The ASEAN economic integration is happening in 6 months time. Already aside from the Agricultural sector, one other sector identified to be vulnerable are the many SMEs operating in the country. And with a broad base covering a cross section of various economic sectors from retail to agriculture, service establishments to even manufacturing entities, the danger of their inability to survive may result in serious capital and job losses as well as serious business disruption for the economy. Let’s hope government act now to address what is needed. More importantly, the various SME groups and associations should start planning a roadmap to help address the various areas for support and assistance.
From BusinessWorld Philippines
August 06, 2014
Are our SMEs ready for ASEAN 2015?
MANY LOCAL CONSUMERS, investors, businesspeople, students and even academe remain unaware of the full impact of the Association of Southeast Asian Nations (ASEAN) full integration, which takes effect six months from now. The most vulnerable sector that is almost unaware of the impact of economic integration is the sector of the small and medium enterprises (SMEs).
Under the ASEAN economic integration, which has the tagline “One Vision, One Identity, One Community,” member nations will enjoy free movement of goods, services, investment, and skilled labor. This means that all trade, non-trade, technical, governmental barriers will be removed. Rules and regulations will be rationalized for good governance and transparency. The goal is for different industries in the region to gain from the enlarged market, greater market access, and growth in trade, investment, private sector, consumer welfare, human resources, and financial resources.
How can the government help SMEs become ready for this challenge? Can the government prevent anti-competitive practices by foreign businesses that have strong trans-border capabilities? Can it ensure a level playing field for local businesses? Does the government have trade restrictions to encourage the observance of ethical business practices to protect Filipino consumers and SMEs, at the same time sustaining the economic performance of the ASEAN region?
In the declaration on the ASEAN Economic Blueprint (AEC Blueprint), each member nation should abide by and implement the AEC by 2015. A nationwide competition policy and law must be developed and observed by 2015 to create a fair competition environment and to enhance regional economic performance.
Tasked with crafting and implementing the competition policy and law is the Office of Competition, which falls under the Department of Justice (DOJ). As early as June 2011, under Executive Order No. 45, the DOJ was designated the Competition Authority of the Philippines, which will formulate national competition frameworks and policies to ensure a level playing field for businesses, especially the micro, small and medium enterprises.
SMEs comprise 99.6% of all registered business in the Philippines and employ 70% of the workforce. They are suppliers, distributors and business partners of world-class corporations. SMEs are engaged in wholesale and retail trading, agriculture, construction, education, real estate, the operation of hotels and restaurants, and the manufacture of food, electronics, textiles, garments, and more.
Now is the time for SMEs to reassert their market position in preparation for ASEAN integration, which takes effect in six months. SMEs need to strengthen their resources and capabilities if they want to survive. Renewal of their sources of competitive advantages is not enough for them to face the region’s business giants. Newly empowered enterprises will enter the Philippine market, which may force smaller SMEs to shut down. Market domination will be the name of the game. New dominant groups that have never been seen in the country will emerge and may distort the business mapping dimensions. Mergers, acquisitions and joint ventures will be their primary agenda to sustain their economic performance.
However, SMEs will be powerless without government protection. It is imperative that SMEs remain the catalyst of economic growth. They are relevant and will continue to be relevant in creating growth as well as maintaining social stability for our developing country. Thus, they must be able to compete directly against the better-funded and highly capitalized foreign companies, whose liberalized capital inflow can threaten the capital structure of the SMEs. The government needs to seriously lay down workable plans and initiatives to provide the much-needed fiscal policy and resources for SMEs. Finally, there is a need for capacity-building, training, information dissemination, and easy access to capital that will enable SMEs to prepare themselves for a more competitive environment next year.
Without sound, efficient and sufficient government support when ASEAN economic integration takes effect, can SMEs survive? I doubt it.
Fred S. Cabuang teaches Strategic Management and Strategic Marketing at the Ramon V. Del Rosario College of Business of De La Salle University.
Article location :