The Department of Trade and Industry (DTI) has placed micro, small and medium enterprises (MSMEs) at the forefront of its trade and investment strategies to boost the growth of the sector.
With MSMEs comprising 99 percent of business establishments in the country and sharing more than 60 percent of total jobs nationwide, the sector has a huge potential to contribute to the economic growth and employment as well as to promote inclusive growth.
As former Trade Secretary Gregory Domingo said, MSMEs should be at the front and center of the department’s agenda.
The Philippines took advantage of hosting the Asia Pacific Economic Cooperation (APEC) annual meetings this year, making it as platform to push initiatives that will benefit MSMEs.
The Philippine-led Boracay Action Agenda, well-received during the Ministers Responsible for Trade (MRT) Meeting in Boracay in May, put in place concrete and detailed action plans for APEC member economies to increase the participation of MSMEs in global value chains.
Under the agenda, APEC will address trade and investment barriers for MSMEs by reducing and eliminating tariffs and non-tariff measures in the region as well as simplifying and streamlining rules for MSMEs, providing timely and accurate information on export and import procedures and requirements, and strengthening institutional support for the sector, among others.
The country also hosted MSME-related APEC meetings this year that included the SME Ministerial Meeting in Iloilo City in September and the first APEC SME Summit in Manila in November. These meetings provided MSMEs a bigger voice in the region.
Among the many outcomes of the APEC 2015 hosting that will benefit Filipino MSMEs are:
• the APEC MSME Marketplace, an online interactive repository of information to promote cooperation and linkages between MSMEs and large firms;
• the APEC Trade Repository, a web-based trade facilitation tool which MSMEs can access for various trade data to help them in global trade; and
• the Financial Infrastructure Development Network, a platform to improve MSMEs access to finance by establishing legal frameworks for Credit Information Systems, secured transactions and the use of movable assets as collateral.
Aside from APEC, the Philippines also used other international platforms to gain support in pushing the MSME agenda in global trade. These included the ASEAN Summit in Kuala Lumpur, Malaysia in November and the 10th World Trade Organization Ministerial Conference in Nairobi, Kenya this month.
The DTI this year was also aggressive in pushing for free trade agreements (FTAs) in order for Filipino MSMEs to have better and easier access to global markets.
After the Philippines signed a Joint Declaration on Cooperation with the European Free Trade Association (EFTA) in June 2014, the two parties kicked off the first round of formal FTA negotiations in March this year.
This year, the Philippines and EFTA had four rounds of formal trade negotiations.
According to Trade Assistant Secretary Ceferino S. Rodolfo, the EFTA is willing to provide the Philippines duty-free access for industrial goods and better tariff rates on agricultural products. The Philippines is hopeful of concluding the agreement by February 2016, during the fifth round of formal talks.
The EFTA states include Iceland, Norway, Switzerland, and Liechtenstein, which account for 1.0 percent of the country’s total trade. With the Philippines-EFTA FTA, the country aims to double trade with EFTA countries two years after the FTA’s implementation.
Another development this year was the announcement that the Philippines and the European Union (EU) would launch formal FTA negotiations.
Through the proposed FTA, the Philippines and the EU aims for elimination of customs duties and other barriers to trade, improving services and investment, access to public procurement markets, as well as additional disciplines in the area of competition and protection of intellectual property rights, among others.
The FTA with 28 member states of the EU will also benefit Filipino MSMEs. Currently, some 6,274 Philippine products enter the EU tariff-free through the EU Generalised Scheme of Preference Plus (GSP+) which took effect December 2014.
Aside from European countries, the Philippines also engaged in exploratory discussions for an FTA with Canada.
Moreover, the United States Trade Preferences Extension Act of 2015 signed by President Barack Obama mid-2015 reauthorized the US Generalized System of Preferences (GSP). The US-GSP gives duty-free access to US market among 122 designated beneficiary countries and territories like the Philippines.
The program excludes textiles, watches, footwear, handbags, luggage, flat goods, work gloves, and other leather apparel from the zero-tariff-rate benefit under the scheme.
The Philippines, however, filed a petition last Oct. 16 under Section 204 of the Trade Preferences Extension Act of 2015, which will provide zero tariffs on travel goods such as luggage, handbags, pocket goods, backpack, sports and travel bags to US-GSP beneficiaries.
The petition will undergo hearings and a decision is expected around the first half of 2016.
In addition to the large manufacturers of bags based here in the Philippines, local MSMEs that make handbags made of recycled materials, leather, water lilies and other local materials, can become competitive in the US market with zero tariffs on travel goods and handbags.
However, Bureau of Small and Medium Enterprise Development Director Jerry T. Clavesillas noted that MSMEs compliance with global standards is one of the major constraints for this secter.
The government, he said, needs to push trade facilitation interventions for MSMEs to help them access the global market.