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DO you
know why the annual 5-percent to 6-percent growth of the
Philippine economy in the last four years is not
generating enough jobs or touching people’s lives? Do
you know why, despite all the gains the country has
achieved through fiscal reforms, more and more people
are saying they are poorer than ever?
Part of
the answer to these questions probably lies in the
recent survey done by the UPS Asia Business Monitor,
saying that the small and medium enterprises (SMEs) in
the
Philippines
are the “least competitive” in Asia.
Least
competitive is actually a polite word for “laggards.”
The survey did not mention the reason for SMEs’ lack of
competitiveness vis-à-vis its counterparts in Asia, but
we could hazard an educated guess.
First,
companies, especially SMEs, can only thrive in an
atmosphere of growth. Of all the countries in Asia, the
country’s “decent growth” of 5 percent to 6 percent is
actually just a recent phenomenon that started in 2003,
owing to the recent surge in remittances, the recovery
of electronics and the rise in outsourcing.
More
people, losing faith in the economy’s capability to
fulfill their dreams for a better life, are leaving and
sending more money home. Depressed wages for office
workers have attracted foreigners to set up call
centers. Voila!—the economy grew sans government
direction. The government, all these years, has largely
been so preoccupied with addressing the budget deficit
that it completely ignored growth-oriented measures.
Second,
the nature of the country’s recent growth, while
encouraging from a job-creation point of view, simply
highlights the entrepôt nature of the country’s economy.
The
classic example here is the electronics and
semiconductors industry, which depend highly on imported
raw materials. Don’t get us wrong, we are all happy with
the way the electronics industry is growing and hiring
hundreds of thousands of workers, and therefore
supporting the growth of certain ancillary support
services industry like logistics. What we are saying is
that electronics and semiconductors are not the type of
industries that nurture local manufacturing SMEs through
forward and backward linkages.
The
third reason has something to do with the globalization
of the Philippine labor market. Again, we are saying
that giving workers all the options to work anywhere
they want is a very good policy. We have been doing that
the last 30 years now.
But it
bears noting that if there are companies that are hit
the hardest from the continuing diaspora of talents in
the Asia-Pacific region, these are the SMEs. Since most
of them could probably not pay higher-salary rates for
skilled workers compared to their counterparts in big
business, they are the ones who are likely to be
abandoned by their skilled staff in favor of jobs among
multinationals here or abroad.
That
trend is fine really, if only the schools are producing
enough knowledge workers. Given the current
circumstances, SMEs are the ones that are finding it
hard to find talents or retain them.
And
fourth, SMEs are the most vulnerable to government
neglect and stupid government policy. They are the ones
whose costs easily bloat when roads are not passable or
when raw materials are protected by high tariff walls;
or worse, when red tape and extortion stand in the way
of efficient transactions with the government.
They
usually have limited working capital and, hence, have
limited options when the banks find them “not bankable”
enough. They are the ones who lose money when the market
ignores their products for lack of granular knowledge of
their markets and the latest lifestyle trends, simply
because the government has not supported their research
and development efforts. They are the ones who suffer
and lose contracts when bureaucrats demand bribes or
make their business difficult simply because most of
them do not have political clout.
All
these constraints are unfortunate considering that,
according to oft-cited estimates, close to 90 percent of
the country’s work force are employed in SMEs. If the
government is serious about addressing poverty, the SMEs
hold the key. Most of them are using labor-intensive
operations and giving them the much-needed boost would
surely go a long way in addressing joblessness.
Given
all these constraints, is there really anything that the
government could do to improve their competitiveness? A
lot, actually.
First,
the government has to get on with progrowth strategies
and it would help a lot if politics in the country is
stable. Remember that “super-regions” initiative that
the government promised in the last State of the Nation
Address? A lot of the projects mentioned in that
strategy dealt with infrastructure development that
should help SMEs. But so far, the government has nothing
to show for that initiative.
In the
first two months of the year, the government expenditure
on infrastructure rose only by 2 percent, according to
newspaper reports this week. If one considers inflation
trends, that figure suggests that government expenditure
on infrastructure is actually lower than last year’s
figure.
We don’t
deny the fact that some government agencies do have
projects for SMEs. A press release this week from the
Department of Industry said that the department and the
Development Bank of the Philippines have just signed a
memorandum of agreement for a P15-billion loan facility
for SMEs.
But all
these initiatives would really not be effective if the
government cannot provide a good environment for
business, in general. How many loan programs in the past
came to naught because of unfavorable policy
environment? There are just too many to mention them
here. Ultimately, enhancing the growth of SMEs really
depends on the overall economic and political context in
the country.
In fact,
direct government actions sometimes simply falter
because they are often done with political
considerations in mind. For instance, that press release
about the P15-billion SME loan program came on election
season, inviting suspicion of the timing and
observations that the government is trying to do so
little and so late.
One
hopes this just isn’t the case. |
