IN FOCUS: Small and medium enterprises

The Philippines is a nation of micro, small, and medium enterprises (MSMEs). More than 99 percent of the total number of establishments in the country are MSMEs. In terms of employment, small firms also dominate, accounting for more than 60 percent or 3.4 million jobs. Despite its size, the sector has yet to provide a significant boost to the domestic economy. The economic performance of MSMEs, according to PIDS industrial sector expert Rafaelita Aldaba, has been subdued as shown by low levels of labor productivity and value-added contribution to manufacturing. Various challenges have hobbled the growth of small enterprises, resulting in a “hollow middle” characterized by weak backward linkages between large firms and small suppliers. Small and medium enterprises (SMEs) have also failed to penetrate the lucrative export markets.

SMEs can be a potent force for economic development if the right policies are in place to increase their competitiveness and thus allow them to “latch on” to regional production networks that have been a source of tremendous growth for East Asian economies in recent years. Research by PIDS has pointed the way forward for SME development, which hinges on a new industrial policy that will rebuild the capacity of the sector and deepen the linkages between large and small firms. In 2013, PIDS was tapped by the Department of Trade and Industry-Board of Investments to lead in the formulation of a comprehensive industrial roadmap that will facilitate the integration of different industries, including SMEs, and transform manufacturing into a major source of growth and employment.

The experience of countries that have been successful in SME development could also prove useful. PIDS President Gilbert Llanto cites policies and practical programs to enhance entrepreneurship and SMEs in Taiwan and Korea, with a common strategy of providing a nurturing environment for start-ups and existing SMEs and to make it easy for small and medium entrepreneurs to conduct their businesses. The best way to go, he says, is by providing support to SMEs to enable them to become innovative and competitive and commercialize new ideas, innovations, and new technologies.

You may access these and other PIDS studies on SMEs as well as industrial policy, industry roadmaps, firm innovation, and manufacturing sector competitiveness from the SocioEconomic Research Portal for the Philippines . Simply type the relevant keywords in our Search box.

• ASEAN Economic Community 2015 SME Development: Narrowing Development Gap Measure
• Supporting innovative small and medium enterprises: new ideas from Taiwan and Korea
• Small and Medium Enterprises' (SMEs) Access to Finance: Philippines
• Results of the 2009 Survey of Innovation Activities (SIA)
• Do FDI inflows have positive spillover effects? The case of the Philippine manufacturing industry
• Why a new industrial policy for the Philippines is critical
• Surviving Trade Liberalization in Philippine Manufacturing
• Integrating SMEs into the East Asian Region: Philippines

NEW PUBLICATIONS

PN 2014-02: Using the Social Rate of Discount in Evaluating Public Investments in the Philippines
by Erlinda M. Medalla

What discount rate to use in evaluating public investments has been a subject of long and intense debate. Varying views come from both theory and practice. The common practice is to use a range of estimates and perform a sensitivity analysis. But behind the numbers and proposed methodologies are unresolved questions and, to some degree, unsettled debate on what should be the social rate of discount. This Policy Note puts forward some suggestions on the "appropriate" social rate of discount for use in benefit-cost analysis of public investments in the Philippines. Click here for the full article

PN 2014-01: How Should We Move Forward in Customs Brokerage and Trade Facilitation?
by Gilberto M. Llanto, Adoracion M. Navarro, Keith C. Detros, and Ma. Kristina P. Ortiz

There are now efforts to modernize customs administration, which will partly affect the customs brokerage profession in the country. The proposed Customs and Tariff Modernization Act is facing resistance from organized customs brokers as the proposed law entails some changes that could adversely affect their role in customs administration.

This Policy Note examines the rarely explored customs brokerage activity in the Philippines and its role in facilitating trade given the ongoing push to modernize customs administration. It gives a brief analysis of how the customs brokerage profession is being regulated and synthesizes insights on opposing views on the importance of customs brokers in trade facilitation. The analysis is important and timely given the purported threat to the profession of the current effort to modernize customs administration in the country. Click here for the full article

DP 2014-10: Industry-Academe Collaboration for Research and Development
by Reynaldo B. Vea

Four forms of industry-academe linkage activities involve the sharing of economic value arising out of the generation of intellectual property: collaborative research and development (R&D), commissioned research, technology licensing, and the creation of spin-off companies. The Philippines is still in an emergent stage in all these forms. It has concerns that are the same as or similar to those of some other developing ASEAN countries. This paper recommends the implementation of a massive science and technology manpower-building program employing the existing systems of science high schools and public and private higher education institutions (HEIs), the creation of a university of science and technology if total current HEI capacity proves inadequate, and the transformation of some existing public universities into research universities. With an overall improvement in R&D capability, R&D collaboration and technology commercialization will also be enhanced. Click here for the full article

DP 2014-09: Assessment of Student Financial Assistance Programs (StuFAP) Policies, Procedures, and Control Mechanisms
by Riza Halili

This study examines the existing design and processes of student grants and loans and identifies the strengths and weaknesses on the control mechanism of student grants. A look into the present procedures and control mechanisms of policies concerning scholarships and grants-in-aid (GIAs) is an imperative measure when seeking to reform the delivery of higher education in the country. This can shed light on the reasons why the administration of a public good is efficient or inefficient. Though, the funds for these scholarship programs and grants are expended in the spirit of charity and altruism for the poor and deserving, they are nonetheless from the government and thus, from the taxpayers` pockets. This makes scholarship funds and other subsidies no different from ordinary government procurement that should be expended in a transparent, accountable, and cost-efficient manner ensuring that every centavo is going where it should. Click here for the full article

DP 2014-08: Environmental Aspects of a Potential Philippines-European Union Free Trade Agreement
by Antonio G.M. La Vina, Lai-Lynn Barcenas, Carla Lesaca, and Liezel Bobadilla

This paper focuses on the environmental aspects of a potential Philippines-European Union Free Trade Agreement (PH-EU FTA). Potential environmental issues in the negotiation of such an FTA (if at all undertaken) are identified to better prepare the Philippine negotiating panel and equip them with information and analysis to make well-informed positions on such issues. It looks at the interaction between the multilateral trade regime--the World Trade Organization (WTO) principally--and multilateral environmental agreements, reviews the Philippine approach to environment-related trade measures, and looks at Philippine practice and implementation of environmental agreements from a trade perspective. EU policies on trade, environment, and development are also discussed to anticipate what could be EU positions during the FTA negotiations with the Philippines. Click here for the full article

DP 2014-07: Enhancing Supply Chain Connectivity and Competitiveness of ASEAN Agricultural Products: Identifying Choke Points and Opportunities for Improvement
by Roehlano M. Briones and Danilo C. Israel

This study examines “choke points” in the supply chain of two selected commodity groups that are of interest to the ASEAN region; within the HS15 group the study focuses on crude coconut oil (CNO); for HS03 the study covers fish and crustacean, mollusks, and other aquatic invertebrates (HS 03). For CNO, no major choke points have been identified from mill site to export stages; cost and delay factors can be found at the farm to mill stage, namely low farm productivity, poor postharvest practices (leading to low quality of copra), and inefficiencies in marketing to the mill. Meanwhile for fisheries, several choke points have been identified, namely: i) domestic road conditions (quality, vehicle capacity, quantity); ii) interisland shipping (high cost, inadequate service); iii) conditions in some ports (inadequate; a weak link in the cold chain); iv) compliance with SPS regulations; and v) certified laboratories (inadequate number). The study recommends specific types of road investments, competition policy in domestic shipping (both CNO and fisheries), industry restructuring in the case of coconut, and SPS measures in the case of fisheries. Click here for the full article

DP 2014-06: Disasters, Poverty, and Coping Strategies: The Framework and Empirical Evidence from Micro/Household Data – Philippine Case
by Danilo C. Israel and Roehlano M. Briones

This study analyzes the interactions between natural disasters and household poverty and discusses the coping strategies used by households in response to natural disasters in the Philippines. It used data from the 2011 CBMS Household Profile Survey for Pasay City, Metro Manila and results of relevant past studies. The study found that a) there are existing analytical frameworks for the study of the interactions between natural disasters, household poverty, and household coping strategies; b) some empirical studies have been done in the Philippines analyzing the aforementioned interactions; c) relevant past studies generally point to the negative effect of natural disasters on household income and subsequently on household poverty; and d) past studies also showed that households practice several coping mechanisms to address the effects of natural disasters. Click here for the full article

DP 2014-05: Prospects for a Philippines-European Union Free Trade Agreement: Implications for Agriculture
by Roehlano M. Briones and Ivory Myka R. Galang

This study examines the impact of a potential Philippines-European Union (EU) free trade agreement (FTA) on the agricultural sector. Static analysis indicates that potential gains to the agricultural sector of the Philippines are limited, primarily owing to the low size of initial agricultural trade with EU (compared to other trading partners), as well as moderate to low tariff and other trade barriers to EU products entering the country. CGE analysis confirms that the overall impact of bilateral tariff elimination leads to an overall increase in agricultural output, accompanied by a decline in price; hence, there is an increase in consumption of agricultural products. Impact on poverty is likewise positive, with improvements biased to the poorer households. Click here for the full article

DP 2014-04: An Analysis of the Philippine Offensive and Defensive Interests in the Non-agricultural Sector: Inputs to the Philippines-European Union Free Trade Agreement
by George N. Manzano

In drawing up the negotiating stance of the Philippines in light of the Philippines-European Union (PH-EU) free trade agreement (FTA), it is important to articulate its offensive and defensive interests. Indications of the offensive and defensive interests can be gleaned from standard measures of competitiveness as well as complementarities of the partners. However, in operational terms, negotiators would require analysis that is carried out at more specific tariff levels. This paper proposes the framework to generate different offensive and defensive lists of commodities in the non-agricultural sector as input to the Philippine negotiators. Because the criteria that is used in generating the offensive and defensive lists is purely economic in nature, the negotiators are expected to weigh in the political and non-economic criteria to determine the final lists for negotiations in the PH-EU FTA. Click here for the full article

DP 2014-03: The Potential Impacts of a Free Trade Agreement with the European Union on the Philippine Fisheries Sector
by Danilo C. Israel

This study assesses the likely economic, distributional, and fisheries resource impacts of a potential free trade agreement (FTA) between the Philippines and European Union (EU) on the fisheries sector of the former. The study used secondary data from institutional sources and results and findings of past studies. Among others, the study found that a) the elimination of tariffs will likely increase fisheries outputs and exports as well as help reduce poverty in the fisheries sector and the general population; b) the elimination of tariffs will likely diversify the currently limited country destinations and number of exported fisheries products of the Philippines to the EU; c) other than tariffs, there are nontariff measures that significantly impede freer flow of fisheries products from the Philippines to the EU that need to be considered; d) some participants in the Philippine fisheries sector will gain from an FTA while others will lose but the net benefits to the sector and economy is not known; and e) increase in fisheries exports due to the FTA will likely worsen fisheries resource overexploitation although the inflow of cheaper imported fish will tend to reduce the overexploitation. Click here for the full article

DP 2014-02: Growth and Redistribution: Is There ‘Trickle Down’ Effect in the Philippines?
by Danileen Kristel C. Parel

This paper aims to explore the determinants of household income and expenditure growth, and assess whether the poor are benefiting from economic development. Using regression analysis, five factors were examined: (1) location of the household, (2) access to infrastructure, (3) changes in rice prices, (4) peace situation, and (5) initial household endowments. The most important finding is that impacts of the five factors vary significantly across households belonging to different income groups--the rich benefit more than the poor. This calls for an effective policy intervention in targeting the poor. Click here for the full article

DP 2014-01: Financing Infrastructure in the Philippines: Fiscal Landscape and Resources Mobilization
by Adoracion M. Navarro and Gilberto M. Llanto

This study assesses the sources and levels of infrastructure financing in the Philippines for the last five years (2008-2012). The mapping of fiscal resources showed that there had been underinvestment in infrastructure. To illustrate, in 2008-2012, public infrastructure spending as a share of GDP ranged between a low of 1.40 percent to a high of 2.09 percent--a far cry from the target 5 percent of GDP over the medium term. The result of many years of infrastructure underinvestment is woefully manifested in the Philippines` place in quality-of-infrastructure ranking among ASEAN member-states; it is currently second to the bottom.

Recently, there had been significant improvements in the government`s fiscal position that augur well for more substantial infrastructure spending in the future. New regional sources of financing, the liquid domestic capital market, and a low interest-rate environment also present opportunities for investing in infrastructure by both the government and the private sector. However, it is not only the constrained availability of financial resources that could restrain infrastructure investments but also institutional weaknesses and, therefore, the government must firmly commit to reform policies and strengthen institutions. Click here for the full article

PRESS RELEASES

PIDS and DAP collaborate for research

Government institutions seal partnership toward strong policy research.

Philippine Institute for Development Studies (PIDS) signed a memorandum of understanding with the Development Academy of the Philippines (DAP) for research collaboration and knowledge sharing. PIDS President Gilberto Llanto and DAP President Antonio Kalaw Jr. signed the MOU for PIDS and DAP, respectively. Under the agreement, PIDS and DAP shall cooperate to identify opportunities for research collaboration; implement seminars, conferences, and workshops; develop cooperative mechanisms and other forms of cooperation; and identify other forms of cooperation for research. Read more

Phl medical tourism needs a boost

The Philippines needs to boost its medical tourism industry to get a bigger share in the regional medical tourism market. 

Oscar Picazo, senior research consultant for health of state think-tank Philippine Institute for Development Studies (PIDS), underscores in a policy note that the Philippine medical tourism continues to get a miniscule share of the medical tourism market even if it offers better prices in surgical procedures than its Asian competitors.  

According to Picazo, the Philippines is among the top 15 medical tourism destinations in 2010. The country is ranked 11th on medical tourism which has 80,000 medical tourists but tails behind Thailand (1st), Singapore (2nd), and Malaysia (5th). Read more

PIDS resource expert tackles mining issues in Palawan forum

"The voice of the people is the voice of God."

For a natural resource expert of the Philippine Institute for Development Studies (PIDS), the people of Palawan, particularly those directly affected, should have a huge say on whether mining activities should continue in what is considered the country's last frontier.

Researchers should investigate whether majority of the people of Palawan and majority of the people in the provinces' mining areas are really against mining, said Dr. Danilo Israel, PIDS senior research fellow, during the seminar-forum titled "The Philippine Mining and Minerals Industry: Development Issues and Recommendation for Research" last January 27 at the Palawan State University (PSU) in Puerto Princesa City. Read more

Palawan hosts 23rd PIDS Corner

As part of efforts to promote evidence-based policymaking, state think tank Philippine Institute for Development Studies (PIDS) opened its 23rd PIDS Corner at the main library of the Palawan State University (PSU) in Puerto Princesa City, Palawan last January 27.

In his opening remarks, PIDS President Dr. Gilbert Llanto highlighted the significance of evidence-based studies, not just in economics, but in different aspects of development as well. Partnerships with state universities such as the PSU "make these (studies) accessible, to most, if not to all, and [allow] us to be able to not only disseminate our policy studies but also interact with the academic community in the provinces." Read more

PIDS, one of the best think tanks in ASEAN

Government think tank Philippine Institute for Development Studies (PIDS) is the top social policy think tank in Southeast Asia and one of the best in the world, according to the 2013 Global Go Think Tank Report released by the Think Tanks and Civil Societies Program (TTCSP) of the University of Pennsylvania.

The Global Go To Think Tank Report is a comprehensive ranking of the world`s top think tanks and acknowledges the important contributions and emerging global trends of think tanks worldwide. For this year, 6,826 think tanks from 182 countries were appraised. PIDS was ranked 37th among the top 50 social policy think tanks in the world. It surpassed the Institute of Southeast Asian Studies (ISEAS) in Singapore that was ranked 41st. PIDS also managed to improve its position from 40th place in last year`s report. Read more

SEMINAR UPDATES

• Pulong Saliksikan on Navigating in uncharted waters: advanced and emerging economies after the U.S. Feds tapering
  Date: 18 February 2014
  Time: 2:00 p.m. - 4:00 p.m.
  Venue: Carlos P. Romulo Hall, NEDA sa Makati Bldg., Legaspi Village, Makati City
  Presenter: Dr. Dan Steinbock
  
  
• DOH-PIDS Health Systems Research Program: Knowledge-Sharing Seminar 1
  Date: 13 February 2014
  Time: 1:30 p.m. - 4:00 p.m.
  Venue: Carlos P. Romulo Hall, NEDA sa Makati Bldg., Legaspi Village, Makati City
  Co-sponsors: Department of Health (DOH) and the Philippine Health Insurance Corporation (PHIC)
  
  
  
• Pulong Saliksikan on Preparing the Philippine Education System for Post-2015 Challenges
  Date: 29 January 2014
  Time: 2:00 a.m. - 4:00 p.m.
  Venue: Carlos P. Romulo Hall, NEDA sa Makati Bldg., Legaspi Village, Makati City
  Presenter: Dr. Elizabeth King, Director of Education and Acting Vice President, Human Development Network of the World Bank
  
  
• Inauguration of the PIDS Corner in Palawan State University
  Date: 27 January 2014
  Time: 10:30 a.m.- 12:00 noon
  Venue: Main Library, Palawan State University, Puerto Princesa City, Palawan
  Co-sponsor: Palawan State University
  
  
• The Philippine Mining and Minerals Industry: Development Issues and Recommendations for Research
  Date: 27 January 2014
  Time: 1:00 p.m. - 4:30 p.m.
  Venue: Palawan State University, Puerto Princesa City, Palawan
  Resource speaker: Dr. Danilo C. Israel, PIDS senior research fellow
  Co-sponsor: Palawan State University
  
  

DATABASE UPDATES

Gross Domestic Product and Gross National Income, Growth Rates, 2012-2013

According to the National Statistical Coordination Board (NSCB), despite the devastation brought about by the series of natural disasters that hit the country in the last quarter of 2013, the country’s gross domestic product posted a growth of 6.5 percent in the fourth quarter of 2013 mainly due to the Service sector, particularly, trade and real estate and renting and business activities.

On an annual basis, GDP grew by 7.2 percent in 2013 from 6.8 percent in 2012. Likewise, gross national income expanded by 7.5 percent in 2013 from 6.5 percent in 2012.

Source: National Statistical Coordination Board (NSCB)

For more details, please refer to this link: http://econdb.pids.gov.ph/tablelists/table/407

Inflation Rate

The National Statistics Office (NSO) reported that the country's year-on-year inflation rate went up further to 4.1 percent in December, from 3.3 percent in November 2013 as all commodity groups recorded higher annual increases except communication; recreation and culture; and education. Meanwhile, the annual average headline inflation rate for the year 2013 went down to 3.0 percent from 3.2 percent in 2012.

For the time-series data on year-on-year inflation rate, please refer to this link:
http://econdb.pids.gov.ph/tablelists/table/568

Source:National Statistics Office

Exchange Rate

The monthly average peso-dollar exchange rate continued to went up to Php44.927 in January 2014, from Php44.104 in December 2013.

For the time-series data on the monthly average peso-dollar exchange rate, please refer to this link:
http://econdb.pids.gov.ph/tablelists/table/49

Source: Bangko Sentral ng Pilipinas

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