SME Initiatives
Business Options
Manila Bulletin

September 06, 2001

The country’s attention may have been fixated on the attempts by both houses of Congress in the past weeks to investigate alleged wide-scale illegal activities by some entities. We find it encouraging that there are initiatives that focus on the other important legislative function of looking for ways and means to improve small and medium scale businesses across the country.

We have been recently been furnished some of these initiatives at the Senate end. Surveying the bills as a package of related legislative measures for the SME sector, our impression is that take together, these initiatives attempt to address the key gaps in the entire system of small business assistance.

Support for Easy Entry of Small Business into the “Formal Sector”. A number of the bills filed seek to enhance access by enterprises in the lower SME scales to credit and business technologies more readily available to “mainstream” businesses. These bills complement and enhance the KALAKALAN 20 LAW, encouraging the registration of small businesses in the countryside through tax incentives and relief from government rules and regulations that inhibit the start-up and expansion of SMEs in the provinces.

The minimum wage law is one particular area of concern being addressed. Furthermore, registration under these proposed laws grant even the smaller SME units with juridical personality which is an important element in their access to credit, business technology and other support from the formal sources, including government and multilateral programs.

Such bills seeking to liberalize the requirements for setting up and expanding small business include SB 10 (Sen. Flavier), SB 672 (Sen. Leviste-Legarda), SB 224 (Sen. S. Osmeņa III), SB 1320 (Sen. Recto) and SB 936 (Sen. Villar).

Other bills go further by providing for a value-added services such as business documentation, information, networks and other forms of support. SB 734 (Sen, Leviste-Leagrda), SB 1164 (Sen. Magsaysay, Jr.) SB 219 (Sen. S. Osmeņa III) and SB 935 (Sen. Villar) put together propose the establishment of Business One Stop shop (BOSS) Centers that will provide these services across the country. For sustainability, these centers are proposed to be allowed to charge fees to SME clients. BOSS Centers may be private or public entities.

Access to Technology. Given the reality of globalization, SME competitiveness should be leapfrogged. There should be much easier and cheaper access to technology, equipment and infrastructure and information and marketing systems.

SB 1321 (Sen. Recto) proposes to provide such access through the establishment of small Business Incubators (SBIs) which like the BOSS Centers may be either public or private entities authorized to charge fees for services and facilities made available to SMEs in their respective areas. Business Incubation Centers (BICs) shall provide the site, facilities, and technical and secretariat support among others to locators.

Another option is provided by SB 938 (Sen. Villar) with the proposed expansion and strengthening of the Cottage Industry Technology Center as head agency to provide assistance to and address the production, technology and skills formation needs of micro and cottage industries. Additional services laid down include equipment  fabrication and technology transfer.

Alternative Credit and Capital Sources for small Business. Given the Substantial experience in developing economies and across the Asian region, the proposed Small and Medium Enterprises Securities Exchange (SMEX) Act of 2001 is provocative as it offers an option for the equity needs of SMEs in the growth stage. Related proposals include SB 280 (Sen. S. Osmeņa III) and SB 774 (Sen. Legarda-Leviste) which aim to create the SMEX as an institution which will enable SMEs to tap the country’s capital market in generating equity funds for their financial requirements. At the start, the more established enterprises, probably medium-scale units, are expected to benefit from the proposed system.

  All these measures give us optimism that we will continue to see substantial work done in our Congress to address important microeconomic issues that affect a great  number of our people. We hope that the efforts put in developing these bills eventually lead to laws that will truly make a difference for the various players in the SME community.

  Viewed comprehensively, it becomes apparent that the various measures proposing more liberalized and efficient entry to small businesses especially in the provinces, the BOSS Centers and the Business Incubation Centers can be integrated into a single package. An important consideration is how to keep these centers sustainable and able to provide systematic and long-term relationships with SMEs, with the vision of a better-equipped, more competitive business sector.

  We expect debate on the many areas touched by the proposed bills – on the incentives, particularly the sensitive tax and wage issues and the feasibility of the proposed additional exchange for SMEs, among others. As these bills are opened up to wider scrutiny, we see a lot of room for improvement. In the end, we hope that the debate on these bills will lead to functional and critical laws that will make a difference for our country’s progress.

  For now, however, we congratulate our distinguished Senators for their initiatives and look forward to other similar measures. We should encourage them to continue exploring  avenues to help our battered SME sector. A robust healthy middle class, most of whom will either run or be employed by our SMEs, is what will ignite our economic development and growth.

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