Prior to Labor Day, the Department of Trade and Industry (DTI) announced the creation of a new development plan for Filipino micro, small, and medium enterprises (MSMEs), the fourth of its kind since 2004.
According to DTI Secretary Alfredo E. Pascual, the new MSME Development Plan 2023-2028 promises to highlight the necessary tools to survive the fourth industrial revolution -- artificial intelligence (AI) and technological innovation -- and lays out ways the government can help MSMEs develop in the digital age.
"The new MSME Development Plan is a testament to our government's commitment to fostering a dynamic business environment that nurtures innovation and inclusivity. By aligning our efforts across all levels of government and integrating digital technologies, we aim to build a stronger, more resilient MSME sector that is well-equipped to face the challenges of today and tomorrow," said Pascual as he presented the new plan to President Ferdinand Marcos Jr.
It aims to utilize the power of AI to assist MSMEs acquire financial loans and assistance from the government and other private finance partner firms.
Moreover, it seeks to institutionalize funding and training support to grow these enterprises since 99.59 percent of businesses in the Philippines are MSMEs, covering 65.1 percent of the country's present workforce.
With this renewed spotlight on digitalization, it bears recalling the three previous versions of the MSME Development, spanning 20 years to this day.
2004 - 2010
The first ever SME Development Plan was made back in 2004 under the helm of then DTI Secretary Cesar Purisima at the time of former President Gloria Macapagal-Arroyo.
The framework was developed in line with Republic Act 6977 or the "Magna Carta for MSMEs," enacted in 1991.
Even in 2001, according to the plan, MSMEs made up 99.7 percent of business firms in the Philippines, 92 percent of which were micro, and 7.6 percent were small businesses. 69.1 percent of workers in all establishments were also recorded in the MSME sector (38 percent in micro, 24 percent in small, and 7.1 percent in medium).
Just years after the turn of the century, the government's vision for the MSMEs continued to resonate -- "create globally competitive SMEs in the new industrial economic environment," laying the groundwork for the plan's future versions.
The plan aimed to grow MSME's sector gross value added contribution to 40 percent of the aggregate by 2010. In the 2000s, MSME contributions were around 20 to nearly 30 percent, with large enterprises having the dominant share. It also wanted to reach 3.4 million (six to 10 million) new jobs created by 2010.
According to the DTI's 2011-2016 report, the 2004-2010 plan was able to generate 6.5 million direct and indirect jobs; provide P367.39 billion in loans to over six million requests from MSMEs, and generate P20.12 billion domestic MSME sales and $1.8 billion total MSME exports.
2011-2016
The second iteration of the plan was made in 2011. By then, the presence of MSMEs in the market remain large at 99.6 percent, driven by micro businesses, and 61.2 percent of Filipinos employed.
Notably, the total value added of the MSME sector to the economy increased to 35.7 percent, not quite hitting the 40 percent target, but was an improvement from the 20 percent.
It's gross value added goal for the 2011-2016 plan remains at 40 percent, however, it now had a target for employment, seeking to generate at least two million jobs by 2016.
Measures to help MSMEs concentrated on establishing an enabling business environment for them (particularly in costs of businesses), access to finance, access to markets, and productivity and efficiency. While these are similar goals, programs per category have expanded.
Sustainable goals, gender mainstreaming, climate solutions for the private sector are stressed more in the framework.
2017-2022
Finally, the third version of the plan was introduced in 2017, encompassing more comprehensive goals to reach until 2022, featuring a seven-point action agenda for MSME development -- Mindset Change, Mastery, Mentoring, Money, Machine, Market Access and Models of Negosyo.
The plan was refined, categorized into three main branches: business environment, business capacity, and business opportunities with the following strategic goals:
"business climate; improved access to finance; enhanced management and labor capacities; improved access to technology and innovation; and, improved access to market."
In 2017, there were 920,677 enterprises in the MSME sector, with a total employment of almost five million. There were 43,000 MSMEs recorded in the year alone.
In 2020, the Covid-19 pandemic severely affected MSMEs, with two years of enforced quarantine measures, leaving the economy to grind to a halt. According to DTI's Impact Assessment Survey, around 27 percent of MSMEs completely stopped their operations amid the pandemic in June 2020, while 52 percent only halted partial operations.
By December 2021, 4.3 percent of MSMEs stopped completely, 31.4 percent had partial operations, and 64.3 percent did not operate at all; around the time pandemic protocols were easing.
Fast forward to end of 2021, total number of MSMEs in the country amounted to 1.1 million, making up 99.58 percent of domestic businesses, and 5.4 million (64.67 percent) employees were in the sector.
"The MSMED Plan has brought more MSME programs and policies to focus on bringing back the vibrant entrepreneurial journey of many Filipinos and adapting to the new normal future," read the report.
Old issues, same goals
As the plans progress, the demand for more advanced technology solutions and utilization increase and become clearer.
Over the course of the years, the government has cited the same issues on fierce competition from export markets, small domestic markets, need for imported parts/materials, as well as lack of support in funding and research and development (R&D), which all still linger today.
However, the goals also remain the same -- "competitive, innovative, and resilient" MSMEs.