|
THE
constant changes in the global economic landscape never
fail to amaze me. But the current liquidity crisis in
the financial markets is most certainly alarming.
This
crisis, which really started last year, now presents a
big risk for all of us. Already, we have all seen the
fall of financial giants like Bear Stearns, Merrill
Lynch and Lehman Brothers in the United States, and
Northern Rock in the United Kingdom.
My long
experience as an entrepreneur serves me well as I study
and assess the turbulence in the global economy and
determine its present and future impact on our own
economy and people.
While
watching these series of events—from the eruption of the
subprime crisis in the United States that triggered an
international credit crunch to the soaring prices of oil
and commodities—I asked myself: How can we all survive
these turbulent crises?
The
solution is to be found in ourselves and in our economy.
I confidently place my bet on the micro, small and
medium enterprises, or MSMEs, as the engines of
sustainable economic growth.
Most of
us are familiar with the figures, but let me recall
these to prove my point. The importance of MSMEs cannot
be overemphasized. They make up 99.6 percent of the
total number of business enterprises in the country,
accounting for almost 70 percent of total jobs generated
and contribute 30 percent to 32 percent of our gross
domestic product (GDP).
Based on
these figures, the giant corporations represent less
than half of 1 percent of the total number of registered
enterprises and only 30 percent of jobs generated during
a given period. MSMEs, which include market vendors,
public utility operators, handicraft makers and
sari-sari store owners, account for about a third of our
GDP.
Clearly,
these figures show the crucial role that MSMEs play in
the economy. They create backward, forward and
horizontal linkages for economic activities. More than
this, the MSME sector is the breeding ground for
entrepreneurial skills, innovation and ideas. It is
where future CEOs are trained, where business skills are
honed, where innovative technologies and processes are
developed and where new ideas are turned to real
products and services.
I know
this from my own experience. I went through a series of
failures and successes in developing my small and medium
enterprise before I joined the big league. I learned the
ropes of the business the hard way, but the experience
sharpened my business instincts.
I say
this with pride, not because of my success, but because
my experience is not unique. The Nacionalista Party
recently recognized and gave awards to 16 entrepreneurs
who, like me, went through a series of failures and
successes to establish their own businesses.
There
are indeed thousands more MSMEs that have succeeded or
are trying to become profitable and stable businesses.
And there are also thousands more of our people who are
planning to become entrepreneurs. They need more support
than they are currently receiving, particularly with
respect to financing.
Figures
from the Bangko Sentral ng Pilipinas (BSP) show that
domestic banks and other financial institutions lent
P344 billion to small and medium enterprises last year.
These figures may be insignificant, but there is still a
large demand for credit that remains to be filled.
A recent
study conducted by the World Bank’s International
Finance Corp. (IFC) indicates that funding obtained by
MSMEs in the Philippines from formal financial
institutions represent between 11 percent and 21 percent
of their total funding requirements. Those who are just
starting their businesses even received less. Now,
compare this with Thailand, where banks provide 34
percent of the total financing requirements of MSMEs.
The IFC
study also showed that in the Philippines, most
entrepreneurs start with their own resources, sometimes
supplemented by loans from relatives and friends. Even
after several years of operation, firms continue to rely
on the owners and on internal resources. To obtain loans
ranging from P150,000 to P5 million is already an
enormous challenge.
The BSP
has been providing incentives, including the lowering of
reserve requirements and exempting small borrowers from
some documentary requirements like income-tax returns
and financial statements, to encourage private banks to
lend more to MSMEs.
But
private institutions, which are profit-driven, can only
be persuaded to do so much. The bigger effort and
resources to help MSMEs must come from the government.
Fortunately, the government, though not awash with cash,
has ample resources that can be used to support small
business ventures. In terms of benefits, the resources
channeled to MSMEs have greater economic impact on the
lives of our people than big-ticket and long-gestating
projects.
Remember, when giants fall the small become strong, just
like Bear Stearns and Lehman Brothers. When they
collapsed, the US government quickly started spending
tens of billions to prevent other failures. Now, look at
the small vendors in Balintawak or Divisoria, our
handicraft or pastilles makers in the provinces and our
small garment producers. These need only a fraction of
that amount to stand on their feet and help our economy
survive the global crises.
This is
why I do not feel the need to press the panic button in
the face of the bleak global economic outlook. Instead,
we must remain calm, cautious and calculating in our
moves.
Commendably, the government is managing the financial
crisis effectively. It has not shown signs of weakness.
And, for its part, the Senate is more than willing to
work with the Executive branch in shielding our people
from the ill effects of the crisis.
And so,
let us work together in building a more developed and
prosperous country. And when we become more developed
and prosperous, as I know we shall be, all of us can
proudly say that we all did our share in making a better
Philippines!
You may send your comments/feedback to mbvillar_comments@yahoo.com. |
