Keynote speech of Secretary Arsenio M. Balisacan

1st EU-Philippines Business Dialogue 04 June 2014 Ballroom 2, Raffles & Fairmont Makati City

I would like to congratulate the European Business Chamber of Commerce of the Philippines for spearheading and launching the European Union-Philippine Business Network (EPBN) which not only advances the friendship and business between the Philippines and EU but also highlights the importance of our EU partners in spurring entrepreneurship and economic development.

Through the years, we have witnessed the growing partnership between EU and Philippines. Total trade has been increasing for the past years with Philippine exports to EU accounting for 12% of the total Philippine exports in 2013 at US$6.55 billion, and imports from EU comprising 10% of the country’s total imports.

With the entry of the EU-Philippines Business Network we expect a more solid partnership between our regions. More importantly, I would like to note that this initiative targets the development of Micro, Small, and Medium Enterprises (MSMEs), which serve as an integral part of the Philippine economy.

In 2011, the MSME sector accounted for about 99.6 percent of registered businesses in the country and employed around 3.9 million people in the same period. In terms of sectoral distribution, nearly half (47%) of the total MSMEs were engaged in wholesale and retail trade, followed by manufacturing sector (13.7%) and accommodation and food services activities (12.9%).

These highlight the role of MSMEs in the economy, and clearly, the development of this sector could contribute to poverty reduction, employment generation for the growing labor force, and economic development in rural and far-flung areas. MSMEs are valuable partners to large enterprises as suppliers and providers of support services. The sector is likewise a breeding ground for new ideas and potential large earners of foreign exchange resources.

However, the MSME sector accounted for only 35.7 percent of the country’s total value added, meaning there is much room for improvement. The sector is seen to have a “hollow and missing middle” as micro enterprises make up 91 percent of the sector. In this light, we welcome businessto-business cooperation with EU SMEs to boost the value-added of the sector.

The government, through the updated Philippine Development Plan 2011-2016, has focused its strategies on fostering a more conducive business environment to encourage more investments. As you may well know, investment is key to the generation of remunerative, durable, high-quality employment. Consistent with the national policy for inclusive growth, we continue to exercise fiscal prudence, intensify governance and institutional reforms, enhance human capital development, and pursue regulatory initiatives supportive of investments, innovation, and competition. Also, we are being more deliberate in implementing spatially and sector-focused economic and social programs, with the intention to equalize development opportunities and improve resilience, especially among the poor.

We expect the economy to grow 7 to 8 percent in the medium term. Despite the lower than expected 5.7 percent growth in the first quarter of this year, we expect the full-year growth to be within the 6.5 to 7.5 percent target.

Measures to further reduce the cost of doing business in the country are a priority. We have taken steps to hasten the process of registering business, securing business permits and clearances, among others. Moreover, we have made huge strides in improving the situation in security risk areas. Very recently, we have entered into a Framework Agreement for Peace and Development in Mindanao.

In addition, the government will accelerate the revival of manufacturing sector, given its potential for innovation, value adding, and backward linkage with the agriculture sector, which is the main source of livelihood of the poor. At the same time, we continue to support priority sectors that contribute positively to quality employment and increased productivity.

Investments in construction are strongly encouraged, particularly in rural infrastructure projects and transport infrastructure. A strong public-private partnership program is necessary to effectively govern and monitor the sector. Thus, the government, in partnership with the private sector, is pursuing the liberalization of contractors’ licensing and registration, promotion and development of domestic and overseas construction, and efficient implementation of the dispute resolution mechanism.

The PDP has also identified some necessary measures to improve the value-added of the MSMEs to the economy. One of the key strategies in the updated PDP to improve the competitiveness of MSMEs is to develop workforce competencies and skills through technical vocational education and training (TVET). In the 2015 Budget Priorities Framework, TVET is one of the priority programs in the social sector. These training programs to be implemented by the Technical Educational Skills Development Authority (TESDA) are expected to reach a total of 1.7 million trainees.

I am glad to note that the EU-Philippines Business Network project will be able to support the Philippines, particularly in strengthening key growth drivers of the country identified in the PDP. Through the EPBN, subsectors such as agribusiness, manufacturing, tourism, Information Technology-Business Process Management (IT-BPM), logistics, and construction will be promoted in view of their potential to contribute to employment generation as well as rapid and sustained growth. Focusing MSME linkage between Philippine and European firms in these areas will certainly help the government achieve its goals of inclusive growth and poverty reduction.

Under the EPBN’s identified priority areas, business opportunities may be explored in agribusiness or food; IT-BPM; transport infrastructure and logistics support; tourism; energy; and healthcare and pharmaceuticals.

For agribusiness, we continue to take fundamental steps to further increase the forward linkage of agriculture to industry and services sector by expanding existing markets, exploring new markets, and linking small-holder farmers to these value chains and commodity clusters. Private sector initiatives through entrepreneurship programs not only ensure sustained livelihood for agricultural workers, but also effectively and efficiently link small farmers into traditional markets and to growing food retailer industry, processors and corporate markets, both domestic and international.

The country strives to remain as the leader in voice business process management (BPM) services and continue promoting ICT to develop the IT-BPM industry. The efforts are guided by the 2012-2016 IT-BPM Roadmap that targets US$25 billion in revenues and 1.3 million employees and support 3.2 million indirect jobs by 2016.

As the demand for ICT outsourcing expands to finance and accounting (F&A), human resource (HR) processes Software Development and Maintenance, customer service support, and IT service and Helpdesk support, the government will nurture the Filipino talent pool by promoting and accelerating the development of high-value IT-BPM services and the Next-Wave Cities which include Baguio City, Davao City, Dumaguete City, Iloilo City, and Lipa City, among others.

Also, the government acknowledges the importance of transport infrastructure and logistics support in attracting investments and supporting productive sectors. The development of transport infrastructure focuses on improving the connectivity between urban centers and regional growth hubs; between airport and ports and tourism destinations; and between airport and ports and economic/industrial zones. Thus, we have put in place programs and projects that aim to improve the flow of people, goods and resources to and from production areas and markets.

In the area of tourism, the government welcomes business linkages in filling the gaps for accommodation requirements and better facilities and services. There are also investment opportunities in air, water, and land transport operations to provide seamless travel to tourism destinations.

The government is targeting to increase tourist arrivals to 10 million by 2016. In order to reach this target, we need to develop and market competitive destinations and products; improve market access, connectivity and destination infrastructure; and improve tourism governance and human resource capabilities. The government is focusing its efforts on developing and supporting strategic tourism cluster destinations and promoting investments in tourism estates and ecozones, historico-cultural heritage projects as well as ecotourism, agri-tourism, and health and wellness projects.

For healthcare, the Kalusugan Pangkalahatan or Universal Health Care is the government’s main strategy for improving the country’s health status. The four outcomes for KP include: achievement of public health development goals (achieve health related MDGs); financial risk protection; access to quality healthcare delivery system; and health governance. Support to the government in these four (4) areas will go a long way towards improving the country’s health status. These may include upgrading, building and improving health facilities, among others.

Finally, for the energy sector, the conservation and efficient utilization of energy through various activities under the National Energy Efficiency and Conservation Program (NEECP) is being promoted. The NEECP can serve as a platform for expanding the market for energy efficient technologies. Hence, EU SMEs may venture into the provision of technologies that promote energy efficiency such as those previously undertaken under the NEECP (e.g., replacement of traffic intersection lights with Low Emitting Diodes [LED], retrofitting of street lights, enhancement of energy efficiency testing facilities and the establishment of lamp waste management facilities).

With the increasingly globalized environment, market opportunities abound for our SMEs in the Philippines. I encourage the private and public sectors to work with their EU counterparts in searching for the missing links and filling in the gaps. I am certain that the EU-Philippines Business Network is a good step in this direction and I am hoping that it will only be the start of greater cooperation efforts between Filipino and EU entrepreneurs towards a shared vision of economic development and inclusive growth.

Thank you and good day.