RHODORA M. LEAÑO Director Bureau of MSME Development Department of Trade and Industry

1. MSME Development Plan 2011-2016 RHODORA M. LEAÑO Director Bureau of MSME Development Department of Trade and Industry

2. Outline • Overview of Philippine MSMEs • Highlights of Accomplishments on • SME Development 2004-2010 • MSMED Plan 2011-2016 • MSMED Council

3. Highlights of Accomplishments on SME Development 2004-2010 • Increased value added of the sector from 32% to 35.7% • Generated 6.5 million direct and indirect jobs • Provided Php 367.39 billion in loans to address 6.3 million requests by MSMEs for credit and other forms of financial support • Generated Php 20.12 billion worth of domestic sales and U.S. $1.8 billion of export sales • Provided capacity building programs to enhance the level of competitiveness of over 115,000 MSMEs

4. Take-Aways from SMED Plan 2004-2010 • All stakeholders both at the national and local levels need to work together to maximize development impact. • We need to improve knowledge management and monitoring and evaluation and make them more participatory. • We need to marry the top down with a bottom up development approach.

5. MSME Development Plan 2011-2016 • To address the key challenges and constraints that continue to prevent the MSME sector from realizing its full potential and boosting the country’s industrial growth • Developed in close consultation with national, regional and provincial stakeholders • Key industry areas such as (tourism, BPO, electronics, mining, housing, agribusiness, logistics, shipbuilding, infrastructure, and other high-potential industries like - homestyle products, wearables, motor vehicles parts and components, garments, and construction materials)

6. Challenges • Business Environment (BE) • High cost of doing business (taxes, fees, etc.) • Registration and licensing procedures are tedious, lengthy and complicated • Efforts to develop a BE are not coordinated, harmonized and sustained by concerned agencies • Laws and policies supporting MSME development are not fully enforced • Several regions lack investment codes while some regions that do, are not implementing them

7. Challenges • Business Environment (BE) • Business development is too focused on micros’ development with little attention given the concerns of SMEs • Several regions lack the infrastructure and utilities needed to promote business and investments • Some regions are prone to risks (i.e. peace and order, natural disasters, etc.) • Enablers lack the capacity to support and promote the MSME sector

8. Challenges • Access to Finance (A2F) • SMEs find difficulty in accessing available funds from financial institutions because of stringent and voluminous requirements and long processing time of loan applications • The interest rate charged is very high • SMEs find the minimum loan requirement and the short repayment period restrictive • The financial packages for SMEs in several regions are only available in urban areas • SMEs lack the capacity for financial management

9. Challenges • Access to Finance (A2F) • There are no funds available for start-up SMEs in several regions • SMEs do not have access to venture capital funds • It is difficult to restructure loans • SMEs have limited access to information regarding the sources of funds and on how to access these

10. Challenges • Access to Markets(A2M) • SMEs are not proactive in seeking markets and responding to market needs • Stiff competition from unregistered enterprises and cheap imports are eroding the SMEs’ market share • SMEs have limited access to organized marketing networks of independent consolidators • Marketing support for SMEs given by stakeholders is not coordinated

11. Challenges • Access to Markets(A2M) • SMEs have poorly packaged and labelled products • SMEs have limited capacity for product development and design • SMEs lack the capacity to use modern technology, i.e. Internet, for marketing purposes • SMEs lack the certification and accreditation needed to penetrate new markets • SMEs lack access to market information

12. Challenges • Productivity and Efficiency (P&E) • The unsteady supply and high cost of water and electricity reduce the productivity of SMEs • SMEs lack information and education on productivity • The level of productivity of SMEs is reduced by their poor working conditions arising from non-compliance with labor laws • The production systems of SMEs are not environment-friendly • SMEs lack the knowledge and capacity to comply with international quality standards • SMEs suffer from piracy of highly skilled workers

13. Challenges • Productivity and Efficiency (P&E) • Vocational and technical schools do not offer learning programs that are responsive to MSME needs • ICT use among SMEs is not pervasive • SMEs are not investing in productivity-enhancing technologies • The services of government-subsidized technology/packaging centers are expensive • SMEs are unable to access productivity programs due to their high cost

14. MSME Development Plan 2011-2016 • Strategic Framework • The new plan envisions a more focused implementation of measures • It is meant to deliver a set of results that would lead to the creation of employment and the improvement in the value added contribution of the SMEs sector.

15. MSME Development Plan 2011-2016 • The Plan is meant to: • Create a business environment that will center around a culture of governance that will foster the establishment, development, sustainability, and competitiveness of SMEs • Improve the availability of reasonably priced financial products, services and support programs that SMEs can conveniently access

16. MSME Development Plan 2011-2016 • The new Plan is meant to: • Improve the sustainability of SMEs to be competitive in selling their products and services to existing and new markets, domestically and internationally, under a climate of fair and free trade • Improve the production and delivery of competitive, standards compliant and environment-friendly products and services that will generate optimum economic returns for SMEs • Take into consideration global themes and cross-cutting issues related to gender, climate change, corporate social responsibility and migration.

17. MSME Development Plan 2011-2016 • Creating employment and increasing GDP • Contribution • The new Plan aims to: • Create 2 million employment in new and sustainable jobs by 2016 • Raise the economic contribution of SMEs to 40% of gross value added to be at par with the share of the SME sector to GDP of other countries in the region.

18. MSMED Plan 2011-2016 Results Framework POVERTY REDUCTION The contribution of the MSME sector to GVA has increased to 40% by 2016 MSME sector employment has reached 2 million by 2016 BE A2F A2M P&E

19. BE Results Statements The contribution of the MSME sector to GVA has increased to 40% by 2016 MSME sector employment has reached 2 million by 2016 A2F A2M P&E Business Environment (BE) The cost of doing business (taxes, fees, etc.) is affordable to MSMEs. The institutional support structures for the development of start-up and existing MSMEs are in place. The policies necessary to develop the MSME sector are crafted and being fully implemented. Support for MSME development is results based, coordinated, harmonized and sustained by capable stakeholders. An entrepreneurial mindset is pervasive among MSMEs and other MSME stakeholders. Soft and hard infrastructures for MSME development are established. The information needs of MSMEs are available and accessible. MSMEs are gender responsive and environment-friendly.

20. A2F Results Statements The contribution of the MSME sector to GVA has increased to 40% by 2016 MSME sector employment has reached 2 million by 2016 BE A2M P&E Access to Finance (A2F) The financial products, services and support programs that MSMEs need are sustainably available even to start-up MSMEs and MSMEs operating in the countryside. The cost of obtaining MSME loans is reasonable and affordable. The requirements that MSMEs need to comply with to obtain loans are reasonable and manageable. The process that MSMEs need to follow and documents that must be submitted to obtain loans is simplified and streamlined. MSMEs are trained in financial management and are able to understand and speak the language of financial institutions, while financial institutions are trained to understand and speak the language of MSMEs. Financial products and services for MSME lending are gender-responsive and environment friendly. The information needed by MSMEs to access financial resources are available and easily accessible. The assistance extended by stakeholders to MSMEs in accessing funds are coordinated, relevant and effective.

21. A2M Results Statements The contribution of the MSME sector to GVA has increased to 40% by 2016 MSME sector employment has reached 2 million by 2016 BE A2F P&E Access to Markets (A2M) MSMEs have maintained their existing markets and penetrated new and emerging markets locally and globally. MSMEs are competitive locally and globally. Marketing support systems are established and are operating on a sustainable basis. MSMEs are implementing the value chain approach and are highly benefited by it. MSMEs are using information technology and intellectual property system to develop a sustainable market share and gain competitive advantage for their products and services. Market information needed by MSMEs is available and freely accessible. MSMEs have considerable share in the sustainable development market locally and globally. Government support programs (e.g. One Town, One Product (OTOP) Program) to help MSMEs access local and global markets are coordinated and highly satisfactory.

22. P&E Results Statements The contribution of the MSME sector to GVA has increased to 40% by 2016 MSME sector employment has reached 2 million by 2016 BE A2F A2M Productivity and Efficiency (P&E) Government programs and policies on productivity enhancement are coordinated, effective and highly satisfactory. The MSME workforce is highly motivated and is equipped with the appropriate skills and attitude needed by MSMEs. The working environment of MSMEs fosters greater productivity and efficiency among the workforce. MSMEs are using gender-responsive and environment friendly technologies. MSMEs are compliant with international quality standards. MSMEs are using state of the art productivity enhancing technologies. Information on productivity enhancement is available and freely accessible to MSMEs.

23. MSME Development Strategy and Approach Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M Market System Development Corporate Social Responsibility Climate Change RegionalIntegration

24. Implementation Approach • Local and Regional Economic Development • espouses the principles of subsidiarity and participatory development • advocates the paradigm that a local government unit (LGU) is an economic space • promotes market based solutions • catalyzes the establishment of upstream and downstream economic activities • adopts a systemic view to local competitiveness Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness Local and Regional Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration

25. Implementation Approach • Sector Competitiveness • fosters cooperation and trust thereby improving the competitiveness of entire value chains • encourages the development by stakeholders of consistent and relevant strategies in keeping with the principle of participatory development Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration Sector Competitiveness

26. Implementation Approach • Market System Development • allows stakeholders to address market failures both at the demand and supply sides of the service market • develops the competitiveness of market actors including the private sector, government, business membership organizations, and informal networks • promotes efficiency in the use of government funds Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M Market System Development MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration

27. Global Themes • Gender • encourages local stakeholders to analyze the business environment for the key characteristics and the context in which female and male entrepreneurs operate • focuses on women’s and men’s access to resources and opportunities Globalization Migration Gender Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration

28. Global Themes • Migration • raises potential investment capital for the establishment of MSMEs in the countryside • improves the demand for MSME products and services in the Philippines and abroad • increases know-how (brain gain) of the OFs leading to new forms of businesses, knowledge transfer, and raises the productivity and efficiency of MSMEs. Globalization Migration Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration

29. Global Themes • Climate Change/Green Growth • can bring business opportunities to MSMEs • leads to greater resource productivity and efficiency Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness BIEE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration Climate Change

30. Global Themes • Corporate Social Responsibility • MSMEs can supply raw materials and services to large enterprises • MSMEs can be the beneficiaries of CSR activities such as capacity building or technology transfer programs • MSME operational “code of ethics” Globalization Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Corporate Social Responsibility Regional Integration

31. Global Themes Globalization Globalization • Globalization • promotes the participation of SMEs in global production networks through outsourcing and subcontracting activities • maximizes opportunities for SMEs in a more open and highly competitive market Migration Gender Local and Regional Competitiveness Sector Competitiveness BE A2F MSME P&E A2M MarketSystem Development Climate Change Corporate Social Responsibility Regional Integration Regional Integration

32. MSME Development Plan 2011-2016 It is envisioned that the Plan will be implemented through a stronger convergence of stakeholders efforts with regular monitoring, validation and updating under the stewardship of the national and local Micro, Small and Medium Enterprise Development Councils.

33. MSMED COUNCIL MEMBERSHIP(RA 9501: Magna Carta for MSMEs) Chairman: Secretary of Trade and Industry Members: Government sector Secretary of Agriculture Secretary of Interior and Local Government Secretary of Science and Technology Secretary of Tourism Chairman of Small Business Corporation Private sector MSME Representatives for Luzon, Visayas and Mindanao Banking Sector Representative Labor Sector Representative

34. MSMED COUNCIL MEMBERSHIP Additional MembersPer Executive Order No. 793 People’s Credit and Finance Corporation National Livelihood Development Corporation Cooperative Development Authority UP-Institute for Small Scale Industries Permanent Resource persons National Economic and Development Authority (NEDA) Bangko Sentral ng Pilipinas (BSP) Congressional Oversight Committee: - Senate: Economic Affairs - Congress: Small Business and Entrepreneurship

35. MSMEDC POWERS AND FUNCTIONS(RA 9501: Sec. 7-B) Help establish the needed environment and opportunities conducive to the growth and development of the MSME sector Recommend to the President and Congress all policy matters affecting MSMEs Coordinate and integrate various government and private sector activities relating to MSME development

36. MSMEDC POWERS AND FUNCTIONS(RA 9501: Sec. 7-B) Review existing policies of government agencies that would affect the growth and development of MSMEs and recommend changes to the President and Congress thru the Senate Committee on Economic Affairs and HOR Committee on Small Business and Entrepreneurship Monitor and determine the progress of various agencies geared towards the development of the MSME sector. Includes overseeing, in coordination with LGUs and DILG as well as private sector groups/associations, the development of MSMEs

37. MSMEDC POWERS AND FUNCTIONS(RA 9501: Sec. 7-B) Promulgate implementing guidelines, programs and operating principles Provide the appropriate policy and coordinative framework in assisting relevant government agencies, in coordination with the NEDA and CCPAP, in tapping local and foreign funds for MSME development Promote the productivity and viability of MSMEs by way of directing and/or assisting relevant government agencies and institutions at the national, regional and provincial levels.

38. MSMEDC POWERS AND FUNCTIONS(RA 9501: Sec. 7-B) Through appropriate agencies of government: Provide more infrastructure facilities and public utilities to support operations of MSMEs Establish, operate and administer a small business incubation program Conduct a nationwide information campaign with the PIA Provide local and international linkages for MSME development Compile and integrate statistical databank on Philippine MSMEs Submit to the President and the Congress thru the Oversight Committee a yearly report on the status of MSMEs in the Philippines Coordinate, monitor and assess the implementation of the MSME Development Plan

39. Thank you. BUREAU OF MICRO, SMALL AND MEDIUM ENTERPRISE DEVELOPMENT 5/F, Trade and Industry Building, 361 Sen. Gil J. Puyat Avenue, 1200 Makati City, Philippines Trunkline (632) 7510.384 • Fax (632) 896-7916 • E-mail: bmsmed@dti.gov.ph www.dti.gov.ph As of March 11, 2011