Last week, I talked about how the Philippines’ support for small and medium enterprises (SMEs) was a little above average when compared to other Asean member states (AMSs). This is according to the Asean SME Policy Index 2014. In terms of institutional framework, the first policy dimension, it scored relatively well in terms of intra-governmental coordination in policy formulation, and in having a resourceful and effective policy-executing agency [kudos to the Department of Trade and Industry], but fared poorly in facilitating the transition of SMEs from the informal to the formal sector.
In this article, we focus on the second and third policy dimensions: access to support services; cheaper and faster start-up and better legislation and regulation for SMEs.
In terms of access to support services, the Philippines scored 3.8 out of 6.0, which is a little better than the Asean average of 3.6. Those that scored better than average are Singapore (5.4), Malaysia (4.8), Indonesia (4.0), and Thailand (3.8). In terms of the specific sub-dimensions, the government did relatively well in terms of having a one-stop shop business development center (4.0), promotion of E-commerce (4.0), and promotion of E-government services. It needs to improve on the government’s action plan on development of SME support services (3.5), and on the quality of its online portals for SMEs (3.5).
Worth noting under access to support services are DTI’s one-stop shop business development centers that provide personalized service for SMEs, including advisory and consulting services in productivity improvement, technology upgrading, product and market development, financing and entrepreneurial development. It has 101 business action centers in different provinces across the country. The government has also set in place the supporting regulation to foster e-commerce through the passage of the E-Commerce Act, which spells out government policies on electronic transactions and sets the legal framework for the country’s participation in e-commerce and for the use of ICT in general. It was pointed out, though, that local e-commerce “has yet to step out of its nascent stages.”
In terms of cheaper and faster start-up and better legislation and regulation for SMEs, the Philippines scored 3.0 out of 6.0, which is below the Asean average of 3.6. We only scored better than Myanmar (2.9), Lao PDR (2.7), and Cambodia (2.1). The Philippine score was pulled down by its extremely low scores in the following areas: completion of the overall registration process and entry in operations (2.8), review and amendment of legislations and regulations (2.5), use of Regulatory Impact Analysis (1.5), and number of steps for completing the overall registration process, including compulsory licenses for standard business activities (1.0).
Clearly, our bureaucratic processes have become a disincentive for many entrepreneurs to set up their businesses. According to the Asean SME Policy Index report, it takes “7 days to obtain the business permit, 7 days to print receipts and invoices at the print shops, 7 days to register with the Social Security System, and 3 days to register the company with the SEC and receive a pre-registered taxpayer identification number (TIN). This is, perhaps, the reason why our attempts to encourage more informal businesses to become part of the formal economy have been met with limited success. It is also not a surprise why businesses avail of the services of ‘facilitators’ so as to speed up the process of satisfying various government requirements.
Raymund B. Habaradas is an associate professor at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University, where he teachesManagement of Organizationsand Management Research. His does research on SME development, corporate social initiatives and social enterprises. He welcomes comments at email@example.com. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty and its administrators.