MANILA, Philippines - The government must create a comprehensive program that recognizes and capitalizes the potentials and competencies of small and medium enterprises (SMEs), according to a report by the Philippine Institute for Development Studies (PIDS).
“Developing countries like the Philippines have immense potential to gain and to contribute to value chains and trade networks. Given that value chains are evident paths for an increasingly more inclusive global economy, it is to the interest of the country to create an enabling trade and business environment,” the report said.
Government, business firms, and related sectors need to change the way they look at trade, it said.
“More importantly, leaders and policymakers must focus on capitalizing on the country’s core competencies and talent—its human capital—and on creating the right environment that is conducive to capturing value chains and to enabling the participating local firms to access higher value-added segments in the chains,” the study said.
The semiconductor and electronics, and the business process outsourcing (BPO) industries are good examples of local business gaining access to global value chains, and thus increase its contribution to the country’s gross domestic product.
The semiconductor and electronics industry accounts for 60-percent of the country’s exports, and employs 2.3 million Filipino workers.
The country’s BPO industry accounts for nearly six percent of GDP, and is considered the second best in the region.
But the country cannot sit on its laurels as the advent of the ASEAN Economic Community (AEC) forces nations to increase the competitiveness of their SME and their products.
Government and the private sector must create policies and programs that will assist SMEs to increase their participation in value chains, the study said.
R&D investment is a key component in developing capabilities for SMEs to upgrade and expand.
One of the major obstacles that hinder small businesses to innovate is access to credit, the study said.
“Policymakers must develop comprehensive and centralized credit information system for both firms and banks to utilize. Making it easier for SMEs to access finance and invest in innovations will improve their chances of joining GVCs,” the PIDS report pointed out.
Finally, infrastructure, poor transport systems and high electricity costs are greater external factors that must be addressed, it said.
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