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Difficult to grow businesses in PH – Neda

Small businesses in the country continue to experience difficulties in becoming large scale firms, says Neda

MANILA, Philippines – Filipino small and medium enterprises (SMEs) still encounter difficulties in becoming medium- and large-scale establishments, according to the National Economic and Development Authority (Neda).

In a speech at the National Data Dissemination Forum, Neda Director General Arsenio Balisacan noted that the 2010 Annual Survey of Philippine Business and Industry (ASPBI) showed that there is still a “missing middle” in the country’s business sector. 

Balisacan also cited data from the National Statistics Office (NSO) which showed that the country had a total of 23,612 establishments that employed 20 or more people each in 2010.

By broad industry group, 72% were engaged in the services sector, 25% in the industry sector, and the remaining 3% in the agriculture sector.

“This tells me that there are not many medium- and large-scale establishments in the country. If you look in the longer series, what you find is a missing middle—huge micro enterprises on the one end, and very large ones on another end. A big puzzle for me is why not many of these micro and small establishments are not able to later graduate to become medium- and large-scale establishments,” Balisacan said.

Where the big boys are
Balisacan said NSO data showed that 47% of large establishments were located in Metro Manila; 28% were in the rest of Luzon; 14% in the Visayas region; and 11% in Mindanao.

The Neda chief said this could be the reason why the National Capital Region (NCR) accounted for 36% of the country’s economic growth. The rest of Luzon accounted for 37.5%, while Mindanao contributed 14%.

“We know from the literature that economies of scale in production can be attained by the large establishments. One suspects that the agglomeration economies also work so well in the country that it encourages the concentration of production in Metro Manila,” Balisacan said.

However, Balisacan lamented that the employment these large firms generated for the survey period was only 3 million or less than 8% of the total number of employed persons in the Philippines.

Balisacan said this information should be used to come up with other social protection schemes for workers who are employed in small companies that do not earn as much as large firms do.

“This information is important to us as program planners, as we aim for inclusive growth. Large establishments are, most probably, covered by regulations with respect to working conditions and other standards, including the provision of benefits to workers. The ASPBI results inform us that a lot more workers are outside the reach of regulation, and should be the subject of other social protection schemes,” Balisacan said. –

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