SME support to lift PH growth prospects

Providing support to high-potential small and medium enterprises (SMEs) could boost economic activity and make the Philippines more resilient, the World Bank said.

"The Philippines can further boost its growth prospects by implementing vital reforms that empower SMEs to flourish," the Washington-based multilateral organization said in its Philippine Economic Update report.

As SMEs account for 63 percent of the country's total employment and contribute 36 percent to gross value added, supporting these small businesses can unlock the potential for increased economic dynamism.

The World Bank has trimmed its forecast for Philippine economic growth to 5.3 percent for this year from 6.1 percent previously. Marginal gains of 5.4 percent and 5.5 percent are expected for 2026 and 2027, but all projections fall below the government's 6.0- to 8.0-percent target.

Many SMEs still have low productivity and face difficulties in growing due to limited access to financing, the World Bank said. As a result, they export less and are less involved in global value chains compared to other SMEs in East Asia and the Pacific.

"Regional and global value chains are more than just sales outlets; they are platforms for creating quality jobs and more value-added through benefits from scale, increased competition, and learning," World Bank senior economist Jaime Frias said.

"Firms that engage with international markets are generally more productive, in part because it takes high productivity to export, but also because exporting makes them more productive," Frias added.

The World Bank said SMEs faced several challenges in growing their exports and joining regional and global supply chains. These include limited access to testing and certification services, lack of financing for equipment and quality upgrades and not enough market information to connect with buyers.

It stressed that improving access to testing and certification services would require investments to make this more affordable.

The World Bank also called for simpler rules for laboratories and importing testing equipment and efforts to gain international recognition for Philippine certifications and standards.

Investing in credit information and collateral registries, it added, can help lenders better assess SME risks. This can lower borrowing costs and allow SMEs to invest in better equipment and improve product quality.

"The government can enhance firms' competitiveness by promoting information sharing, which benefits both SMEs and larger companies," the World Bank said.

"This involves closing information gaps by providing easy access to export market data and establishing systems to connect SMEs with larger firms and multinational corporations."

Source: Manila Times

Small businesses, startups need more funding options

The Securities and Exchange Commission (SEC) said available financing instruments for micro, small, and medium enterprises (MSMEs) need to be expanded to boost their business operations.

“In our continuous bid for financial inclusion, we recognize that there really is a need to broaden the financing instruments available for MSMEs,” SEC Commissioner Karlo S. Bello said during the 11th and last leg of the commission’s 2023 nationwide roadshow on capital formation for MSMEs and startups held in Tacloban City.

“Together with our industry partners, we wish to present the different ways you can acquire financing through the capital market in order to jumpstart your business or expand your operations,” he added.

With this, the SEC pitched crowdfunding as an “accessible and viable capital-raising option for MSMEs and startups for their business expansion.”

The corporate regulator defines crowdfunding as a fundraising activity done by startups and SMEs where the public can fund a business idea via an online platform.

“It is unmistakable that MSMEs and startups have a crucial role in driving economic growth, fostering innovation, and generating employment,” Tacloban City Mayor Alfred S. Romualdez said in his opening remarks delivered by City Planning and Development Coordinator Janis Claire S. Canta.

“Understanding the challenges they face in accessing capital and in navigating the financial market, we have committed ourselves to create an environment conducive to entrepreneurship and investment,” he added.

Source: Business World

P750 wage hike may force small firms to downsize or raise prices

The employers Confederation of the Philippines (ECoP) said micro and small enterprises, which account for 98% of all businesses, may have to raise prices or reduce their staffing if Congress legislates a P750 wage hike.

“90% of our enterprises are micro, 8% are small, 1% are medium, and 1% are large,

any untoward increase would push the company to either pass it on to the market or downsize its workforce,” ECoP President Sergio R. Ortiz-Luis, Jr. said.

“I’m not even speaking for the big ones, because they can probably afford it,” he said.

House Bill No. 7568, filed by the minority bloc, proposes a wage increase of P750 for all private-sector workers, including those working in special economic zones, freeports, and in the agricultural sector. The bill runs contrary to the advice of economic managers, who warned that such a wage increase could affect the Philippines’ competitiveness.

Kabataan Party-list Rep. Raoul Danniel A. Manuel said in a briefing on Thursday that small businesses will not be left behind because the pending bill has provisions for wage subsidies.

Under the measure, micro and small enterprises and landowners owning at most five hectares may apply for subsidies until they are able to fully afford the proposed increase. However, companies cannot lay off workers or reduce headcount to comply with the proposed wage increase.

Mr. Ortiz-Luis said, “I don’t think the government can afford to subsidize the whole of the 90% (micro and small enterprises), considering it will still need to provide the P2,000 subsidy,” referring to the government’s P9.3-billion cash transfer program for nine million poor households.

He also said any wage increase proposals should be referred to the Regional Tripartite Wages and Productivity Board (RTWPB) because a legislated wage increase “will be politicized, you will never know what their (motives) will be.” He added that workers, employers, and government agencies are better represented in regional wage boards.

The RTWPB in January said that the National Capital Region had the highest daily minimum wage at P570. The lowest was the Bangsamoro Autonomous Region with P316.

Senate President Juan Miguel F. Zubiri has filed a bill seeking a P150 minimum wage increase.

Source: BusinessWorld