MSMEs shield local economy from slowdown

Your neighborhood sari-sari (variety) store, the Internet café on the street corner, the food stall where you buy cheap meals to fix that grumbling stomach—they may not be as huge as a shopping mall, an IT hub or a fastfood restaurant, but these micro-, small- and medium-enterprises (MSMEs) help bolster the domestic economy amid a global crunch.

According to latest data from the Department of Trade and Industry (DTI), of the 783,065 businesses operating in the country in 2006, 780,469, or 99.7 percent are MSMEs. Of these MSMEs, 92 percent are micro enterprises, 7.3 percent are small enterprises and 0.4 percent are medium enterprises.

Also, MSMEs created 70 percent of the total jobs generated in the country in that period, the DTI said.

It added that about 25 percent of the country’s total exports revenues are contributed by MSMEs, which comprise about 60 percent of all exporters here.

The DTI defines an MSME as “any business activity or enterprise engaged in industry, agri-business and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value [by asset size] falling under the following categories: up to P3 million [micro enterprises]; between P 3,000,001 and P15 million [small]; and between P15,000,001 and P100 million [medium].”

MSMEs can also be categorized based on the number of employees: between one and nine employees (micro enterprises); between 10 and 99 workers (small); and between 100 and 199 workers (medium).

The DTI, in its website, said MSMEs are important because:

• MSMEs play a major role in the country’s economic development through their contribution in rural industrialization; rural development and decentralization of industries; creation of employment opportunities and more equitable income distribution; use of indigenous resources; earning of foreign exchange resources; creation of backward and forward linkages with existing industries; and entrepreneurial development.

• They are vital in dispersing new industries to the countryside and stimulating gainful employment. A country like the Philippines where labor is abundant has much to gain from entrepreneurial activities. MSMEs are more likely to be labor-intensive, thus they generate jobs to the locality where they are situated. In this sense, they bring about a more balanced economic growth and equity in income distribution.

• MSMEs are quick in assimilating new design trends, developing contemporary products and bringing them to the marketplace ahead of the competition. They tend to be far more innovative in developing indigenous or appropriate technology, which may be grown later into pioneering technological breakthroughs.

• They are able to effectively increase the local content or the value added in final goods that are processed and marketed by large manufacturing firms.

• MSMEs are notably skillful in maximizing the use of scarce capital resources and are able to partner with large firms by supplying locally available raw materials in unprocessed or semi-processed forms.

• Also, they can act as the seedbed for the development of entrepreneurial skills and innovation; play an important part in the provision of services in the community; and can make an important contribution to regional development programs. –Manila Times