How SMEs can Leverage Opportunities of ASEAN Integration
The ASEAN Economic Community (AEC) has promised an even closer integration in 2017, which will directly impact trade, create opportunities and challenges for SMEs in the region. How can SMEs leverage this trend?

Strengthening Philippine Business Strategies Towards ASEAN Integration

By John Peterson, Managing Director for Philippines, Indonesia, and Brunei

The upcoming full integration of the ASEAN Economic Community (AEC) in 2017 puts the spotlight on the preparedness of ASEAN countries, including the Philippines, in conquering challenges and leveraging the opportunities this economic milestone brings.

Introduction of new products, enhanced market access and internationalization are some of the benefits that large businesses and small and medium enterprises (SMEs) gain from the AEC[1]. But along with these advantages is the need for local SMEs to be globally competitive and adaptive in the face of this development.

SME trends in ASEAN integration

SMEs make up 96% of businesses in ASEAN member states, which generate employment and income fundamental in achieving sustainable economic growth[2].

Given that SMEs across the region are diverse, the AEC set a common vision, mission, and strategic goal for the member countries. AEC is committed to promoting ASEAN SMEs individually and collectively to be globally competitive, inclusive and resilient through innovation, entrepreneurship and exports[3].

In the Philippines, the government emphasizes the need to place SMEs at the front and center of regional trade agenda. Since the local SME sector represents 98 percent of all registered businesses and employs more than 50 percent of the entire domestic workforce[4], the government is implementing initiatives to cultivate an environment that empowers local SMEs to prosper and seize opportunities in the global market.

Neighboring countries in the Asia Pacific prove that shipping goods within the region contribute to the growth of SME revenues. Singapore and Korea are strong with their intra-regional exports with average revenues amounting to US$2.1 million and US$1.4 million, respectively.

Philippine SMEs can leverage this trend by investing in  electronic products, woodcrafts and furniture, and other manufactured goods, which are the top commodity exports of the country[5] in order to reinforce their export performance.

The Department of Science and Technology, through its Small Enterprise Technology Upgrading Program (SETUP), helps SMEs develop world-class products by improving the quality of their production and services[6]. SETUP offers technical assistance and consultancy services, conducts trainings and seminars, provides laboratory analyses, assists in product labeling, and makes industry-standard equipment and other technologies available to SMEs[7].

Evolving technology and internet tools provide SMEs an avenue to reach markets beyond their borders. By utilizing social media sites, instant messaging apps and business apps, 80 percent of SMEs reported an increase in revenue. Social media platforms not only allow them to reach their existing consumers more effectively, but also to touch base with new markets around the world.

Overcoming business challenges

While local SMEs recognize the opportunity for business growth driven by the regional integration, there are still a number of business challenges they need to face. As expected, the most commonly cited challenge is the increase in competition, internationally (38%) and locally (37%).

To overcome this challenge, SMEs must think big and set their mind on investing in training, market research, new technology, and services rather than reducing costs to be more financially viable.

The Department of Trade and Industry’s Philippine Export Development Plan supports local SMEs by providing more access to finance for market prospection, product development and market diversification. One of its strategies is focused on harnessing a national innovation system, which involves unlocking the flow of knowledge and information among stakeholders and providing incentives for collaborative research and technology development[8].

As the ASEAN region becomes one of the world’s fastest growing investment destinations, SMEs can take advantage of the booming intra-regional trade opportunities with help from logistics providers. By strategically employing technology and efficient logistics solutions, SMEs can expand their market reach and help meet local and global customer delivery requirements.

Role of logistics

To sustain regional competitiveness, enhanced and efficient logistics and distribution services[9] will reduce transport time and distribution costs within and outside the region.

For many businesses, navigating logistics can be a major hurdle to business expansion across borders. However, tapping the right logistics provider can help SMEs thrive in the global market place.

Across Asia, FedEx is helping SMEs increase their revenue by bringing better, faster, and more flexible shipping solutions to support unique business needs. FedEx has experts that assist with trade regulations and supply chain management which are common causes of setbacks for APAC SMEs exporting to other countries.

In the Philippines, FedEx has operations in Manila, Clark, and Cebu and has World Service Centers nationwide to cater to the growing and changing needs of its SME customers.

As the AEC realizes its potential as a region, it is imperative for Philippine SMEs to study the neighboring markets, examine opportunities, and invest in technology and efficient logistics services that will propel them to global competitiveness.

 

[1] Strategic Action Plan for SME Development (SAPSMED) 2016-2025 http://www.asean.org/wp-content/uploads/images/2015/November/ASEAN-SAP-SMED-2016-2025/SAP%20SMED%20-%20Final.pdf

[2] SME Developments in ASEAN http://asean.org/asean-economic-community/sectoral-bodies-under-the-purview-of-aem/small-and-medium-enterprises/

[3] Strategic Action Plan for SME Development (SAPSMED) 2016-2025 http://www.asean.org/wp-content/uploads/images/2015/November/ASEAN-SAP-SMED-2016-2025/SAP%20SMED%20-%20Final.pdf

[4] PH ready for full ASEAN integration in 2016 – DTI Chief http://investphilippines.gov.ph/ph-ready-for-full-asean-integration-in-2016-dti-chief/

[5] Philippine Export Development Plan http://www.dti.gov.ph/images/EMB/pdf/PEDP_2015-2017_Executive%20Summary%20_28as_of_09_Mar2016_29.pdf

[6] DOST programs help entreps yield more innovative products and services http://www.dost.gov.ph/knowledge-resources/news/45-2016-news/1062-dost-programs-help-entreps-yield-more-innovative-products-and-services

[7] Science campaign features successful technology-based enterprises http://www.dost.gov.ph/knowledge-resources/news/45-2016-news/916-science-campaign-features-successful-technology-based-enterprises-in-soccsksargen

[8] Philippine Export Development Plan http://www.dti.gov.ph/images/EMB/pdf/PEDP_2015-2017_Executive%20Summary%20_28as_of_09_Mar2016_29.pdf

[9] ASEAN Economic Community 2015: Progress and Key Achievements http://www.asean.org/wp-content/uploads/images/2015/November/aec-page/AEC-2015-Progress-and-Key-Achievements.pdf

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