SME SME CHARACTERISTICS CHARACTERISTICS

andandSTATISTICAL NEEDS STATISTICAL NEEDS

in thein thePHILIPPINESPHILIPPINES

By Benel P. Lagua

Small and Medium Enterprises in the Philippines

Current State of SMEs in the Philippine Economy

Available SME Statistics Deficiencies in the present

system of SME statistics Current initiatives to develop

SME statistics Conclusion

A. SMALL & MEDIUM ENTEPRISES in the Philippines

Small and medium enterprises (SMEs)

comprise 99.6% of all registered business in

the Philippines and employ 70% of the

workforce

Recently, Recently, Republic Act No. 9178, otherwise known as the Barangay Micro Business Barangay Micro Business Enterprise (BMBE)Enterprise (BMBE) Act of 2002 Act of 2002 has redefined the categories. has redefined the categories. Hence, the present structure, Hence, the present structure, by law, is as follows :by law, is as follows :

MicroMicro -- up to 3,000,000up to 3,000,000 Small Small -- P3,000,001 - 15,000,000P3,000,001 - 15,000,000 Medium Medium -- P15,000,001 - P15,000,001 - 100,000,000 100,000,000 Large Large -- above P100,000,000above P100,000,000

SMEs

B. Current State of SMEs in the B. Current State of SMEs in the Philippine EconomyPhilippine Economy

1. Number of Establishments and EmployeesAccording to the 2001 statistics of business establishments published by the National Statistics Office, there are 811, 589 business establishments in the country.

Of total, micro-enterprises account for 743,949 (97.1%), small enterprises 61,759 (7.6%), medium enterprises 2, 923 (.4%), and large enterprises 2,958 (0.3%).

2. Geographic Distribution

The analysis of geographic The analysis of geographic distribution of enterprises distribution of enterprises throughout the country throughout the country indicates a high concentration indicates a high concentration in the National Capital Region in the National Capital Region (NCR), which accounts for (NCR), which accounts for 24.4% of all establishments and 24.4% of all establishments and 40.1% of all employees.40.1% of all employees.

The five regions subject to the present study (NCR, The five regions subject to the present study (NCR, Regions 3, 4, 7 and 11) hold a combined share of Regions 3, 4, 7 and 11) hold a combined share of 65.0% of total establishments. Similarly, the regions 65.0% of total establishments. Similarly, the regions account for 72.1% of total employees. As a result, account for 72.1% of total employees. As a result, around two-thirds of SMEs are concentrated in the around two-thirds of SMEs are concentrated in the five regions.five regions.

3. Sales and Value Added 3. Sales and Value Added by SMEsby SMEs

The recent trends in value added by SMEs in the The recent trends in value added by SMEs in the country and their sales indicate a growing share. country and their sales indicate a growing share. SMEs as a whole have been steadily growing year SMEs as a whole have been steadily growing year after year with the overall industrial growth, as after year with the overall industrial growth, as indicated by relevant factors, including the indicated by relevant factors, including the number of establishments and the number of number of establishments and the number of employees. employees.

Nevertheless, compared to the absolute number of Nevertheless, compared to the absolute number of establishments and employment, SMEs hold establishments and employment, SMEs hold relatively small share of value added and sales, relatively small share of value added and sales, less than 30%, thus suggesting their less than 30%, thus suggesting their development potential in the country.development potential in the country.

C. Available SME StatisticsC. Available SME Statistics

1. National Statistics OfficeThe primary source of The primary source of

statistics on Philippines SMEs statistics on Philippines SMEs is the National Statistics is the National Statistics Office. Office.

NSO is the major statistical agency NSO is the major statistical agency at the national level responsible in collecting, at the national level responsible in collecting, compiling, classifying, producing, publishing, compiling, classifying, producing, publishing, and disseminating general-purpose statistics. and disseminating general-purpose statistics. Statistics on the census of establishments is Statistics on the census of establishments is done every 5 years done every 5 years

2. Loans lent to SMEsAll lending institutions are required to lend All lending institutions are required to lend set aside at least 6% of their total loan set aside at least 6% of their total loan portfolio to small enterprises and at least 2% portfolio to small enterprises and at least 2% to medium-sized enterprises. to medium-sized enterprises.

The Republic Act 6977 enacted in 1991 The Republic Act 6977 enacted in 1991 (the Magna Carta for Small Enterprises) (the Magna Carta for Small Enterprises) required 10% more to be diverted to required 10% more to be diverted to SME’s. Then, it was amended in 1997 SME’s. Then, it was amended in 1997 under the Republic Act 8289 to extend under the Republic Act 8289 to extend the applicable period to 2007 and lower the applicable period to 2007 and lower the minimum level to 6% and 2%. the minimum level to 6% and 2%.

The Bangko Sentral ng Pilipinas is The Bangko Sentral ng Pilipinas is mandated by law to monitor this mandated by law to monitor this initiative.initiative.

3. Tradeline Philippines Tradeline Philippines is an online Tradeline Philippines is an online

database service that provides database service that provides product search listing thousands product search listing thousands of manufactured exported of manufactured exported Philippine products complete Philippine products complete with product specifications and with product specifications and is a business search allowing is a business search allowing users to contact Philippine users to contact Philippine exporters, suppliers and exporters, suppliers and local/foreign buyer details and local/foreign buyer details and the products/services they the products/services they manufacture / provide and manufacture / provide and exportexport

4. Exponet4. ExponetThe Bureau of Export and Trade Promotion's The Bureau of Export and Trade Promotion's

(BETP) Export Assistance Network (EXPONET) (BETP) Export Assistance Network (EXPONET) helps exporters and prospective exporters’ helps exporters and prospective exporters’ access information and resolve specific access information and resolve specific problems related to exportingproblems related to exporting

Exponet provides information on export seminar Exponet provides information on export seminar schedules, export organizing, export schedules, export organizing, export procedures and documentation, import procedures and documentation, import facilities for exporters, buyer linkages, export facilities for exporters, buyer linkages, export financing and incentives, product raw material financing and incentives, product raw material sourcing and other statistical information. The sourcing and other statistical information. The agency also assists exporters in export-related agency also assists exporters in export-related problems / trade complaints.problems / trade complaints.

D. Deficiencies in the present D. Deficiencies in the present system system of SME statisticsof SME statistics

1. Timeliness1. TimelinessStatistics on the census of Statistics on the census of

establishments (done every establishments (done every 5 years) and the annual 5 years) and the annual survey of establishments are survey of establishments are usually released 15-24 usually released 15-24 months after the yearmonths after the year.. This This makes the data more or less makes the data more or less an imprecise tool for an imprecise tool for analysis and decision-analysis and decision-making. making. In the same manner, BSP collects information on In the same manner, BSP collects information on the loans lent to SMEs (in compliance with the the loans lent to SMEs (in compliance with the Magna Carta for Small and Medium Enterprise) Magna Carta for Small and Medium Enterprise) every quarter. The data every quarter. The data athered is usually athered is usually released only after 3 months. released only after 3 months.

2. Cross compatibility with other 2. Cross compatibility with other countries for cross country countries for cross country

comparisonscomparisons

The major classification used by most countries to The major classification used by most countries to define SMEs is through assets and employment define SMEs is through assets and employment size. However, the size ranges of their size. However, the size ranges of their classification differ, since developed countries classification differ, since developed countries have large industries than the less developed have large industries than the less developed ones. ones.

Hence, what might be considered as “small” by Hence, what might be considered as “small” by developed countries will already fall into the developed countries will already fall into the “medium” or “large” category for developing “medium” or “large” category for developing countries like the Philippines. Thus, cross countries like the Philippines. Thus, cross compatibility with other countries for cross compatibility with other countries for cross country comparison, is sometimes inappropriate country comparison, is sometimes inappropriate or could not be used as basis for a policy or could not be used as basis for a policy recommendation.recommendation.

3. Inadequateness3. InadequatenessThe scope and coverage of SME statistics are limited The scope and coverage of SME statistics are limited

to 1) the number of establishments, 2) to 1) the number of establishments, 2) employment contribution, and 3) regional employment contribution, and 3) regional distribution. More important data which will help distribution. More important data which will help policy makers and businesses to react quickly in a policy makers and businesses to react quickly in a competitive environment are usually not competitive environment are usually not available. These statistics include:available. These statistics include:

Export contribution of SMEs Export contribution of SMEs

(direct and indirect contribution)(direct and indirect contribution) Contribution of micro enterprises/Contribution of micro enterprises/

informal SMEs to GDP, etc.informal SMEs to GDP, etc. Sectoral statistics/Growth potentials Sectoral statistics/Growth potentials

of industries.of industries.

4. Availability 4. Availability There are confidentiality clauses in census There are confidentiality clauses in census

for firm level data. This cannot be for firm level data. This cannot be accessed at the National Statistics accessed at the National Statistics Office because their agency has to Office because their agency has to comply with the rules of confidentiality.comply with the rules of confidentiality.

In similar ways, banks also ensure that In similar ways, banks also ensure that access to customer information is access to customer information is limited to selected bank employees and limited to selected bank employees and are very conservative in disclosing are very conservative in disclosing client information. client information.

5. Coverage5. CoverageThe Philippines has a large section of small business The Philippines has a large section of small business

constituting the so-called underground or informal constituting the so-called underground or informal economy. This refers to the small scale units in the economy. This refers to the small scale units in the national economy, which produce and distribute national economy, which produce and distribute goods and services without the benefit of official goods and services without the benefit of official sanction or control. sanction or control.

They don't register, don't keep books and don't pay They don't register, don't keep books and don't pay taxes. They operate beyond the reach of the law. taxes. They operate beyond the reach of the law. They have little or no access to organized markets, They have little or no access to organized markets, credit institutions, educational or training centers credit institutions, educational or training centers or public services. Although efforts are being made or public services. Although efforts are being made by the government to bring the underground by the government to bring the underground economy to the surface, the nature of this sector economy to the surface, the nature of this sector makes it very difficult to gather and process makes it very difficult to gather and process statistics on them. statistics on them.

E. What are the current initiatives to E. What are the current initiatives to develop SME statistics?develop SME statistics?

1. National Business Registration (NBR) ProjectThe NBR project aims to address the growing concern of having

consolidated information on all the registered businesses in the country.

Currently, no government agency has a complete record of all registered businesses since registration is being done by various agencies. It is the objective of the NBR project to integrate the information contained in the various agencies and have a single consolidated database containing basic information of all registered businesses.

The NBR project is considered a “timely” project for the country The NBR project is considered a “timely” project for the country in this day and age of global economy. The NBR will not only in this day and age of global economy. The NBR will not only enable Filipino entrepreneurs to find business ventures with enable Filipino entrepreneurs to find business ventures with fellow Filipinos but with foreign investors as well. fellow Filipinos but with foreign investors as well.

2. SME Database ProjectThe SME Database (headed by the DTI SME-Project The SME Database (headed by the DTI SME-Project

Management Office) aims to act as a repository (databank) of Management Office) aims to act as a repository (databank) of the corporate profiles of SMEs. Its objective is to serve as a the corporate profiles of SMEs. Its objective is to serve as a tool for monitoring the assistance given by the different tool for monitoring the assistance given by the different agencies to each SME firm. The database is also designed to agencies to each SME firm. The database is also designed to identify individual companies and to track the kinds of identify individual companies and to track the kinds of government assistance given to each.government assistance given to each.

The interim database will enable the much-needed tracking of The interim database will enable the much-needed tracking of SMEs during the crucial first six (6) months of 2003, SMEs during the crucial first six (6) months of 2003, especially for measurement against the National SME Agenda especially for measurement against the National SME Agenda objectives. The final database could act as a master database objectives. The final database could act as a master database of all SMEs nationwide, possibly supporting other of all SMEs nationwide, possibly supporting other organizations outside DTI, and would allow for more complex organizations outside DTI, and would allow for more complex analysis and reporting. A networked database would facilitate analysis and reporting. A networked database would facilitate the encoding of data from the provinces at the source of the the encoding of data from the provinces at the source of the informationinformation

The ultimate benefit of the SMEs is the possibility of minimizing, The ultimate benefit of the SMEs is the possibility of minimizing, if not eliminating the need to register numerous times with if not eliminating the need to register numerous times with various organizations.various organizations.

F. ConclusionF. Conclusion

While the SME sector is recognized as the focal While the SME sector is recognized as the focal point for growth that will ensure that the point for growth that will ensure that the Philippine economy moves forward despite Philippine economy moves forward despite the threats of an unfavorable global the threats of an unfavorable global environment, the overall fiscal condition of environment, the overall fiscal condition of the country prevents it from being given the country prevents it from being given utmost financial support. utmost financial support.

Development programs have been laid out but Development programs have been laid out but resources are not readily available because of resources are not readily available because of competing demands for government support.competing demands for government support.

It is also in this light that the It is also in this light that the government is open to learn new government is open to learn new modalities in gathering and analyzing modalities in gathering and analyzing data. The administration has given data. The administration has given outmost policy attention to SME outmost policy attention to SME development and hopes that that development and hopes that that through new and better development through new and better development initiatives, stakeholders can move the initiatives, stakeholders can move the program forward.program forward.

Thank you very muchThank you very much

andand

MABUHAY!!!MABUHAY!!!