Final Module 01 - The Role of Entrepreneurship in Philippine Economy

MODULE 1 Santiago Campus

(The Role of Entrepreneurship in Philippine Economy)

THE PHILIPPINE ECONOMY

The national economy is composed of business enterprises, households, and the government. These are the major sectors of the economy. The strength or weakness of one sector affects the other sectors because of their interdependence. However, it is the government which provides the leadership in improving the economy.

In economic development, the bottom line is the quality of the people of a given country. Knowledge, skills and values are the main determinants of economic growth. Needless to say, values constitute the key to economic success of any nation. The Japanese are risk takers, hardworking and self reliant. Such entrepreneurial qualities have made Japan a prosperous nation. But above all, the Japanese love their country-including its culture, traditions, institutions and products. THE COLONIAL RULE

The Philippine became the slave of three colonial masters; Spain, United States and Japan. For more than three centuries we were under Spanish rule, and about half a century under the American regime. The Chinese dominated the retail trade business even during the Spanish time.

Likewise, Japan invaded the Philippines and other Southeast Asian countries for economic reasons. It had problems such as population explosion, shortage of raw materials and surplus of factory products. Our economy was at its worst during the Japanese time. Goods and services were extremely scarce. The production of sugar stopped for lack of foreign market. As a result, inflation became very high. This was aggravated by the printing of money by the Japanese government. Most Filipinos starved. Rice sacks were used as clothing. The price of rice per cavan was P30 before the war. During the Japanese time, it was P3,000.

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(The Role of Entrepreneurship in Philippine Economy)

The United States granted our political independence on July 4, 1946. FiIipinos rejoiced and expressed their gratitude to the U.S. government, only to realize later that our independence was not meaningful. The United States still influenced our political and economic policies. The Americans imposed the Bell Trade Act of 1946. This gave the American businessmen the right to exploit our natural resources to operate public utilities and other businesses, and to enjoy the pre-war free-trade agreement. The Philippine government accepted the Bell Trade Act in exchange for war damage payment.

THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

There are various definitions of entrepreneurship. However, the key concept is INNOVATION. This refer to new or different ways of doing things, like technology, marketing, human relations, management, and so forth. When an individual creates a new product, it is innovation. When he sells his product in a new approach, it is also innovation.

Entrepreneurship in the Philippines In the Philippines, entrepreneurship is viewed as important to empowering the poor, enhancing production, and as an impetus to innovation. The 1987 Philippine Constitution recognizes entrepreneurship as an engine of economic growth. Article XII Section 1 highlights the role of private enterprises in supporting equitable distribution of income and wealth, sustaining production of goods and services and expanding productivity, therefore raising the quality of life. The Philippine Development Plan (PDP) further reinforces the thrust on entrepreneurship through trade and investment to achieve the government’s goal of economic development and job creation. Based on the plan, measures for macro-economic stability, employment, trade and investment, agribusiness, power-sector reforms, infrastructure, competition, science and technology, and anti-corruption are being pursued to strengthen Philippines’s competitiveness and contribute to job creation.

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MODULE 1 Santiago Campus

(The Role of Entrepreneurship in Philippine Economy)

In 2011, there were approximately 830,000 business enterprises in the Philippines. Of these, 99.6 percent are classified as micro, small, and mediumsized enterprises (MSME) which are responsible for 38 percent of total job growth. ENTREPRENEURSHIP DEFINED

ENTREPRENEURSHIP, according to Professor Nathaniel Left, is the capacity for innovation, investment and expansion in new markets, products and techniques.

•

“Entrepreneur” derives from the French words entre, meaning “between,” and prendre, meaning “to take”

•

Originally used to describe people who “take on the risk” between buyers and sellers or who “undertake” a task such as starting a new venture

ECONOMIC DEVELOPMENT AND GROWTH EXPLAINED

Development is a process while growth is a product. So, growth is a result of development. In agriculture, the application of fertilizers, insecticides, labor, machines and other productive inputs represents a process or development. The results or outputs are crops like corn, rice, or sugar. In simple terms, development is input while growth is the output.

DEVELOPMENT AND GROWTH THEORIES

1. LAISSEZ FAIRE THEORY- this theory explains that the government should not interfere in economic activities. It is absolutely free- enterprise economy. The role of the government is only confined in education, justice and public works.

2. KEYNESIAN THEORY- The government should play the key role in economic development, particularly in less developed countries, or those with depressed economic conditions. This theory contends that during economic depression the government should put up Page 3 of 11

MODULE 1 Santiago Campus

(The Role of Entrepreneurship in Philippine Economy)

massive public works, like construction of roads and bridges, other labor intensive projects. These generate large-scale employment resulting to more incomes to more people.

3. RICARDIAN THEORY- This is the theory of David Ricardo, an English classical economist. He believes that the key factor in economic growth is land. This means that agriculture plays a major role in economic development.

4. HARROD-DOMAR THEORY- This was conceptualized by Sir Harrod of England and Professor Domar of United States. The key factor in economic growth is physical capital like machines. The theory claims that more products can be produced through the use of machines.

5. KALDOR THEORY- Nicholas Kaldor maintains that the key factor is technology. The theory explains that the application of modern technology in the production of goods and services has been responsible for the economic success of the highly developed countries like United States, Japan, Great Britain, France, Italy, and Germany. 6. INNOVATION THEORY- This was developed by Joseph Schumpeter. He stresses the role of innovators or entrepreneurs in economic development. Schumpeter says that it is the innovator who has the courage and imagination to handle old systems, and be able to transform the theory into reality. It is the innovator who introduces change for the better.

7. NON-ECONOMIC THEORIES- There are several other theories which are non economic in nature. Their key factors are political stability, efficient public administration, open society, and positive cultural values.

THE IMPORTANCE OF ENTREPRENEURSHIP

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Statistics in both rich and poor countries show that small enterprises are leading in the generation of jobs and wealth. In the Philippines, most of our economic activities fall under the micro and small business categories. There are many retailers, vendors, and other small sole proprietors.

“The Harvard Business School is beginning to see that its role is not just training general managers, but also training and providing preparation for people to start their own business… It is a kind of a new freedom to go out and take some risks and run your own show… It’s a kind of a new frontier for people of some boldness and creativity.”

CONTRIBUTIONS OF ENTREPRENEURS

1. Develop new markets (the modern concept of marketing, markets are people who are willing and able to satisfy their needs) 2. Discover new sources of materials (entrepreneurs are never satisfied with traditional or existing sources of materials) 3. Mobilize capital resources (entrepreneurs are the organizers and coordinators of the major factors of production, such as land, labor, and capital. They properly mix these factors of production to create goods and services) 4. Introduce new technologies, new industries and new products (aside from being innovators and reasonable risk takers, entrepreneurs take advantage of business opportunities, and transform these into profits. So, they introduce something new or something different.) 5. Create employment (the biggest employer is the private business sector. Millions of jobs are provided by factories, service industries, agricultural enterprises, and the numerous small-scale businesses.

THE GOVERNMENT AND ENTREPRENEURSHIP

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Santiago Campus

In underdeveloped countries, the government plays a major and active role in economic development. Aside from setting up the economic infrastructures, like roads, bridges, transportation, communication and electric facilities, the government is directly involved in business and industry where the private business sector has no or inadequate investment. Although, entrepreneurs are risk takers, self reliant, and optimistic, there are factors which encourage or discourage them to invest. Obviously, the primary factor or determinant of investment is profit. It is very clear, therefore, that there is a very strong and direct relationship between the government and entrepreneurship. It is the government that provides the basic incentives

to

entrepreneurship.

In

return,

entrepreneurship

accelerates

economic

development through more employment, production and consumption. Precisely, this is the goal of government for the people.

DETERMINANTS OF INVESTMENT

Profit is the first consideration in investment. It is profit that stimulates businessmen to go into business.

THE ROLE OF THE GOVERNMENT

During the 1700’s in Europe, particularly England, the Laissez Faire system of government was practiced. The non-interference of the government in economic activities led to the growth of capitalism. The capitalists, however, abused their powers and privileges. They exploited their workers in terms of low wages and long hours of work, usually 17 hours a day. They also paid very low prices for the raw materials produced by farmers. These miserable situations happened during the height of the Industrial Revolution in England. The role of the government is to promote the welfare for all sectors-producers, consumers, employees, businessmen and the rest of the society and the economy. It is of course, difficult to strike a happy balance of support among all members of society. But a good government always considers social justice as a basic yardstick in public administration.

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The Philippines is a highly entrepreneurial country. The main reason that drives its entrepreneur spirit is its poverty. Small and medium-sized enterprises (SME) account for the largest share of Philippine entrepreneurs. SMEs, including micro-enterprises, account for 99 percent of all business establishments and 60 percent of the exporting firms in the Philippines. SMEs currently employ about 55 percent of the Philippine labor force and contribute 30 percent to total domestic volume sales. Women hold significant leadership positions in national and local government, universities, business corporations and family business enterprises in the Philippines. 51% of entrepreneurs in Philippines are female. Challenges for entrepreneurs in Philippines include a lack of research and development, inadequate access to technology, financing—most entrepreneurs starting small business in the Philippines have difficulty acquiring capital, a lack of marketing advice and logistical problems. The Philippines government sees that Entrepreneurial efforts will help ignite economic growth, improve living standards, and build a worldwide market for Philippine products so they welcome foreign investors and offer incentive and support by lowering tariffs, opening its entire economy, including land ownership and “free trade.”

GOVERNMENT ASSISTANCE PROGRAM

1. Peace and order 2. Political stability 3. Price stability 4. Taxes 5. Infrastructures 6. Education and training 7. Public administration 8. Production technology 9. Marketing assistance 10. Financial assistance

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Santiago Campus

PRIMER: MAGNA CARTA FOR SMALL ENTERPRISES

1.

WHAT IS R.A. 6977, OTHERWISE KNOWN AS THE MAGNA CARTA FOR SMALL

ENTERPRISES?

R.A. 6977, signed on 1991 January 24, is an act to promote, developed and assist small and medium scale enterprises (SMEs) through the creation of a Small and Medium Enterprise Development (SMED) Council, the establishment of a Small Business Guarantee and Finance Corporation (SBGFC), the mandatory allocation of credit resources to small enterprises and the rationalization of government assistance programs and agencies concerned with the development of SMEs.

2.

WHO WILL BENEFIT FROM THE MAGNA CARTA FOR SMALL ENTERPRISES?

Small and medium enterprises will benefit from the Magna Carta for Small Enterprises

3.

WHAT IS SMALL AND MEDIUM ENTERPRISE?

A small and medium enterprise is defined as any business activity or enterprise engaged in the industry, agribusiness and/or services, whether single proprietorship, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, must have value falling under the following categories:

MICRO–

less than

–P50,000

COTTAGE–

P50,001

–P500,000

SMALL–

P500,001

–P5,000,000

MEDUIM–

P5,000,001

–P20,000,000

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4.

WHAT IS THE SMALL AND MEDUIM ENTERPRISE DEVELOPMENT COUNCIL?

The council shall be the primary agency responsible for the promotion, growth and development of SMEs in the country by way of facilitating and closely coordinating national efforts to promote the viability and growth of SMEs, including assisting relevant agencies in the tapping of local and foreign funds for SME development, as well as promoting the use of existing guarantee programs.

TYPES OF SME SKILLS TRAINING

 Meat Processing

 Speed Sewing

 Fish Processing

 Salt and tile making

 Peanut Processing

 Basic Carpentry Training

 Wine and Vinegar Processing

 Skills Training on Rope Making

 Mango Chip Processing

 Bamboo Craft (basketry)

 Skills upgrading on knitting

 Embroidery

(paghahabi)

 Soft Broom Making

 Skills upgrading on Leather craft

 Stuffed toy Training

 Skills Upgrading of Shell Craft

 Sawali making

 Skills Upgrading on Ceramics

 Loom Weaving (machine)

 Skills Upgrading on Pottery

 Clay Hollow block Making

 Skills Upgrading on Banacbac

 Seagrass Basketry

Handicrafts  Skills Upgrading on Coco-midribs Handicrafts

 Rattan Basketry  Christmas Décor Making  Fruit Processing

 Chalk Making

 Candle Making

 Bamboo Furniture Training

 Banana Processing

 Duck Raising and Hatchery

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TYPES OF SME MANAGEMENT TRAINING

 Simplified Bookkeeping

 Store Design/Merchandising

 Financial Management

 Effective Time Management

 Business Management

 Leadership Training for Farmer

 Marketing Management  Production Management  Product Planning and Development

Leaders  Management Extension and Consultancy

 Furniture Business Development

 Advertising and Promotion

 Strategic Marketing

 How to get started in Exports

 Product costing and Pricing

 How to negotiate with Buyers

 Basic of Exporting

 Exports Management

 Consumer Education

 Entrepreneurship Development

 Productivity Quality Improvement  Improve Your Business Training  Symposium on Livelihood Projects  Starting a Small Business  Subcontracting with Exporters  Organizing a Corporation  Value Formation Seminar

Seminar  Seminar on Bookkeeping and Accounting  Seminar on Management & Simple Bookkeeping  Cooperative Management and Simple Bookkeeping

 Teambuilding

Nurturing the entrepreneurship paradigm Entrepreneurship is more than just an economic term — it is a way of thinking. Creating jobs, empowering people, and giving individuals access to better lives for themselves and their children is a wonderful gift. Today, it has become a dynamic, developing part of the economy promoting inclusive growth. Entrepreneurship is a way of inspiring creative individuals to pursue opportunities despite its risks.

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In closing, the challenge for countries like the Philippines is to accelerate both the political and economic leadership that can muster social reforms through entrepreneurship. Entrepreneurs have the power to achieve great things. Entrepreneurs will emerge as the well-oiled wheels that will keep the economy going and the society efficiently running.

http://www.cipe.org/publications/detail/entrepreneurship-philippines-opportunities-andchallenges-inclusive-growth

http://www.internationalentrepreneurship.com/asia/philippines/

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