2022 saw many micro, small and medium enterprises (MSMEs) return to a sense of normalcy as the last of the Covid-19 pandemic restrictions were dropped. However, new challenges such as inflation, fluctuations in peso-to-dollar values and disruptions in global supply chains have also disrupted economic recovery. In addition to existing challenges in competitiveness and digitalization, MSMEs also had to deal with higher costs of raw materials and lending interest rates.
MSME revitalization is one of the priorities of the Marcos administration, with the President himself promising to intensify efforts to help MSMEs seize more opportunities for digitalization and globalization. With this promise, what changes and improvements in the business environment can SMEs expect?
First, there will be more projects to help MSMEs become more resilient through digitalization, financial education and stronger occupational safety. The Department of Trade and Industry (DTI) estimates that 73 percent of MSMEs failed to digitalize their operations in 2021, limiting their market reach.
To address this, DTI’s Philippine Trade Training Center and the Technical Education and Skills Development Authority (Tesda) will begin offering the “Start and Improve Your Business” management training program nationwide for over 20,000 MSMEs nationwide. The project is part of an agreement with DTI; International Labor Organization, which developed the program; and the Japanese government, which pledged to support MSMEs recover from the economic effects of Covid-19.
Tesda, which received the highest MSME budget allocation for 2023 at P13.470 billion, vows to improve its technical vocational programs along with the administration’s priority sectors: agriculture, tourism, manufacturing, transportation and logistics; health, IT-BPM (information technology business processing management), creative industries, energy and construction. Tesda also aims to rebrand its perception among Filipinos into a viable option for post-secondary education. Starting next year, there will be a nationwide rollout of e-certificates, institutionalization of micro-credentialing and the possible integration of Tesda’s Registry of Certified Workers and Department of Labor and Employment’s PhilJobNet.
DTI will also continue to improve access to digitalization for province-based MSMEs through several projects in partnership. One is the continuation of “Innovation Hubs” in Pampanga, Cebu and Mindanao, where experts can exchange ideas and educate MSMEs on doing business using modern technology. Another initiative is the improvement of digital connectivity to remote areas in the Philippines by the Department of Information and Communications Technology. They aim to achieve this with the help of Elon Musk’s Starlink satellite system and the completion of the Luzon Bypass Infrastructure Project this year. A third initiative is the digitalization of business registrations. With the Central Business Portal, new business owners can register their companies in a one-stop online portal; other portals, this time for MSME e-commerce and LGU (local government unit) business permit issuances, will be deployed in 2023.
DTI’s digitalization program also involves helping MSMEs adopt digital financial services. Still part of Japan’s aid program with DTI is to teach SMEs the fundamentals and benefits of incorporating digital financial services into their operations. In addition, DTI will guide MSMEs on how to use, transfer and process personal information in a way that promotes privacy and a safe internet environment for stakeholders. By being literate in digital financial services, local SMEs are expected to attract and serve more local and foreign trade partners, and clients.
To protect consumers and MSMEs involved in online trade, an e-commerce bureau will be created under the Internet Transactions Act, which was approved by the House of Representatives in December 2022. The bill seeks to regulate all B2B (business-to-business) and B2C (business-to-consumer) commercial transactions to protect consumer rights, data privacy, advertising practices and competition, intellectual property rights, and product standards and safety. Lawmakers also expect this bill to encourage a sustainable growth in the e-commerce industry.
Despite budget cuts for the DTI and the Cooperative Development Authority in 2023, DTI Secretary Alfredo Pascual promises MSMEs continued access to financing. While he still hopes to have the final P2.25-billion budget for the MSME development program augmented, the agency will also partner with private entities for more public-private partnership projects.
A new DTI masterplan, this one focusing on national logistics strategy, is slated to launch in 2023. In line with President Ferdinand Marcos Jr.’s order to reduce logistics costs in the Philippines, DTI is looking into reforms and improvements involving container deposits for trucking companies, farm-to-market roads and other issues in the logistics sector.
Lastly, there will be more platforms and plans to market products and services to a bigger population, as evidenced by DTI’s Philippine Export Development Plan for 2023 to 2028. The program aims to transform the country from an exporter of commodities and intermediate goods to an exporter of high-value products and services. The plan aims to develop the following priority clusters: industrial, manufacturing and transport — which deals in aerospace — automotives and semiconductors; technology, media and telecommunication; health and life sciences; and resource-based industries.
In connection to this, the Center for International Trade Exhibition and Missions — which is DTI’s export trade promotion arm — received a higher budget of P165 million for 2023 than the expected P153 million. President Marcos expects the agency to connect MSMEs to more private investors and export markets outside of the country, such as the United States, China, Japan, Hong Kong and Singapore.
Benedict Carandang is the vice president for External Relations in First Circle, a fintech provider that helps SMEs grow through long-term partnership, flexible financing and free tools to help them find government opportunities. It is consistently recognized as one of the best businesses in the Philippines. This article is co-written with Kathryn Jose, a contributing writer for First Circle.