Philippine gov't needs to support MSMEs to sustain growth - ADB

15:06, July 20, 2011      

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The Philippine government needs to support micro-, small- and medium-sized enterprises (MSMEs) to expand the country's private sector and sustain growth, the Asian Development Bank (ADB) said Wednesday.

In its report "Philippines: Private Sector Assessment", the Manila-based lender proposes that the Philippine government can help MSMEs by lowering the cost of doing business. This can be done by improving infrastructure; streamlining and removing excess administrative procedures; and creating a fair competitive environment through antitrust laws and good business practices.

The ADB noted the absence of a "healthy, competitive industry sector" in the Philippines. This indicates that the country's private sector can't cope with a more open economy and weak partnership between public and private sectors.

The ADB said one of the problems that keep the private sector from growing is that its small and medium enterprises can't prosper owing to lack of capital, unreliable supply chains, and weak demand for their output.

MSMEs account for 99 percent of the over 800,000 registered businesses in the country, according to the National Statistics Office.

The "disconnect" between smaller businesses and large companies is also hampering the growth of MSMEs, according to the ADB.

"The inability of MSMEs to provide efficient and cost-effective support to large firms on the one hand, and the lack of demand from large firms for such support from MSMEs, on the other hand, present a vicious cycle that debilitates the sector," the report said.

The ADB added the government needs to prove the accessibility and quality of infrastructure by promoting public-private partnerships (PPPs).

The present administration is promoting PPP as a way to develop its infrastructure and attract more investments. But the ADB said businesses shun PPPs because of unclear policy and regulatory frameworks, a cumbersome government approval process, and a lack of bankable projects. Other impediments, such as controversial judicial decisions, have also constrained PPP growth.

The ADB advised that the government should improve transparency in PPP project selection, provide better accounting of revenues and expenditures, and have a higher-profile anti-corruption drive.

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