Problems and prospects of SME

The large regionally diversified rural sector must be mobilized in terms of the accelerated growth of both agricultural and non-agricultural employment and output-creating activities over a widely diversified area of the Philippines. The urban industrial sector, which is still relatively small and heavily concentrated, must be dispersed and allowed to look outward toward the export markets in order to provide for the rapid growth of employment opportunities while helping to finance its own future growth.

Balance rural mobilization calls for the simultaneous growth of primary and secondary food production and of rural industry and services in a mutually reinforcing, self-feeding fashion. It is a mushrooming exchange of food grains, vegetables and poultry, on the one side, and pumps, implements, shoes and shirts, on the other, with the simultaneous generation of incomes and reciprocal markets. This mushrooming activity, with its generation of productive employment and output gains in a large number of towns, is not confined to an interchange of productivity between a town and its rural hinterland but includes production and trading activities among the islands and between smaller towns and the intermediate-level urban growth poles, as well as enhanced output-generating activity within a barrio itself.

Small industry problems

Philippine industry is dominated by rural enterprises using little capital and employment—few workers whose productivity is rather low. The state of affair not only keeps down the over-all level of industrial output and productivity but also tends to perpetuate the low per capital income in the countryside. The over-all result is a vicious cycle of poverty, characterized by low output per capital in cottage industries, due to the limited local market which is in turn constricted by the low agricultural and, to a smaller extent, industrial productivity. This state of affairs obviously reduces the incentive on the part of the cottage industries to increase efficiency.

Moreover, the import substitution policy in the past developed assembly operations of the “beauty parlor” type which were located close to port areas—since most of the “raw materials” or more accurately the components were imported. On the other hand, it is increasingly more evident that the development of new exports required the production of items which are standardized and strictly controlled in terms of quality e.g. garments, furniture, electronic, components which inevitably require factory operations. In brief, it would seem that the “backwash” or “spread” effects of this operations are very limited and that the favorable effects of these economic activities on the countryside are negligible. We might even go so far or to say that cottage industries may find it extremely difficult to compete with bigger production units in these two types of manufacturing activities—import substitution and exports.

Small-scale industries—that industries that are bigger, sometimes much bigger than household enterprises, have normally sought out the cities especially the big cities. (This is very obvious in the smaller streets in Cebu City). This is only logical considering as the cities have relatively cheaper and more efficient power and transportation system, respectively. Driving small industries to the countryside might be too utopian a policy.

Moreover, modern industry has the capability to produce products that are cheaper more attractive and durable than those produced by cottage industries and when agricultural income rise in certain communities these products of more advanced manufacturing tend to invade these areas thereby displacing these cottage industries.

Protection for small industries

The spread effects from smaller industries are greater than those of large-scale manufacturing. The experience gained from working with machines in smaller industries and from managing them would be wider among the labor force.

There is need not only to promote a regional balance in our industrialization program, but also to promote a balance between large and small production units. Certainly no one would like to see an economy consisting of a few big enterprises and a vast number of small farms and cottage industries—which can only reflect a serious maldistribution of income.

Large and small industries could implement each other in two principal ways:

1. Big units could subcontract to smaller the production of parts and service works.

2. The smaller enterprises could look to the larger units for the materials to process into finished items.

Small-scale industries can be protected from over powering competition from bigger units by the following:

1. Important and investment restrictions can be imposed.

2. Modernized and improve the productivity of small industries.

3. Rationalize small industries by preventing over crowding.

4. Provide equipment of hand-tools at subsidized rates (e.g. tax exemptions and low interest loans).

5. Organize them into marketing cooperatives.

6. Provide extension services and training programs. –Jose V. Romero Jr. Ph.D., Manila Times

opinion@manilatimes.net