Policies and Approaches to Promote Innovation in SMEs

Raul C. Sabularse

Deputy Executive Director, PCIERD

Philippines

THE PHILIPPINES

OUTLINE OF PRESENTATION

• About the Philippines

• Philippine SMEs

• SME Development Agenda

• DOST Initiatives

• Conclusion

THE PHILIPPINES

Population (2004)Population (2004)82.7 M82.7 M

Family Inc (US$) (2000)Family Inc (US$) (2000)1,5001,500

GDP Growth (%) GDP Growth (%) 4.44.4

Export (US$) (2003)Export (US$) (2003) 2.952 B2.952 B

Import (US$) (2003) Import (US$) (2003) 3.274 B3.274 B

THE PHILIPPINES

# Firms %

Large 2,958 0.36

Medium 2,923 0.36

Small 61,762 7.61

Micro 743,949 91.67

TOTAL 811,592 100.00

Asset

(Php M)Employment

Large > 100 > 200

Medium > 15 – 100 100 – 199

Small > 3 – 15 10 – 99

Micro Up to 3 1 - 9

1$ = Php 50

Source: SMED

Philippine SMEsPhilippine SMEs

• creates employment• source of investment and revenue• boosts personal wealth and talent

– Outlets for the talents of enterprising people– Catalyze innovations and dynamism– Stimulate personal savings

• promotes community stability– less harm to the environment than large companies– Raise level of people participation in the economy

• vital engine of economy– Earn foreign exchange– Stimulate growth in rural areas– Expand domestic markets/penetrate non-traditional markets

Importance of SMEsImportance of SMEs

Critical NeedsCritical Needs

• Appropriate technologies

• Technical manpower training

• Products standards and testing facilities

• Appropriate packaging and product labeling

• Access to information

• Access to capital

• Financial, personnel & business management

• Access to markets

• Sustainable raw material supply

• Better/more efficient transport facilities

SALES

INVESTMENT

JOBS

SME

Product Devt/ Technology

Marketing

Finance

Training Advocacy

Total & integrated approachTotal & integrated approach

Objective: To increase the contribution of SMEs to the economy

by pushing enterprises to higher levels through a convergence of assistance

- PRODUCT/TECHNOLOGY DEVELOPMENT

- SKILLS TRAINING

- FINANCIAL

- MARKETING

SME DEVELOPMENT AGENDASME DEVELOPMENT AGENDA

• DOST R&D Institutes

• Product Development and Design Center

• Packaging R & D Center

• Packaging Institute of the Philippines

• Technology and Livelihood Development Center

PRODUCT/TECH DEVTPRODUCT/TECH DEVT

• Technical Education and Skills Development Authority

• Cottage Industry Training Center• Phil Trade and Training Center• Dept of Labor and Employment• Fiber Industry Development Authority• Technology and Livelihood Development

Center• Dept of Science and Technology

TRAININGTRAINING

Niching and Clustering Address Pressing National Problems S&T Human Resources Development Support to SMEs Accelerate Technology Transfer and

Utilization Build and upgrade S&T Infrastructure Strengthen Government-Industry-Academe-

Civil Society and International Linkages in S&T

Improve S&T Governance Promote and Popularize S&T

DOST S&T STRATEGIESDOST S&T STRATEGIES

SMALL ENTERPRISE TECHNOLOGY UPGRADING PROGRAM (SETUP)

TECHNOLOGY INCUBATION FOR COMMERCIALIZATION (TECHNICOM)

DOST INITIATIVES for SMEsDOST INITIATIVES for SMEs

Technical assistance package to SMEs• Appropriate technologies• Products standards and testing• Packaging and product labeling• Access to information• Linkaging and networking

SETUPSETUP

• Food processing

• Gifts, toys, house wares, handicrafts, fashion

accessories, natural fibers and dyes

• Horticulture (Cut flowers, fruits and high value crops)

• Marine and aquatic resources

• Metals and Engineering

• Furniture

Priority SectorsPriority Sectors

InterventionsInterventions

Provision of Technology• Technology needs assessment, sourcing

and installation of technology• Seed fund for technology acquisition• Human resource development• Productivity consultancy and technical

advisory services

Product Standards and Testing• Assist BPS develop standards• Product testing• Enhancement of national and

regional DOST testing laboratories

• ISO accreditation of testing laboratories

InterventionsInterventions

Packaging and Labeling• Development of functional package

designs and identification of alternative packaging materials using local resources

• Development of appropriate labels for food products

InterventionsInterventions

Database Management and Information System• List of available technologies• List of S&T experts• Directory of testing laboratories

with testing services offered• Networking with other databases

InterventionsInterventions

INTER-AGENCY DESIGN AND ENGINEERING ASSESMENT (IDEA)

Team

1. Assess equipment requirement of firm 2. Establish efficiency indicators, maintenance and

troubleshooting guidelines for equipment 3. Identify accessories to enhance equipment efficiency4. Train local experts on trouble shooting, material/energy

balance, among others 5. Introduce concepts to ensure quality, uniformity and

efficiency of operations

InterventionsInterventions

Linkaging and Networking• Raw material sourcing• Marketing• Financing• Equipment design and fabrication

InterventionsInterventions

BRIDGING THE GAPBRIDGING THE GAP

Technology Generation Commercialization

Stimulate technological innovation

Strengthen SMEs to adopt results of R&D

Increase private sector investment in R&D

Maximize benefits from R&D investments

TECHNICOMTECHNICOM

To fast track the commercial application of technologies developed by the S & T community

• business plan preparation• IP protection• negotiation and licensing • commercial prototype• pilot scale production• training and consultancy

TECHNICOMTECHNICOM

• SME Database

• Trade Fairs/Exhibitions– Provincial Trade Fair – National Trade Fair – Manila F.A.M.E.

• Buying and selling mission– Domestic Fairs– Int’l Fairs Buyer-supplier matching

• Permanent display showrooms

MARKETINGMARKETING

• Business Counselors (BCs) provide consulting and advisory services to SMEs – How to prepare a business plan

– How to market products better

– What training courses to take

• 60 BCs at SME Centers

• Over 100 Volunteer BCs– FINEX (Financial Executives of the Phil)

– MAP (Management Assoc of the Phil)

– PICPA (Phil Institute of Certified Public Accountants)

Business CounselingBusiness Counseling

• SME Unified Lending Opportunities for National Growth (SULONG)

• Venture Capital• Initial Public Offerings (IPO)

• Bonds

• Advances from clients

FINANCEFINANCE

Qualified Borrowers

• all industries except imported goods, liquor, cigarettes, and extractive industries.

• at least 60% Filipino-owned

• not more than P100 M assets

Requirements

• Debt/Equity Ratio of at most 80:20

• positive income for the preceding year/s

SULONGSULONG

We have been trying to push the economy from the top. But to move the economy faster, we also need to push from the base.

SMEs

CONCLUSIONCONCLUSION