The newly installed Department of Trade and Industry (DTI) Secretary Alfredo Pascual announced that among his priorities in the next six years is to help micro, small, and medium enterprises (MSMEs), especially in the expansion of their markets. The way the DTI aims to help MSMEs is via digitalization, which includes providing MSMEs with an e-commerce platform. The digital platform will link local MSMEs online for free and enable them to participate in a bigger market and revenue stream, as well as support them in their business operations such as the record-keeping of business transactions, improve accounting, and even re-branding.

If this digitalization is carried out, it will surely be a big boost to MSMEs.

A roughly similar program has been identified by a team of consultants together with stakeholders as a key starting point to link SMEs in Central Luzon with large local and foreign companies operating in economic zones and enable them to benefit more from the industrial progress happening in the region.

Digitalization is the missing link for local companies to benefit more from industrial progress

Aware of their limitations, many SMEs in Central Luzon mainly seek to provide supplies and services to support the operations of the offices and workers of the locators in ecozones. This includes selling office supplies, food, furniture, and furnishings, and the provision of services such as building construction and repair, transport, packaging, and logistics. Only a few have the desire to supply production inputs or engage in subcontracting to the large corporations inside the industrial enclaves. Since the volume requirements, high quality standards, and need for prices to be competitive are challenges the SMEs could hardly cope with.

From Narda’s. A stall in the IMC also sells traditional wear from the Cordilleras. Photo credit: Rappler.com

The SMEs would rather tap the domestic market than export or provide inputs to export-oriented industries. Only as they grow and achieve higher scale of operations do their capacity to export rise. This is evident in some firms in the region, mostly manufacturers of processed meat products and other processed food. They have become large enterprises with surplus production that enabled them to succeed in selling abroad.

But for most SMEs, the goal is capturing the demand of major companies in economic zones for goods and services incidental to their operations, not delivering raw materials or intermediate goods in the manufacture of their export products. 

They believe digitalization – the establishment of a B2B platform – can facilitate more of these transactions. Our team recommended this as a project to be funded by DTI. This, together with the formulation of a roadmap for linking SMEs with multinational and large local companies as suppliers, service providers or subcontractors, as well as policy reforms particularly on taxation and accreditation to reduce the cost of doing business of ecozone locators with SMEs, are among the priority imperatives to enable the SMEs to benefit from the industrial progress in Central Luzon.

It would be heaven-sent if indeed, DTI will establish the digital platform to SMEs free of charge.

About this Research

This research extracts the key points derived from the various studies and stakeholder consultations conducted under the “Integrated Infrastructure and Investment Planning for Investment Corridors” Project commissioned by the National Economic and Development Authority (NEDA) in 2020-21. The studies and consultations were done to determine how to link micro, small, and medium enterprises (MSMEs) to the industrial progress in the Central Luzon Region.

This article was written for Limelighter Research Inc.