How does the Philippines fare against other Asean member states (AMSs) in terms of providing support for small and medium enterprises (SMEs)? Just a little better than average. This is according to a report published by the Economic Research Institute for Asean and East Asia (ERIA) in 2012. Dubbed Asean SME Policy Index 2014: Towards Competitive and Innovative Asean SMEs, the report presents the SME development policies and actions implemented by the 10 Asean countries, compares their experiences and performance, checks whether they have been consistent with the policy guidelines of the Asean Strategic Plan for SME Development (2010-15), and proposes reforms that these countries ought to put at the top of their priorities.
The SME Policy Index, which is based on a tool developed by the Organization for Economic Co-operation and Development (OECD), is meant to evaluate progress in SME policy reform across countries and to assess the countries’ performance corresponding to the various dimensions of reform. The Index also serves other purposes, such as encouraging more effective peer review through a common evaluation framework, establishing a measurement process that encourages public/private consultation, and providing a tool for medium-term planning as well as for resource mobilization, given a particular country’s strengths and weaknesses.
The SME Policy Index is composed of several policy dimensions, each of which is subdivided into a number of sub-dimensions. Each sub-dimension, in turn, is composed of a number of indicators, with each indicator having a number of levels of policy reform or a set of policy reforms. The eight policy dimensions are: (1) institutional framework; (2) access to support services; (3) cheaper and faster start-up and better legislation and regulation for SMEs; (4) access to finance; (5) technology and technology transfer; (6) international market expansion; (7) promotion of entrepreneurial education; and (8) more effective representation of SMEs’ interests.
The results of the policy index indicate uneven levels of performance in the implementation of SME development policy at the national level between the Asean-6, which includes Brunei Darussalam (BRN), Indonesia (IND), Malaysia (MYS), Philippines (PHL), Singapore (SGP), and Thailand (THA); and the less developed members, also known as the CLMV countries, namely Cambodia (CAM), Lao PDR (LAO), Myanmar (MMR), and Vietnam (VNM). The Philippines got an aggregate index score of 3.8, which is just over the 3.7 average for the entire region. Singapore got a score of 5.4, followed by Malaysia (4.7), and Indonesia and Thailand (4.1).
For this article, we focus on institutional framework. For this dimension, the Philippines just matched the Asean average of 3.7. Those that scored higher than the average are SGP (5.4), MYS (4.6), IND (4.4), THA (3.9), and VNM (3.8). Among the five dimensions of institutional framework, the Philippines scored relatively well in terms of intra-governmental coordination in policy formulation (5.0), clearly defined and consistent application of SME definition (4.0), and resourceful and effective policy executing agency (4.0). It scored relatively poorly in terms of having a responsive and effective implementation of SME development strategy (3.5), and in facilitating the transition of SMEs from the informal to the formal (registered) sector (2.0).
Fortunately, the Philippines can learn from the good practices of other Asean countries in terms of supporting their SMEs. Among the best practices in the region in terms of institutional framework are the Standards, Productivity and Innovation Board of Singapore (SPRING Singapore), an agency under the Ministry of Trade and Industry, which engages partners to help enterprises in financing, management development, technology and innovation, and access to markets. It also develops and promotes an internationally recognized set of standards and quality assurance infrastructure, and oversees the safety of general consumer goods in the country. In Malaysia, there is a dedicated central coordinating agency, SME Corporation Malaysia (SME Corp), which formulates policies and coordinates the implementation of SME programs by various ministries and agencies. In 2011 alone, SME Corp has implemented 183 programs for human capital development, access to finance, innovation and technology adoption, and market access. These programs, amounting to RM4.7 billion has benefited 681,263 SMEs.
I will discuss how the Philippines fared in the other dimensions of the SME Policy Index soon.
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 teaches Management of Organizationsand Management Research. His does research on SME development, corporate social initiatives and social enterprises. He welcomes comments at firstname.lastname@example.org. The views expressed above are the author’s and do not necessarily reflect the official position of DLSU, its faculty, and its administrators.