Introduction to Enterprise Development 5.

Overview of National and Regional Policies Affecting Enterprise

Development
1. Definition and Importance of Enterprise Development
Government policies play a significant role in creating a supportive
Enterprise Development is the process of creating, growing, and environment for MSMEs. Some key policies include:
sustaining businesses, with particular emphasis on small and medium- ▪ MSME Development Plan (2017-2022): This national policy
sized enterprises (SMEs). SMEs are key drivers of economic framework aims to enhance the competitiveness and sustainability of
development in many countries, including the Philippines. MSMEs in the Philippines. It includes provisions for improving access
to finance, building entrepreneurial capabilities, and fostering market
Importance of enterprise development lies in its contribution to: linkages.
▪ Job Creation: SMEs generate a significant portion of employment ▪ Philippine Development Plan (PDP): Outlines the broader economic
opportunities, especially in emerging and rural areas. goals of the country, with specific strategies targeting the improvement
▪ Economic Growth: SMEs help diversify the economy by producing of MSMEs. These include strengthening infrastructure, promoting
goods and services, which in turn boosts GDP and enhances market innovation, and improving the business environment to facilitate MSME
stability. growth.
▪ Poverty Reduction: By promoting inclusive business growth, enterprise ▪ Regional Development Plans: These address specific needs and
development can directly impact poverty alleviation efforts, particularly challenges faced by MSMEs in different regions of the Philippines.
in rural areas and underserved communities. Example, in rural regions, policies might focus on enhancing
▪ Fostering Innovation and Competition: New businesses and agricultural value chains, while in urban areas, digital infrastructure and
innovations lead to more competitive markets, driving better quality and access to technology may be prioritized.
lower prices for consumers.
These policies work together to create a more enabling environment for
2. Types of Enterprises: Micro, Small, and Medium Enterprises MSMEs, helping them overcome obstacles and seize opportunities for
(MSMEs) growth.

MSMEs are generally categorized based on the number of employees Conclusion:

and total assets. Enterprise development, particularly for MSMEs, is vital to the
▪ Micro Enterprises: economic growth and stability of the Philippines. By understanding the
- Less than 10 employees challenges and opportunities facing businesses in the country and
- Assets of less than ₱3 million leveraging key national and regional policies, the government and
- Typically family-owned or informal businesses private sectors can work together to support sustainable enterprise
- Ex: Small local stores, repair shops, or cottage industries growth.

▪ Small Enterprises: The Philippine Business Environment

- 10 to 99 employees
- Assets between ₱3 million to ₱15 million 1. Economic, Political, and Social Environment of the Philippines
- May have a formal structure and more diversified business operations
- Ex: Small manufacturing units or retail outlets Economic Environment:
The Philippines, with a population of over 113 million and a rapidly
▪ Medium Enterprises: growing middle class, represents one of Southeast Asia's most dynamic
- 100 to 199 employees economies. The economic landscape is shaped by several key factors:
- Assets ranging from ₱15 million to ₱100 million ▪ GDP Growth: The country has seen consistent GDP growth over the
- More formalized businesses with the capacity to scale up and innovate last few decades, driven by domestic consumption, remittances from
- Ex: Mid-sized manufacturing companies or service providers Overseas Filipino Workers (OFWs), and a booming services sector,
particularly in Business Process Outsourcing (BPO).
3. Role of MSMEs in the Philippine Economy ▪ Key Sectors:
* Services: The BPO industry, tourism, and retail trade are significant
MSMEs play a central role in the Philippine economy: contributors to the GDP.
▪ 99.5% of all businesses in the Philippines are MSMEs. They dominate * Manufacturing and Agriculture: These sectors remain essential, though
the business landscape, significantly outnumbering large corporations. their contribution to GDP has been decreasing over time.
▪ 65% of the workforce is employed by MSMEs, which highlights their * Exports: Electronics, semiconductors, and agricultural products (like
importance in providing livelihood and reducing unemployment. coconuts and sugar) are key exports.
▪ MSMEs contribute around 35% of the country's GDP, making them a ▪ Challenges:
cornerstone of the economy. * Income Inequality: Despite growth, wealth distribution remains
▪ MSMEs are particularly important in rural development. They can help unequal.
create local jobs, develop regional markets, and reduce rural poverty * Inflation and Currency Depreciation: These factors can affect the cost
through sustainable business practices and community engagement. of doing business, especially for businesses dependent on imports.
* Unemployment/Underemployment: While employment levels are
4. Key Challenges and Opportunities improving, there is still a large segment of underemployed workers.

Challenges: Political Environment:

▪ Limited Access to Financing: MSMEs often struggle to secure loans or ▪ Government Structure: The Philippines operates as a presidential
credit due to lack of collateral, high interest rates, and complicated republic, where the President is both head of state and head of
lending procedures. government.
▪ High Operational Costs: Rising input costs, including raw materials, ▪ Political Stability: Political issues, corruption, and sometimes unstable
labor, and utility expenses, can make it hard for MSMEs to remain leadership have impacted the long-term predictability of policies, which
competitive. businesses need to navigate carefully.
▪ Regulatory Barriers: Bureaucratic red tape, complicated regulations, ▪ Policy Direction: The government often focuses on infrastructure
and lengthy approval processes can hinder the growth of small development, poverty reduction, and enhancing the country’s
businesses. competitiveness globally, such as the "Build, Build, Build"
▪ Lack of Skills and Training: Many MSMEs face a skills gap in infrastructure program.
management, technology, and innovation, preventing them from ▪ Trade Policies: The Philippines is a member of various international
improving their operations or scaling. trade organizations like the World Trade Organization (WTO), ASEAN,
▪ Market Competition: MSMEs often face tough competition from larger and APEC. Tariff and trade regulations are designed to encourage
enterprises or imported goods, limiting their market share. foreign investments and trade partnerships.

Opportunities: Social Environment:

▪ Digital Transformation: The increasing availability of digital tools ▪ Demographics: The country has a youthful, tech-savvy population,
presents MSMEs with opportunities for business automation, online which is an asset for many industries, especially technology,
marketing, and access to global markets. entertainment, and consumer goods.
▪ Expansion to International Markets: Trade agreements and ▪ Cultural Influence: Filipino culture blends traditional values with
globalization have opened doors for MSMEs to export their products Western influence due to colonial history. This impacts consumer
and services abroad. behavior and preferences, which businesses must understand.
▪ Government Programs and Incentives: The Philippine government ▪ Social Issues: Issues such as poverty, education, healthcare, and labor
offers various support programs, such as subsidies, loans, and tax rights are significant social challenges, which affect the broader market
incentives, to help MSMEs grow and innovate. and business operations.
▪ Sustainable Business Models: Embracing green technologies,
sustainability, and socially responsible practices can provide MSMEs 2. Government Regulations and Their Impact on Businesses
with a competitive edge and long-term viability. The Philippine government plays a critical role in shaping the business
environment through various regulations. These can either foster growth
or pose challenges to businesses.
▪ Business Registration and Licensing: Philippines has streamlined * Cybersecurity: As more businesses go digital, ensuring the security of
business registration through Philippine Business Registry (PBR). data and transactions has become a priority to protect consumers and
However, starting a business can still be time-consuming due to local businesses from cyber threats.
government unit (LGU) permits and taxes.
▪ Taxation System: Bureau of Internal Revenue (BIR) enforces tax 5. Case Studies of Successful Enterprises in the Philippines
regulations, including corporate income tax, value-added tax (VAT), and
local taxes. The tax system has been reformed under the Tax Reform for Jollibee Foods Corporation:
Acceleration and Inclusion (TRAIN) Law to simplify taxation and ▪ Sector: Fast Food
improve revenue collection. ▪ Overview: Founded in 1975, Jollibee is the Philippines' largest fast-
▪ Labor Laws: The Philippines has stringent labor laws that protect food chain, with a global presence. The company succeeded by adapting
workers' rights. Employers must comply with regulations on minimum its menu to local tastes while maintaining strong brand loyalty.
wage, working hours, social security contributions, and health benefits. ▪ Success Factors:
This can increase operational costs for businesses but ensures a fair * Understanding local preferences and cultural nuances.
working environment. * Expanding internationally through franchising, particularly in markets
▪ Environmental Regulations: The government has introduced with significant Filipino populations.
regulations focusing on sustainable business practices. The Clean Air
Act, Solid Waste Management Act, and the National Integrated SM Group (SM Investments Corporation):
Protected Areas System Act are examples that businesses must adhere ▪ Sector: Retail, Real Estate, Banking
to, particularly in industries like manufacturing and construction. ▪ Overview: SM Group, founded by Henry Sy, is one of the largest
▪ Foreign Investment Laws: The Foreign Investments Act allows foreign conglomerates in the Philippines. It operates SM malls, one of the most
businesses to own up to 100% of certain industries, except in areas that extensive retail networks in the country.
are reserved for Filipino citizens or companies. In some sectors, like ▪ Success Factors:
mass media or small and medium enterprises (SMEs), foreign ownership * Diversification into multiple industries (retail, real estate, banking)
is restricted. allows the company to weather economic fluctuations.
* Strong focus on customer experience and location selection for its
3. Local vs. Global Market Opportunities and Challenges malls.

Local Market: Globe Telecom:

▪ Growing Middle Class: The local market offers ample opportunity for ▪ Sector: Telecommunications
consumer goods and services, driven by a growing middle class with ▪ Overview: Globe Telecom is a major player in the Philippine
increasing disposable income. telecommunications industry. It provides mobile, broadband, and digital
▪ Emerging Sectors: The rise of e-commerce, fintech, and green services.
technology offers significant opportunities for entrepreneurs looking to ▪ Success Factors:
tap into new industries. * Emphasis on innovation and adapting to digital transformation.
▪ Challenges: * Strategic partnerships with global tech companies, positioning itself at
* High Competition: The local market is highly competitive, with many the forefront of the telecom and digital revolution.
domestic and international players in various industries.
* Logistics and Distribution: In many parts of the country, infrastructure Conclusion:
issues and transportation costs can hinder businesses from efficiently The Philippine business environment presents both significant
reaching remote areas. opportunities and challenges. Entrepreneurs must navigate complex
economic, political, and social factors, understanding the local context
Global Market: while remaining competitive globally. Government plays a central role
▪ Export and Trade: The Philippines benefits from a strategic location in in shaping this environment, and businesses need to adapt to regulatory
Asia, allowing access to key international markets, especially in changes, leverage digital transformation, and capitalize on local and
manufacturing and BPO services. international market opportunities. By studying successful enterprises
▪ Opportunities: like Jollibee, SM, and Globe, businesses can learn valuable lessons on
* Outsourcing Industry: The BPO industry positions the Philippines as a how to thrive in a dynamic and evolving marketplace.
global leader in outsourcing, offering services such as customer support, National Programs for Enterprise Development in the Philippines
IT services, and back-office operations to companies worldwide.
* Export of Goods: The Philippines has a competitive advantage in Objective:
industries like agriculture, electronics, and minerals. This lesson aims to introduce key government initiatives and programs
▪ Challenges: in the Philippines that support enterprise development, with a particular
* Global Competition: Competing on a global scale often requires focus on Micro, Small, and Medium Enterprises (MSMEs). These
continuous innovation and maintaining quality standards, which can be a programs provide financial, technical, and operational assistance to help
challenge for local businesses. MSMEs grow and contribute to the country's economic development.
* Foreign Exchange Fluctuations: Currency volatility can affect the
profitability of businesses, especially those that rely on imports or 1. The Micro, Small, and Medium Enterprise Development
exports. (MSMED) Act
- (Republic Act No. 9501) is a landmark legislation in the Philippines
4. Role of Infrastructure and Digital Transformation that provides the foundation for the promotion and development of
MSMEs in the country. Its core objectives include:
Infrastructure Development:
▪ Transportation: Infrastructure improvements under the Build, Build, Key Provisions:
Build program aim to enhance transportation systems (roads, ports,  Definition of MSMEs: The law categorizes MSMEs based on
airports), which is essential for businesses to operate efficiently and their assets and number of employees.
reduce logistics costs. o Micro enterprises: Assets not exceeding ₱3 million
▪ Energy: Reliable power supply is critical for businesses. The o Small enterprises: Assets between ₱3 million and
Philippines is working on expanding its energy capacity, including ₱15 million
renewable energy sources like solar and wind power, to meet growing o Medium enterprises: Assets between ₱15 million
demand. and ₱100 million
▪ Challenges:  Support for MSME Access to Credit: The Act aims to
* Traffic Congestion: Despite infrastructure improvements, Metro enhance access to financing through various government
Manila and other urban areas continue to face severe traffic congestion, programs and private sector partnerships.
which impacts delivery times and employee productivity.  Incentives and Assistance: MSMEs are entitled to various
* Access to Utilities: In rural areas, access to reliable water and power incentives, including tax exemptions, subsidies, and capacity-
services can still be inconsistent, affecting business operations. building initiatives.
 Promotion of MSME Innovation: The Act encourages
Digital Transformation: innovation by providing grants for research and development
▪ E-commerce Growth: With the rise of internet penetration, more and fostering entrepreneurial skills through training.
businesses are leveraging digital platforms to reach customers. E-
commerce has become a crucial business model for local and MSMED Act provides the legal framework that enables the Philippine
international companies. government to implement programs that cater to the growth and
▪ Digital Payments and Fintech: The use of digital payments is growing sustainability of MSMEs.
rapidly, with the government and private sector supporting cashless
transactions, particularly in urban areas. 2. Government Programs: DTI’s Negosyo Centers and SB
▪ Challenges: Corporation
* Digital Divide: Rural areas still face issues with internet connectivity
and access to digital technologies, limiting market reach for some Department of Trade and Industry (DTI) plays a central role in
businesses. promoting MSMEs through several key programs, including the
Negosyo Centers and SB Corporation.
  Business Environment Improvement: The DTI collaborates
Negosyo Centers: with local government units (LGUs) and other stakeholders to
 Purpose: Established to provide one-stop-shop services to improve the business environment for MSMEs, reducing red
MSMEs. The centers aim to facilitate the start-up and growth tape and improving access to resources.
of MSMEs across the country. The DTI’s role is to be the primary advocate and facilitator for MSMEs,
 Services: The Negosyo Centers offer a variety of services, ensuring that they have the necessary tools, resources, and environment
including: to succeed.
o Business registration assistance (helping MSMEs
comply with legal requirements) 5. International Assistance and Collaboration
o Business development services (e.g., business International organizations and foreign governments also play a
planning, financial management, marketing, etc.) significant role in supporting MSMEs in the Philippines.
o Training and seminars (skills development, business Programs and Initiatives:
growth strategies)  Asian Development Bank (ADB): ADB has supported
o Networking opportunities for MSMEs to connect various MSME programs in the Philippines, providing loans
with larger businesses, suppliers, and markets. and technical assistance for MSME infrastructure
 Local Reach: As of 2024, there are over 500 Negosyo Centers development, capacity-building, and access to markets.
across the Philippines, making it easier for entrepreneurs,  United States Agency for International Development
particularly in rural areas, to access essential support. (USAID): USAID provides grants and technical assistance to
improve the competitiveness of MSMEs, focusing on sectors
SB Corporation (Small Business Corporation): such as agribusiness, manufacturing, and technology.
 Purpose: A government-owned and controlled corporation  World Bank: Through its various initiatives, the World Bank
under the DTI, SB Corporation focuses on providing financial helps the Philippine government improve the policy and
assistance to MSMEs. regulatory environment for MSMEs and provides funding for
 Loan Programs: SB Corporation offers various financing MSME development programs.
schemes, including: Bilateral and Multilateral Partnerships:
o Pondo sa Pagbabago at Pag-asenso (P3  The Philippine government collaborates with organizations
such as the ASEAN (Association of Southeast Asian
Program): A microfinance program designed to
Nations) and the World Trade Organization (WTO) to help
provide affordable and accessible loans to small
MSMEs gain access to international markets and benefit from
entrepreneurs, particularly those in the informal
regional trade agreements.
sector.
Capacity-Building Programs:
o Direct Lending Programs: These programs offer
 International development agencies often partner with local
low-interest loans to MSMEs that are unable to government units (LGUs) and DTI to provide specialized
access traditional financing. training programs, often aimed at enhancing the global
o Capacity-Building Programs: In addition to competitiveness of MSMEs.
financing, SB Corporation offers training and
advisory services to strengthen MSME operations Conclusion
and sustainability. Philippine Government has developed a robust system of programs and
initiatives aimed at supporting the development of MSMEs, which are
3. Financing Options for MSMEs critical to the country’s economic growth. Through legislative efforts
Access to financing is one of the primary challenges faced by MSMEs. like the MSMED Act, institutional support from the DTI and SB
However, there are several government-backed programs designed to Corporation, and financing options tailored for MSMEs, entrepreneurs
address this issue and provide MSMEs with the necessary capital to in the Philippines are given the tools they need to grow and compete.
grow their businesses. Additionally, international collaborations bring valuable resources and
expertise to enhance the global competitiveness of MSMEs. As these
Government-Backed Loan Programs: enterprises continue to thrive, they will play a key role in driving
 The P3 Program: The P3 program, managed by SB innovation, job creation, and sustainable economic growth in the
Corporation, offers loans of up to ₱500,000 with low interest country.
rates (as low as 2% annually) to micro and small enterprises.
This is designed to help entrepreneurs overcome the high-
interest rates and collateral requirements typically associated
with traditional loans.
 The 7% Interest Rate Program: Aimed at medium-sized
enterprises, this program provides financing with an interest
rate of 7% per year.
 Philippine Guarantee Corporation (PhilGuarantee): This
corporation provides credit guarantees to MSMEs that are
unable to provide collateral for loans from financial
institutions. The guarantees help reduce the risk for lenders
and encourage them to extend credit to MSMEs.
Private Sector Partnerships:
 Banks and Microfinance Institutions: There are several
private banks and microfinance institutions that offer loan
products tailored to MSMEs, often in partnership with
government agencies such as DTI or SB Corporation.
Venture Capital and Angel Investors:
 Another growing source of financing for MSMEs is venture
capital (VC) and angel investors, especially for businesses
with innovative products or services. While this is more
common in larger MSMEs, it is becoming increasingly
available to smaller enterprises as well.

4. Role of the Department of Trade and Industry (DTI)

Department of Trade and Industry (DTI) is the main government
agency responsible for promoting the development and growth of
MSMEs in the Philippines. Its role can be broken down into several key
areas:

Key Functions:
 Policy and Regulation: The DTI is responsible for
formulating policies that support MSME development,
including trade and industry regulations, consumer protection,
and standards.
 Capacity Building: DTI runs training and educational
programs to improve the business acumen of MSMEs. These
programs focus on topics like business management, digital
marketing, and export development.
 Promotion of MSMEs in the Global Market: DTI helps
MSMEs expand internationally by supporting their
participation in trade fairs, business matching, and export
initiatives.