Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the Closing Ceremonies of the First National Small and Medium Enterprises Leaders’ Summit

[Delivered at Malacañang, Manila, June 9, 1995]

Promoting small and
medium enterprises

THE GOVERNMENT has long acknowledged that small and medium enterprises play a strategic role in generating employment, developing entrepreneurship, promoting technological change, and creating wealth in the country.

For one, small and medium enterprises compose more than 95 percent of all our business enterprises. The sector is so important that, within the last decade, extensive studies on the appropriate policy environment for the development of these enterprises have been conducted by both the Government and bilateral and multilateral donor agencies.

Landmark laws

These studies led to the approval by Government of two important legislative measures.

In 1989 the Magna Carta for countryside and barangay business enterprises, otherwise called “Kalakalan 20,” (Orbos Bill—Republic Act 6810)—was passed to assist rural industries with less than 20 workers through simplified registration procedures and various exemptions from taxation and labor regulations.

In 1991 the Magna Carta for small enterprises (Shahani Bill—Republic Act 6977) created the Small Enterprise Development Council to advise Government on the policy on small and medium enterprises. It was during the Ramos Administration when the implementing regulations for Republic Act 6977 were promulgated and the Small Business Guarantee and Finance Corporation (which I fondly refer to as “Small Buga”) was established to serve as a guarantee fund for easier credit to the poor, and provided for mandatory allocation of credit resources to small enterprises by the banking sector.

Although small and medium enterprises account for a huge portion of the business sector, they still play a minor role in international trade and investment. Export companies and foreign investment inflow and outflow remain dominated by large multinational companies.

Small and medium enterprises currently face a number of constraints for them to become major players. These include limited access to market intelligence relating to business opportunities; limited access to production inputs such as finance; difficulty in meeting product standard specifications; and social and cultural mores which discourage certain groups, such as women, to participate in business activities.

The need for SME development

Thus we need to devise programs to promote small and medium enterprises and speed up their development to enable them not only to become major regional players, particularly in the Asia-Pacific region, but also to compete on a global scale.

We should emphasize the importance of promoting small and medium enterprises in the international market by providing seed capital, tax incentives, start-up schemes and improved access to finance, as well as by enhancing their organizational and managerial capabilities.

In particular, we need programs that will accomplish the following:

1. Reduce and, as far as possible, eliminate administrative and unfair competitive barriers to market accessibility and distribution channels;

2. Improve accessibility to financial institutions providing credit, venture capital, leasing and insurance;

3. Promote and assist in the upgrading and adoption of appropriate technologies;

4. Enhance the small and medium enterprises’ organizational and managerial capability, as well as the skills necessary to efficiently and effectively operate their business;

5. Foster business partnership and strategic alliances.

This Administration has in fact made headway in improving financial accessibility to small and medium enterprises. From 1946 to 1992, banks lent P16.1 billion to small and medium enterprises, but from July 1992 to December 1994, banks lent out P51.67 billion to small enterprises.

The loans to small enterprises of P51.67 billion compose 13.06 percent of the loan portfolio of all lending institutions and exceed the mandatory allocation of 10 percent of total loan portfolio to small enterprises required under Republic Act 6977, or the Magna Carta for small enterprises.

By providing the proper atmosphere conducive to business and financing, this Administration took only two and a half years to surpass the total amount lent by the banks to small and medium enterprises in 46 years before 1992.

Strategic actions

I have been informed that this summit has thoroughly tackled these issues and has come up with some measures, labeled strategic actions for global competitiveness of small and medium enterprises, to respond to those concerns.

Further, the summit has articulated the wish for the greater participation of the private sector in the Small and Medium Development Council and for the establishment of the SME Grassroots Action Information Network System, or GAINS.

I am in full support of your objectives. Indeed, your aspirations, while ambitious, are realizable and feasible, if the Government and the private sector could coordinate their efforts more effectively toward their attainment.

You will recall that in the 1993 APEC Leaders’ Summit in Seattle, Washington, hosted by President Bill Clinton, I articulated, for the developing countries of Asia-Pacific, the need for the more advanced economies to transfer technology on small and medium enterprises to us who were lower down in the economic ladder.

That initiative is now a reality and that APEC center is here in the Philippines pursuant to the consensus of APEC leaders in Bogor, Indonesia, in November 1994. Early in 19951 broke ground at the APEC center in Los Baños within the U.P. College of Agriculture community, just 20 kilometers from the center of the CALABARZON.

This morning I signed Administrative Order 196, creating the preparatory committee leading to the establishment of the Asia-Pacific Economic Cooperation (APEC) Center for Technology Exchange and Training for Small and Medium Enterprises (CTET-SMES) and providing the initial organizational and budgetary requirements for this purpose.

Keeping to the path of progress

I have also declared 1996 as the “Small and Medium Enterprise Development Year” with focus on the theme “Renewing the Spirit of Philippine Enterprise.”

I hereby direct the chairmen of Cabinet Clusters “A” and “B” to jointly review the proposals of institutional funding and policy support for small and medium enterprises presented in this summit, and to coordinate with Trade and Industry Secretary Rizalino Navarro about these.

I have also directed for Cabinet Cluster action the involvement of the Department of Education, Culture and Sports in the integration of entrepreneurship in the department curricula. I assure you that after the Cabinet Cluster discussions and my review, the issues will be comprehensively acted upon before the 21st of this month.

This Administration will take all steps to ensure that not only the large corporations are given the opportunity to flourish and compete on a global scale, but most especially the micro, cottage, small and medium enterprises among us.

But this I ask of the private sector: Let our country have a workforce that is ever raring to push itself to maximum productivity. Provide your workers with skills upgrading mechanisms and monitoring systems that will improve their output while we, together, put in place policies and networks for higher product quality and greater labor productivity.

If our country is to move decisively forward, it will be largely because of groups like you who are more than willing to extend time and effort to further the growth of the small-business men.

We have to keep to this path of sustained progress. Only by so doing can we move forward purposefully as one people and one nation, seething with the power of an economic dragon.

Let us all become a competitive Philippine team—ready, willing and able to meet the demands of the new world order and the twenty-first century.