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To PH MSMEs: Innovate to survive Fourth Industrial Revolution

PILI, CAMARINES SUR, Philippines – Innovative products varying from cosmetics, personal care, and home accents derived from pili nuts are seen showcased at the Regional High Value Crops Processing and Value Adding Center of the Department of Agriculture Regional Office in Pili, Camarines Sur, 17 July 2015 file image. Senator Win Gatchalian’s Philippine Innovation Act will mandate banks to set aside at least 4% of their total loanable funds for the innovation development credit among MSMEs. Photo by Mark Cayabyab/OS WIN GATCHALIAN

Philippine micro, small, and medium enterprises (MSMEs) need to constantly innovate their products and services if they want to survive the global disruptions caused by the Fourth Industrial Revolution, Senator Win Gatchalian said.

Speaking at the recent 27th Metro Manila Business Conference, Gatchalian urged MSMEs to foster a culture of innovation in order to allow them to upgrade their products and services, with an emphasis on value-added products.

“In this day in age, we must choose between innovation or eradication. In three words: Innovate or die,” Gatchalian, chair of the Senate Committee on Economic Affairs, said.

“I am confident that you will all endeavor to innovate and thrive. The innate entrepreneurial spirit of the Filipino has always allowed Philippine firms to rise to the emerging challenges in the business environment,” he added.

The lawmaker pointed out that in the Philippines, one of the constraints that many MSMEs face is access to finance. The lack of access to financial tools limit MSMEs’ productivity and capability to innovate their products and services, he said.

Gatchalian noted that the Philippines performed above the ASEAN average in the 2018 ASEAN SME Policy Index, behind Singapore, Malaysia, Thailand, and Indonesia.

To improve our rankings further, the senator said the government must focus on improving two areas where the country had sub-par performance: Access to Finance and Legislation, Regulation, and Tax.

Gatchalian said a survey conducted by the World Bank Enterprise in 2015 explains the Philippines’ sub-par performance in these areas. The survey showed that 27% of small-sized Philippine firms had recent loan applications rejected, while medium-sized firms bear a rejection rate of 4%.

To help ease the burden of MSMEs in the country, Gatchalian said he championed the passage of the Philippine Innovation Act, which now only needs President Rodrigo Duterte’s signature to become law.

The Philippine Innovation Act declares it to be the policy of the State to foster innovation as a vital component of national development and sustainable economic growth.

The Philippine Innovation Act, in essence, puts emphasis on the concepts of strategic innovation and knowledge-based economic development by adopting the “whole of government” approach to facilitate engagement with business, the research, development, and extension (RD&E) sector, MSMEs, and the broader community towards ensuring the full and effective implementation of the country’s innovation agenda.

Gatchalian also highlighted three sections of the Act, which will help address the lack of financial access of MSMEs.

These provisions are Section 22, which espouses the development of an Innovation Credit and Financing Program; Section 23, creates a credit quota which mandates all banking institutions, whether government or private, to set aside at least 4% of their total loanable funds for the innovation development credit; and Section 21, which provides for the establishment of a ₱1 billion Innovation Fund.

“All in all, I am confident that these provisions will truly empower MSMEs to financially adapt, innovate, and rise to greater heights in the Fourth Industrial Revolution and beyond,” Gatchalian said.

“By encouraging the proper investments in innovation and human capital development, I am certain that Philippine capital and labor will not only survive, but thrive in the rapidly changing economic times of today,” he said.