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Speech of at the Rotary Club Visayas and Mindanao District Conference
March 9, 2012
Matina, Davao City

Thanks to “Ony” Partoza Jr., DISCON 2012 Chairman, to “Nonoy” Villa-Abrille, District Governor of Rotary 3860, fellow Rotarians from the Visayas and Mindanao, my kababayans from my hometown of Davao, maayong hapon. Thank you for inviting me to this conference. It’s great to be here.

You know, I have always had a close affinity with Rotarians. My dad was a Rotarian here in Davao and my uncle was President of the Rotary Club of Davao in 1985-1986. But more than that, I have always admired the Rotarian’s vocation for service. You can probably call me a Rotarian at heart.

Before I proceed, let m first of all greet all the ladies here a belated Happy Women’s Day. Mabuhay ang ating mga kababaihan! At tamang-tama, nandito tayo ngayon sa Philippine Women’s College. Tamang-tama.

Since its Women’s month, here’s a pick up line for the ladies out there. Rotarian ka ba? Bakit? Kasi you make my world turn.

Just to be clear, I am not here to speak about the Corona impeachment, thank God. Change channel muna tayo. I am here to speak on “Small Business Enterprises” — not just any enterprise or business, but SMALL business.

The term, of course, is a relative modifier. Small, compared to other businesses. Small, in relation to our economy. Small, in relation to the world. But it can be BIG, depending on how your look at it. “One small step for man, one giant leap for mankind!,” sabi nga ni Niel Armstrong upon reaching the moon. Yung nanotechnology, napakaliit din niyan, pero malaki ang gamit mula cellphone hanggang medical operation.

Do you know what the dominant life form on earth is? No, it’s not man or the human species. It’s bacteria. Bacterial ang dominant form of life dito sa planeta. At kahit maliit na virus, pwedeng patumbahin ang malaking tao. “A small leak can sink a great ship” — sabi na ni Benjamin Franklin.

Kaya’t huwag nating ismolin ang small business. The fact is, in business, small is big. Sabi nga ng mga Chinoy, liit gastos, laki kita. Pag laki gastos, liit kita. That’s the rationale for small business – liit gastos, laki kita.

And since we’re all Rotarians here, I’ll apply the 4-Way Test in discussing the situation of our small business enterprises.

Ang sabi natin: Of the things we think, say or do
Is it the TRUTH?
Is it FAIR to all concerned?
Will it build GOODWILL and BETTER FRIENDSHIPS?
Will it be BENEFICIAL to all concerned?

I might as well ask: ano ang true and fair sa small business, may goodwill bang nabubuo dito, at beneficial ba ito?

Una, ano ang truth sa mga micro, small and medium enterprises (MSMEs)?

Kung bacterial ang dominant mode of life sa mundo, ang ating MSMEs ang dominant mode of business sa Pilipinas. This has been the case for a long time. MSMEs are important for the economy – comprising 99.6% of total establishments in the country, providing six out of ten jobs, and producing 35.7% of all value added.

We can even see a trend of “micronization” of the economy. In fact, nine out of ten MSMEs are micro, with a capital of three million and below. Instead of small and medium enterprises leveling up to medium and large, what we have is a hollow middle, at umaatras pa sa micro enterprises. It’s the tingi tingi or sachet phenomenon we see all around us.

Thus, what was formerly known as SMEs we now call the MSMEs. Sila na ang pinakamarami.

At dahil nga malaking bahagi ng mga negosyo ngayon ay MSMEs, kailangan silang suportahan. Next to our farms, it is our MSMEs that is the backbone of our economy. Not the BPOs, not tourism, certainly not large-scale industry.

Which brings me to my second point, fair ba tayo sa small business?

We have the highest electricity rates in Asia. Siyam na beses nang tumaas ang local oil prices, mas mahal pa sa malalayong probinsya. And the taxes and fees. Imagine, we are taxing small businesses more than big mining corporations. What else? Lack of credit, high transportation costs, rentals, shipping infrastructure, lack of information and market access, low productivity and intense competition from cheap imports – maraming usapin ang hindi fair para sa maliliit na negosyo.

Kung ‘yung malalaking negosyo, nagrereklamo na, ‘yun pa kayang maliliit? It’s not fun doing business in the Philippines if you’re a small player.

I remember a lament told to me by a small entrepreneur in Cebu. Nanalo siya ng P20,000 sa isang competition for small business start ups. Ito sana yung pang kapital niya sa kanyang winning business plan. Pagpunta niya sa city hall, yung bayad pa lang sa mayors permit P15,000 na. Ang sabi niya, mayor’s permit pa lang, ubos na ang kapital ko. Kung pwede lang daw isasauli na lang niya yung prize niya. Its so unfair, no?

Pero actually, may fair din naman sa mga small entrepreneur – ang trade fair. Oo, marami tayong tiyangge.

But seriously, the MSMEs who prop up the local economy, just like pur OFWs, are often praised but not supported or protected. Ang DTI nga sa Southern Mindanao region, sa akin pa nagpapatulong ilakad ang pag-establish ng DTI office sa Compostela. Mismong sa loob ng gobyerno, kulang ang suporta. Like a small leak, this can indeed sink a big ship.

Last year, the Aquino administration came up with its MSME Development Plan (2011 to 2016) which declared the MSME sector as a “critical driver for the country’s economic growth.” That’s fine. Kaya lang, kapag kaharap ang mining sector, sasabihin ng gobyerno, sila ang susi sa pag-unlad. Ganoon din kapag kaharap ang Business Process Outsourcing o BPO industry o kapag foreign investors ang kaharap. Sila raw ang magpapaunlad, sila ang prayoridad, sila ang tututukan. Ano ba talaga, kuya?

Again, what is the truth? Even the IMF-World Bank says our growth is consumption-led – fueled mainly by OFW remittances. Lumiliit ang manufacturing, bumababa ang agriculture, at matumal ang exports, traditional man tulad ng asukal o bago katulad ng electronics.

With the large and medium enterprises taking a downturn, and jobs in industry and agriculture being sacrificed due to unbridled free market competition and lack of government support, even the “isang-kahig-isang-tuka” types of livelihood is now considered an “enterprise”. “Entrepreneur” has become the new euphemism for unemployed persons who engage in informal livelihoods. O di ba? Bos, anong trabaho mo? Wala, entrepreneur. Ah, entrepreneur. Anong ginagawa mo? Eto, nagbebenta ng basahan sa kalsada. Huwag ka nang maghanap ng trabaho, mag entrepreneur ka na lang.

Pero ok lang yon. But then where is the fairness when there is no “level playing field?” Ang small entrepreneur hirap sa credit, mataas ang cost of business, pinag-iinitan ng BIR, at nalulunod sa mga imported at smuggled goods galing China o saan pa man. Marami ngang nagtatayo ng small at micro business. Pero marami rin ang nagfo-foldup after one or two years in operation. Nagiging panandalian lang.

This is why we really need to support our local enterprises, lalu na yung MSMEs. That is why I and a few like-minded advocates in the business sector have launched “Buy Pinoy, Build Pinoy” – a grassroots-based movement to actively promote the consumption of Filipino-made products as a patriotic duty and push for policies beneficial to local producers/entrepreneurs, leading to the establishment of integrated, world-class Filipino industries. Dapat tangkilikin natin ang sarili nating mga produkto at itaguyod ang sarili nating mga industriya para lumikha ng trabaho at kabuhayan para sa lahat. I hope the Rotary Club can join me in this advocacy.

As a first step, I have filed a bill declaring November of every year as Buy Pinoy, Build Pinoy month. In the works is a bill to further strengthen the preference for local goods and services in the government’s procurement program.

I will now proceed to the question of building goodwill and being beneficial to all concerned, the last two in our 4-Way Test.

While micro entrepreneurship is fine as a remedial, immediate response to unemployment, we cannot develop as a country of food carts, makeshift stalls and retail shops. Statistics will show, for example, that while large industries are very few, comprising less than 1% of total business establishments, they employ 40% of employed Filipinos and create 65% of the national income. In other words, while small is beautiful, big still matters the most.

What is lacking is the mechanism and strategy to ensure that our MSMEs are linked to the large industrial enterprises. Ito ang Japanese, Korean model – SMEs supplying the needs of large industries.

Ang problema sa Pilipinas, walang large industry na susuplayan ang MSMEs. That is why a great majority of MSMEs are in retailing rather than manufacturing. Kung meron mang big players, they are linked to a global supply chain and get their supplies and materials from China or some other country. Many do not exert the extra effort to link up and get their supplies locally. Eh kasi daw mahal, low quality at ma-hassle. Pero ang problema pa siguro, walang malinaw na industrial plan ang gobyerno to make it happen.

In fact, the thrust of government policy for MSMEs is to export. This is not sustainable in the long run as shown by the global recession we are now experiencing.

If we are serious about developing MSMEs, we should therefore pay serious attention to large industries as well and ensure that the whole dynamic between MSMEs and large industries happen in the Philippines. That is why we are still pushing hard for national industrialization – para may goodwill talaga at maging beneficial para sa lahat ang ekonomiya. In this regard, I am crafting a bill to create mechanisms for the building up of supply chains and linkages among MSMEs and large industries.

Talking about industrialization, do you know that for the longest time, our government hasn’t had any national industrial strategy or plan? The secretary of the DTI himself admitted this during the budget deliberations in Congress last August 2011, where he said that such a plan is still being drafted. Guess what, two weeks ago, or some seven months later, I asked about it in a Senate hearing and I was told they have now started discussions with other stakeholders. In other words, it took seven months for them just to talk to each other about it. Goodness gracious, at this rate, baka 2016 pa matapos ang plano, in time for the exit of the Aquino administration.

But don’t worry, all is not lost. Let me tell you a few things we have been doing in the Committee on SBED which I chair:

We are currently hearing bills amending the Baranggay Micro Business Enterprise Law. Some amendments include exempting micro businesses with a capital of P200,000 and below from all national and local taxes and fees for six years. It also aims to ensure clear mechanisms for easy, low-cost credit.

Congress recently approved a bill on micro development institutions which will set policy and regulations on non-stock, non-profit NGOs providing comprehensive micro-finance and other livelihood programs for the poor. This will improve the delivery of cheap credit and other services for micro-entrepreneurs. The said bill is now pending approval in the Senate.

We have ongoing hearings on a Credit Surety Fund Bill which aims to institutionalize the creation of provincial surety funds to guarantee collateral-free loans taken out by qualified MSMEs.
I recently filed a bill puting a cap on interest rates to 12% per annum as well as another bill to limit the increase in rental fees for small businesses.

On a wider scale, we are aiming to immediately reduce production costs by removing the VAT on oil and power. Iyan, immediately doable, ayaw lang gawin. In the long-term, our proposal is to replace the policy of oil deregulation with proactive and stricter regulation, including the buy-back of Petron, centralized procurement and price controls. The entire power industry also needs reforms that could lower electricity rates, like bringing back regulation in power generation, allowing Napocor to once again build power plants and changing the ERC’s rate setting formula.

These are just some of the things that could significantly reduce the cost of doing business, making it truthful, fair, good and beneficial for small business enterprises.

Ilan lang po ito sa mga panukala kong batas sa Lower House. Unfortunately it takes forever to get progressive legislation passed in Congress. I am now on my third and final term and yet so much more needs to be done. That is why I have decided to run for the Senate in order to continue my advocacy for small business in the Upper House. I hope my fellow Rotarians can support me in this leveling-up of our collective endeavor just as I have supported a number of Rotary Clubs in their projects and activities.

Alam n’yo po I am an unlikely senatorial candidate. Unlike the others, I don’t have a political pedigree. Hindi ako anak, asawa o kapatid ng senador. Hindi nama ako mayaman. In fact I am the second poorest member of the House. Mayaman lang ako sa dalawang bagay, sa prinsipyo at sa kaibigan. Eh sana po mula ngayon tratuhin n’yo na rin akong kaibigan.

Maraming salamat po at mabuhay kayong lahat!

2 thoughts on “The 4-Way Test for Small Business Enterprises

  1. Alam n’yo po I am an unlikely senatorial candidate. Unlike the others, I don’t have a political pedigree. Hindi ako anak, asawa o kapatid ng senador. Hindi nama ako mayaman. In fact I am the second poorest member of the House. Mayaman lang ako sa dalawang bagay, sa prinsipyo at sa kaibigan. Eh sana po mula ngayon tratuhin n’yo na rin akong kaibigan.

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