MOST small and medium enterprises in the Philippines will find it illusory to even dream of linking up with global value chains unless local conditions are present for them to grow, strengthen and develop. Unfortunately, APEC-related policies prevent countries like the Philippines from creating such conditions for the small producers.
According to Teddy Casiño, former congressman who chaired the Committee on Small Business and Entrepreneurship Development in the 15h Philippine Congress, economic liberalization policies since the late 1980s have caused the demise of the Philippine manufacturing sector, notably in garments and textiles, footwear, rubber products, furniture, appliances, food and beverage, steel, chemicals, drugs and pharmaceuticals, many consumer goods and even agro-industrial products.
“Filipino manufacturers and farmers have been decimated by the deluge of cheap imported goods and raw materials brought about by government’s policy of slashing tariff rates to one of the lowest in ASEAN. Philippine SMEs are under threat of extinction because of globalization,” he said.
“At present, 91.5% of Filipino enterprises are micro-enterprises, which contributed a mere 4.9% of value-added to the economy and are too small and inefficient to compete for a piece of the global or even regional value chain. For APEC to preach that they should target the global market is giving them false hopes,” he said.
“Meanwhile, the small and medium-sized firms that have the most chances in global competition are dwindling and find little support at home, since most large industries in the Philippines source their equipment, parts and materials from foreign suppliers. Such local linkages between large enterprises and SMEs are crucial to maintaining a robust and sustainable SME sector whose benefits rebound to the local economy,” Casiño said.
Citing official figures, he said around 72,777 manufacturing firms – mostly MSMEs – closed between 1996 and 2012, or some 4,549 annually, due in part to increased competition from abroad.
He added that to be able to compete, Philippine SMEs should be fully supported by government programs ranging from credit, research and development, and an industrial strategy that integrates the SMEs with the local economy. “Otherwise, only a handful will have the capability to jump to the global market or link up with global value chains,” he said.
“Unfortunately, policies like trade and investment liberalization and economic deregulation make it double difficult for countries like the Philippines to industrialize in a wholistic and integrated manner. The local linkages between the large enterprises and SMEs have broken down, with foreign suppliers taking the place of local SMEs. Unless this is reversed, our SMEs will merely end up as subcontractors of transnational corporations, offering mostly contractual work and low wages,” he stressed.
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