APEC Members Adopt Iloilo Initiative on Msmes
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68 BUSINESS APEC members adopt Iloilo initiative on MSMEs The 21 member countries of the Asia Pacifi c Economic Cooperation (APEC) recently adopted the APEC Iloilo Initiative – a guiding framework in integrating Micro, Small and Medium Enterprises (MSMEs) in international trade and global value chains (GVCs). The initiative is intended to provide “a bigger voice and better opportunities” through the following: increased focus on the potential of the internet, digital economy, and electric commerce (e-commerce). he “APEC Iloilo Initiative: Growing Global MSMEs for Inclusive Development” is a framework that Tresulted from the series of meetings of APEC SME ministers and offi cials. It was put in place to monitor the development and integration of MSMEs in the regional and global markets. And its goal is to provide MSMES a major boost by laying down strategic actions through dialogues among MSMEs, large businesses and policy makers. MSMEs in the Asia-Pacifi c region account for over 97% of all enterprises, employ more than 70% of the workforce, and contribute at least 20-50% to the total GDP. The sector, however, fails to achieve greater participation in the global trade, making up less than 35% of annual global exports. Among the challenges faced by the MSMEs are the following: underdeveloped facilities; inadequate information regarding market opportunities across boarders; the lack of ability to develop globally competitive, market driven products and solutions; pushing for small entrepreneurs to be at the center of discussions and the inability to fully leverage on the benefi ts provided by during the forums leading up to the APEC leader’s summit. the digital economy. There is, indeed, a need for an ‘ecosystem’ The emergence of the Iloilo Initiative recognizes the that will support enterprise creation as well as increase the importance of e-commerce as a platform in facilitating the entry of innovation capabilities of MSMEs. Over the years, there were MSMEs in the exchange of goods and cross border transactions, numerous initiatives proposed in APEC to promote free and open Trade Undersecretary Zeinada Maglaya noted. “We acknowledged trade and investments, and to further deepen regional economic that MSME’s participation in the international market is enhanced integration. The Philippine government had been actively when they leverage on the benefi ts of e-commerce.” The most Micro, Small and Medium Enterprises in the Asia-Pacifi c region account for over 97% of all enterprises, employ more than 70% of the workforce, and contribute at least 20-50% to the total GDP. Philippine ANALYST BUSINESS October-November 2015 BUSINESS 69 THE 3 pillars of the APEC MSME MARKETPLACe FaFacic liitat te Ennhhancance MSMSMME Impmmpprovve mmechahah nnisismms for bbuusis nenessss awwaarrenenesss annd feedbadbbaack onn trraade knoowleedgedge sshaaring neetwtwororkik ng reguulaatiotions iin order on trradee ffacilii taation, and matchhinng for MMSSMEsM too acccess busineinnenesss supppoport, iinnvolvvining inforrmmatiationo ono new partnenershs ipss, and MMSMMEs nonono -tatarriff capacicity buibu lddding meae sururese actctiviv ttiei s for MMSSMEsMEM The 1st pillar allows MSMEs to leverage on the opportunities off ered by international market. This pillar intends to strengthen MSME’s participation, not only in local supply chains, but through GVCs as well. To support this, APEC economies will contribute by providing relevant information on MSMEs and Large enterprises (LEs) which will include listings and/or website to encourage business networking. The 2nd pillar caters to the need of MSMEs for information on trade-related measures and standards by economy. Among the sources for this are the following: APEC Trade Repository (APECTR), the World Trade Organization International Trade Information Portal (WTO I-TIP), and the International Trade Centre’s Market Access Map (MacMAP). The 3rd pillar provides a platform for information sharing on key development and experiences of MSMEs in the context of GVCs, production and cross-border supply chains. This portal will serve as an avenue for partnerships, innovation and linkages between MSMEs and LEs, which could increase the potential for MSME internationalization. Source: Asia-Pacific Economic Cooperation (APEC) "The APEC Iloilo Initiative: Growing Global MSMEs for Inclusive Development recognizes the importance of e-commerce as a platform in facilitating the entry of MSMEs in the exchange of goods and cross border transactions." Philippine ANALYST BUSINESS October-November 2015 70 BUSINESS notable component of the Initiative is the creation of the APEC IFC has provided advisory services to CARD Bank since MSME Marketplace, which is set to be implemented in 2017. 2007, when it helped develop an SME lending platform, The Marketplace will be a one-stop-shop online portal that allows which was later implemented by CARD SME Bank in 2009. MSMEs to participate in international trade and be part of GVCs. It In 2013, IFC also helped CARD SME design an agri-fi nance also enables partnership through information sharing (e.g. market strategy, which was expanded in early 2015 to reach more regulations, proposed initiatives/programs, and trade promotion regions and farmers. The international lender is also currently assistance packages provided by APEC) among member helping in establishing a comprehensive credit information economies since it will serve as an “interactive repository” of system for small borrowers nationwide. The improved credit APEC activities. According to Usec. Maglaya, “(the) Marketplace information would provide suffi cient information and encourage will be a rich source of knowledge and information,” and it banks to lend to small borrowers with good credit histories. will focus on 3 pillars (see graph and table on previous page). According to Jane Xu, the country manager of IFC Philippines, Inclusion of MSMEs in the economy remains vital if IFC had so far poured around $140 million worth of investments a country is to achieve inclusive growth. Trade Secretary into the country from August to November 2015. She said the Gregory Domingo said local MSMEs must be competitive amount was used to fi nance various projects in the country. and “to (be able to) succeed internationally, they need Aside from MSMEs, IFC also provides and mobilizes capital access to open, transparent, and efficient markets.” to encourage private investments in other underfi nanced sectors like renewable energy, energy effi ciency, water and agriculture. Ms. Xu said that while IFC has a country exposure limit, IFC invests P700Mn for MSME fi nancing “the Philippines is still far away from that limit.” “We have project exposure limit but it’s more like a percentage Micro, small and medium enterprises (MSMEs), especially of total project fi nancing. We don’t really have an absolute those in rural areas, are set for a big fi nancial boost as the number,” she added. For fi scal year 2015, IFC’s long-term investment arm of the World Bank, International Finance investments in developing countries rose to nearly $18 billion. Corp. (IFC), committed to lending up to P700 million ($15.7 million) to 2 MSME-oriented fi nancial institutions. Card Bank, the largest microfi nance institution in the Philippines with a customer base of 1.4 million, will receive a loan of up to P540 million ($12.1 million) to grow its microfi nance client base and to establish new branches in provinces. Meanwhile, Card SME Bank, a thrift bank servicing 228,000 clients, will receive up to P160 million ($6.3 million) to further help its customers, who are primarily those who have “graduated” from the microfi nance bank (CARD Bank), in their transition from micro-entrepreneurship to small businesses. The multi-million IFC loan particularly targets to benefi t the MSME sector in rural communities. According to the international lender, “almost three-quarters of the poor in the Philippines live in rural areas. Poverty among farmers is 3 times higher than in other sectors. Without access to formal fi nancial institutions, a majority of the population borrows from informal sources.” IFC Financial Institutions Group Global Director Marcos Brujis said “making loans more aff ordable to people and MSMEs through formal fi nancial institutions quickens the pace at which people are lifted out of poverty.” The MSME sector is the lifeblood of the local economy as it accounts for 99.6% of the registered enterprises in the Philippines and comprises 61.2% of the country’s total employment. However, the “lack of access to fi nancing remains the biggest roadblock for the growth of MSMEs in the country since the existing requirements for credit do not consider the nature of micro and small businesses,” Sen. Paolo Bam Aquino, chairperson of the Committee on Trade Commerce and Entrepreneurship, said. Giving MSMEs the access to aff ordable fi nance will help "Giving MSMEs the access to aff ordable enable the sector to create jobs as well as meet the capital needs fi nance will help enable the sector to of the poor, IFC said. MSMEs also need the fund to invest in create jobs as well as meet the capital innovation, which is crucial for them because they leverage on innovation as a competitive edge against big businesses. needs of the poor, IFC said." Philippine ANALYST BUSINESS October-November 2015 BUSINESS 71 Iron and steel industry primed for growth says SEAISI chairman Roberto Cola says despite the upward NEDA trend in demand, “The restructuring and consolidation of the domestic steel industry had wiped out the Philippines fl at products The National Economic Development Authority (NEDA) production base of hot rolled coils and plates, cold rolled coils and sheets and tinplates, [and now] in crude steel terms, the has identifi ed the iron and steel industry as a potential Philippines imports around 80% of its steel requirement.” sector for growth that could support the development of the The iron and steel industry has strong forward and backward country’s infrastructure and manufacturing sectors.