THE MOUNTAINEER

Identifying entrepreneurs for financial assistance
Edison L. Baddal

BONTOC, Mountain Province -- About three million small and medium operators and enterpreneurs are being identified to receive financial assistance through formal lending conduits from the government.

In relation to this, a group of consultants of the National SMEDC (Small and Medium Enterprises
Development Council) conducted a one-day workshop here on the localization of the National SMED Plan and its subsequent harmonization with local SMED plan to heads of line agencies and local offices of the province on Sept. 21.

The SMED Plan is a consolidated roadmap for SME development to be achieved from 2004 up to 2010.It is a conglomeration of multi-stakeholder support programs geared towards a sustainable growth and development of SMEs.

Capacities of SMEs are expected to be maximized within the backdrop of a globalized and liberalized economy and thereby increase their contributions to national economic growth.

Comprising about 99.7 percent of all employment-generating firms in the country with an estimated 69 percent of the labor force under its employ, the current government envisions the SMEs to be the catalyst of economic growth within the next three years.

This is to new with the employment-generation agenda of the government. Hence, upon the completion of the SME Development Plan (2004-2010), three million SME operators and enterpreneurs have been identified to receive financial assistance through formal lending conduits from the government.

Most of them have availed of the assistance that contributed to job generation during the past three years with the number of borrowers having increased at this time. Three years has passed after the completion of the SMEDP and with about 6.6 million jobs having been created since then, the
goal of the workshop was for the participants to work on the gaps and issues regarding the
achievement of the remaining goals of the plan.

With about 3.4 million jobs as deficit and to be created within the next three years, the consultants stressed that it is high time that the local SMED Plan should be harmonized with the national
SMED Plan or the local SMED Plans should provide the gaps or deficits in areas where
the government apparently failed to perform at par during the past three years.

Relative to the above, the SMED Plan Results Framework were handed out to participants.The framework provided the indicators which more or less benchmarks the performance indices of the National Government in coordination with the LGUs vis-à-vis the targets set in the SME Development Plan. The said “results” structural framework were divided into four sectors, namely: Business and Investment Environment Enabling (BIEE), Access to Finance (A2F),
Access to Markets (A2M) and Productivity and Efficiency (P & E).

The indicators under each of the four sectors were the ones wherein the participants were made to make practical estimations as to the degree or rate of contribution of the province in relation to the achievement of the goals/targets provided in the plan.

Under the BIEE sector, one of the indicators was the formal recognition of about 700,000
SMEs from CY 2004 to 2010 . For the sector on Access to Finance (A2F), one of the indicators provide that SME financing will enjoy an increase by P130 billion a year from 2004 to 2010.
For the sector on Access to Market (A2M), total sales of the SME sector is expected to have increased by 130 percent come 2010 while for the fourth and last sector, the level of productivity
of the SME sector is projected to have increased by 60% by 2010.
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Looking at the indicators, which also doubled as targets for each of the sector in the results
framework, one is constrained to regard them with a benefit of a doubt. It is simply preposterous
that the indicators-cum-targets could be achieved within the next three years. Needless to say, achieving these targets within a short span of three years is nothing short of miraculous.

As for instance, the establishment of 700,000 SMEs from 2004 to 2010 is next to impossible.
Being a poor country with a moribund economy at that (despite rosy economic forecasts
through misleading statistics being fed every and then to the public by the NEDA), not many people could afford to put up a business enterprise even with a capital of even Php 50,000.

Besides, the huge decrease in the purchasing power of the peso compared to ten or more years ago make people more wont to save and putting up a business enterprise is generally out of the question now. Also, current business climate is too risky for comfort and businesses are not expected to thrive for long.

The vegetable industry of Bauko is a classic example. Before the implementation of GATT, a number of farmers in Southern Bauko enjoyed a thriving vegetable business. Because it provides constant employment to a big number of people there, the vegetable industry comprised the greatest number of microfinance entities in Bauko. In the process, many vegetable farmers became prosperous and even afforded the luxury of owning a vehicle or two for business transactions.

Although their crops are subject to the unpredictable fluctuation of prices at the La Trinidad Vegetable Trading Post by notorious middlemen from Manila, they managed to realize invariably an acceptable measure of profits even when their products failed to command a high price occasionally. And although prices dip to nonprofitable levels sometimes, the fact that a ready outlet for their products and a fighting chance to make it next time kept them on their toes for the next cropping season. More oftentimes, they always make it quite favorably the next time around.

However, the implementation of GATT in 2005 led to a glut in vegetable supply in the country. Consequently, it virtually killed the vegetable industry. The entry of cheap vegetable imports from China and other temperate countries flooded the market to the detriment of local farmers.

Those imported vegetables, which are considered better-looking and sold at giveaway prices, led to an almost negligible demand for vegetables from Mt. Province and Benguet. And to think that about 5,ooo or more households are dependent on the vegetable industry in Mt. Province and about 30,000 or more households depend on it in Benguet. So with the onslaught of GATT, many vegetable farmers were rendered abjectly poor, including those who thrived on it.

A sad testament to the collateral damage that GATT caused to the vegetable industry is that many vegetable terraces that line up the hillsides of Southern Bauko and Benguet are idle. Adding further to the damage is the folding up of many mini- grocery stores in Bauko which were regularly frequented by gardeners due to a huge slump in sales.

Even the videoke bar operators who enjoyed brisk business before GATT also vouch for the poor state of business in Bauko now with the demise of the vegetable industry.

Adding further to the negative impact is that many farmers who were not able to pay back their loans from banks, coops and other lending institutions are now the subject of foreclosures
of their assets. Inversely, lawyers of said banks are the ones raking money out of the farmers’ miseries.

The worst thing is that the safety nets, which Ramos annunciated during his watch to cushion the impact of GATT prior to its full implementation, were never put in place.
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The workshop participants targeted 2,000 jobs as a contribution of Mt. Province to the national government’s target of creating 3.4 million jobs from 2007 to 2010 while SME financing
is expected to increase to more than half of the lending portfolio extended by formal institutions
at present.

The participants also targeted the expected increase in sales of SMEs between now and
2010 with resultant increase in the level of productivity of the SMEs.

If only the vegetable industry has not been rendered inutile by GATT, the proposed job contribution
of Mt. Province to the national target of 3.4 million jobs could be much higher.

Although vegetable farming is not the only job generating venture in Mt. Province, it is a given that the vegetable industry has a huge impact in the economic growth and development of the province.

It then behooves the LGUs of the province to devise ways and means in order to counter the
negative effects of GATT on the vegetable industry of the province.

As things stand, with the hostile and unfavorable business climate generally prevailing
in the province and in the whole country as well due to the negative impact of GATT and the humongous unequal playing field between big business and the SMEs, these projections
as reflected in the “results” framework of the SMED Plan are nothing but PIPE DREAMS.

Unless and until safety nets should have been installed to blunt the impact of GATT and more pro-SME policies are promulgated by the national government and vigorously implemented, all those targets will just remain nothing more than targets.