Project Management Office) aims to act as a repository (databank) of the corporate profiles of SMEs. Its objective is to serve as a tool for monitoring the assistance2. SME given by the different agencies to each SME firm. The database is also designed to identify individual companies and to track the kinds of government assistance given to each.Database The interim database will enable the much-needed tracking of SMEsProject during the crucial first six (6) months of 2003, especially for measurement against the National SME Agenda objectives. The final database could act as a master database of all SMEs nationwide, possibly supporting other organizations outside DTI, and would allow for more complex analysis and reporting. A networked database would facilitate the encoding of data from the provinces at the source of the information. The ultimate benefit of the SMEs is the possibility of minimizing, if not eliminating the need to register numerous times with various organizations.
  36. 36. References, Feliciano.Entrepreneurship. Philippines, 2009 Ideas and OpportunitiesBenel P. Lagua accessed Nov. 2012