The Philippine Environment for Entrepreneurship

Chapter 4

Rationale for Promoting Micro, Small, and Medium Enterprises (MSME)

• Relative ease in setting up• Employment Generation• Flexibility and lower capital cost per job created• Provision of niche services that may not be

profitable for large business• Distribution of income• Utilization of local resources

The Definition of an MSME

MSME Is defined on the basis of total asset value and number of employees. Accordingly, MSMEs are subdivide into three categories: Micro Enterprise, Small Enterprise, and Medium Enterprise

Category Total Assets No. of Employees

Micro Enterprise P 3,000,000 or less 1 - 9

Small Enterprise P 3,000,001 – P 15,000,000

10 - 99

Medium Enterprise

P 15,000,000 – P100,000,000

100 - 199

Source: DTI SME Development Plan 2004-2010

Table 4.1. Number of Establishments per Category,2003

Percent to Total

Total Micro Small Medium Large

810.362 743.628 60.785 2,922 3,027

100% 91.76% 7.5% 0.36% 0.37%

Source: NSO as of June 2005

Series1

Fig. 4.1. Percentage Distribution of Establishments

75000

600000

450000

300000

150000

0

Small Enterprise(7.5%)

Medium Enterprise (0.36%)Large Enterprise (0.37%)

Micro Enterprise(31.8%)

Fig.4.2. Employment By Sector

Large at 0.4%

MSMEs at 99.6%

70%

30%

Large

MSME

Fig.4.3. Value Added By Sector

Large at 0.4%

MSMEs at 99.6%

32%

68%

Large

MSMEs

Table 4.2 Number of establishments per Sector, 2003

Categories Number %Agriculture, Hunting, Forestry 3,215 0.40Fishery 1,145 0.14Mining and Quarrying 328 0.04Manufacturing 123,406 15.23Electricity, Gas, Water 1,241 0.15Construction 2,675 0.33Wholesale and retail trade 434,650 53.64Hotels and Restaurants 88,624 10.94Real Estate, Renting and Business Activities 38,940 4.81Health and Social work 28,201 3.48Financial Intermediation 24,061 2.96Transport, Storage, and Communications 14,318 1.76Education 9,338 1.15Other community, Social and Personal Services Activities 40,310 4.97Total 810,326 100.00

Major Challenges and Issues for Philippine MSMEs

1. Competition in export markets and influx of mass- produced products

2. Existence of small domestic markets and limited local market

3. Need for imported parts and materials and limited industrial linkages

4. Lack of basic management techniques5. Barrier to start up business, Lack of support

in the areas of fund raising and research and development

6. Limited economic activities at local level

The Philippine SME development Plan

1. Intense foreign competition2. Critical issues such as improvement of the

management capability of MSMEs and business environment for MSME growth

3. Government and Private sector resources and partnership

4. Innovative in all aspects of operation5. Creation of more business opportunities

Strategic Development Goals

A. Enterprise-Level strategiesA. Provide comprehensive support to

entrepreneur in terms of managerial and technological capability

B. Provide business opportunities for development

B. Sector Level Strategies.C. Broad base level strategies

International Institutions

1. The world Trade Organization(WTO)2. The Association of southeast Asian Nations

(ASEAN)3. The ASEAN Free Trade Area (AFTA)4. The Asia-Pacific Economic Cooperation

(APEC)

Lending Institutions for Developing Countries

1. The World Bank2. The Asian Development Bank

What is Globalization?

Globalization is the opening up of national economies to foreign competition, where there is unhampered flow of financial capital, goods, services and technology thereby creating a single world marketplace without tariffs or other barriers trade.