The head of the Philippines’ umbrella organization of exporters is appealing to President Ferdinand Marcos, Jr. to substantially increase investments in our exporters and small businesses, noting Filipino companies are losing in competitiveness to ASEAN competitors that are getting generous development funding from their governments.
“We have to graduate from looking at export as an expense [to] looking at it as an investment because we’re being left behind” by the rest of Southeast Asia in growing our exports, said Sergio R. Ortiz-Luis Jr., president of the Philippine Exporters Confederation, Inc. (PHILEXPORT).
Ortiz-Luis made the petition for increased support in a July 28 studio interview with Bilyonaryo News Channel, a few hours ahead of the State of the Nation Address speech of President Ferdinand Marcos Jr.
“[Our small and medium-sized enterprises are] the most underbanked SMEs in this part of the world,” he said, as he claimed that the “government’s idea of export development is ‘lip service’.”
To prove his point, he said the Department of Trade and Industry (DTI) has a “pathetic” budget for carrying out its mandate of export development and promotion.
“There’s practically none compared to our competitors’ expenses for research, R&D, market research,” he said.
Further, Ortiz-Luis highlighted the huge difference between the US$10.1 billion in funding to Filipino MSMEs in 2019 and the $230 billion provided to their Thai counterparts that same year.
The Business Mirror in a news report cited an Asian Development Bank study indicating that in 2019, the Philippines registered the smallest MSME bank loan total for a country among the ASEAN-5, comprised of Indonesia, Thailand, Malaysia, Philippines and Singapore.
And yet “we expect SMEs to be the backbone of our economy,” Ortiz-Luis pointed out.
The reality, he continued, is that more than 90% of businesses in the Philippines are MSMEs, and of these, some 90% are the micros, which “don’t graduate and they just fall to the side and somebody comes in” to replace them.
This lack of growth for exporters and MSMEs was attributed by Ortiz-Luis to a lack of budget support.
Asked how MSMEs can specifically be assisted, he said they have requested the Bangko Sentral ng Pilipinas (BSP) to allow the Small Business Corporation (SB Corp)—the DTI’s credit arm—to make its own lending rules to improve loan accessibility and extend the credit limit for MSMEs.
However, Ortiz-Luis said that while the BSP had finally signaled its willingness to remove its oversight of SB Corporation, “there’s no funding” available even if this should come to pass.
This is in contrast to the government’s conditional cash transfer (CCT) programs for poor households, which are extremely well-funded, he said.
It’s unfortunate that the programs of DTI, the Department of Science and Technology and other agencies to support MSMEs have negligible funding, the executive continued.
He added that amendments are currently being made to the Magna Carta for MSMEs, the legislation that strengthens development and assistance programs to MSMEs, to allow the removal of the provision on BSP supervision of SB Corp.
To secure the needed funds, Ortiz-Luis suggests creating a program similar to the CCT but tailor-fit for MSMEs and small exporters, and one that requires partial repayment of the funding.
He argued that if the government “can give away all this money free” under its CCT program, “why not invest in MSMEs?”
He emphasized that investments in MSMEs and exporters will not be complete giveaways, which will make it more sustainable compared to CCT.
If the government can do this, small businesses will have the capital to grow and generate jobs, and can fulfill their potential as the backbone of the economy, he explained.
Last May, Ortiz-Luis, who is also the president of the Employers Confederation of the Philippines (ECOP), made a similar pitch to the new solons of the 20th Philippine Congress.
He said the business sector’s wish was for Congress to institute legislative reforms that would put sufficient budget into MSME development.
The export chief said the budgets for the MSME development initiatives of concerned agencies were too small to yield satisfactory results, yet “we expect so much from them [the agencies]” in terms of attracting investors to the country and improving MSME operating conditions.
“We hope that they will really consider putting budgets there. There is no budget [for MSMEs],” Ortiz-Luis stressed.