Q&A with DTI Secretary Ramon Lopez on Championing The SMEs

The Department of Trade and Industry (DTI) under the new president Rodrigo Duterte and Secretary Ramon Lopez defined its overall mission as alleviating poverty and uplifting the quality of life of all Filipinos. This will be done through sustainable economic growth that generates more income opportunities through employment and entrepreneurship. Secretary Lopez, a champion of SMEs for the last eleven years with his Go Negosyo advocacy, shares his insights about this mission.

Q1: Which industries do you consider as globally competitive and innovative in the Philippines that are capable of generating more quality employment and higher income opportunities?

A: Our mission is to develop innovative, competitive, job-generating and inclusive industries that will create employment and income opportunities and address inequality and bring prosperity for all. These would be industries where we have comparative advantage, which our country should be known for. We have studied industry resource-based, their revealed comparative advantage (RCA) indices, their job-generating capabilities and respective multiplier effect on the economy and we have come-up with the following areas which we should develop and excel in:

12 priority sectors:
1) electronic manufacturing services (auto electronics, medical devices, telecommunication equipment, power storage, civil aviation / aerospace) and semiconductor manufacturing service: IC design
2. Automotive and auto parts
3. Aerospace parts
4. Chemicals
5. Shipbuilding: RoRo as well as small and medium-sized vessels
6. Design-oriented furnitures and garments
7. Tool and die
8. Agri-business: food and resource-based processing (cacao, coffee, mangoes, banana, coconut, bamboo, fruits and nuts, palm oil, and other high value crops)

9. IT-BPM: higher earning and more complex non-voice services, BPO, and Knowledge Process Outsourcing (KPO) segments in medical, financial, and legal services, game development, engineering design in manufacturing, software development and shared services.
10. Transport and Logistics
11. Tourism
12. Construction

Q2: What are your priorities in building an efficient supply chain ecosystem in order for producers to supply quality goods and services at affordable prices?

A: We need to have an efficient set of economic infrastructures such as farm-to-market roads, bridges, seaports, airports, railways for cargo, passengers and RORO vessels and service providers. We have aligned with the DPWH and DOTr to ensure that business infrastructures are aligned with the needs of the industry sector, in terms of types and geographical location of industries. There is a national Logistics Master Plan being reviewed and finalized . We shall review policies and support bills that will further improve the air and shipping and inter-modal connectivity and policies to allow more competition in the logistics and transport industry that will further bring down costs.

Q3: Aside from President Duterte’s mandate to have a maximum 3-day turnaround time to get permits, what do you want to achieve to accelerate ease of doing business in the Philippines?

A: We have streamlined the process and forms in the processing of Business Permits and Licenses that should enable the completion of the process in 2-3 days. The form has been shortened to 2 pages, which is practically a one-pager simple form to fill-up, and the second page for assessment. With streamlined form, we can then automate the process and further shorten the processing time to less than one hour. Other agencies which are partners in this effort are the DILG and DICT. Moreover, there is an ongoing project REPEAL that is currently reviewing and rationalizing the over 25,000 government Department Orders, Rules and Regulations to remove inconsistent, irrelevant and old rules, streamline procedures. Thousands of Memoranda and Orders have already been repealed and the review continues. Moreover, there are reviews being done to prolong the effectivity of licenses issued, to lessen the frequency of applications.

Q4: Do you agree with Senator Bam Aquino that new businesses should be tax-exempt for two years? Will this also apply to foreign investments?

A: Yes. For Micro businesses, they need to be encouraged to surface and register and not be afraid of the complexities of facing tax revenue officers. There is a need to simplify the tax due for Micro businesses, let say, having a fix rate of P500 or P1000 per year, and simplifying the reporting to once a year, rather than monthly frequency of submitting reports and payments. This is a way to encourage Micro businesses to formalize their businesses. Such programs shall also broaden the the tax base and generate more revenues coming from a wider base.

Q5: Which social enterprises, local or international, would you like to see more of and why?

A: Social enterprises like Human Nature and R2R or Rags to Riches are two ideal social enterprise models because they are sustainable as a business model, innovative and competitive in the market and their products really excel. As they achieve triple bottom line, they really level-up their products that make them really marketable. People will continuously purchase your products if they are really good and offer value, and not just for charitable purposes. It is only a plus that the products sale will benefit a marginalized group, likened to a business with a social purpose, but key is the unique value that the products offer. Their businesses offer real good benefits, to the consumers and the workers which would normally get salaries that are higher than minimum wage, and where the suppliers or farm producers would get higher prices for their supplies since products are supplied directly, eliminating traders in the supply chain.

Q6: To push for export, you like to encourage clustering and value chain linkages that link with MSMEs sourcing of products and services. What exactly do you mean by this?

A: In essence, the strategic approach is to work on the value chain of many of our key resources, in an effort to value-add into more innovative products. Being a resource-base, the Philippines stands to gain a potential unique advantage as a major supplier to the world market. Value chain linkages foster partnerships between the MSMEs as suppliers of goods and services, and the large enterprises (LEs) as buyers. It is also known as our inclusive business model, where we link the small farmer or entrepreneur in the value chain of the bigger businesses, to generate a sustainable business arrangement that will allow the small partner to hone their specialization and eventually level-up as well. The process includes setting up of platform for MSMEs and LEs as a venue for discussion and exchange of information. This is now being done thru fora we hold around the country, or thru the use of technology apps that directly links the small producers with the LEs. This also includes capacity-building to enable MSMEs to adequately comply with the requirements of LEs. Moreover, this includes access to credit for any upgrading requirements of the MSMEs; and establishment of common service facilities such as fabrication lab, Co-working spaces, innovation centers, testing labs, shared service facilities (SSFs). We also have corollary initiatives that encourage partnerships between the multinational corporations (MNCs) and MSMEs by matching the needs and requirements of the former with the production capability of the latter. This includes ongoing projects such as the Regional Interactive Platform for Philippine Exporters (RIPPLES) Plus Program which handholds MSMEs to develop their export capabilities and value-add on their products, links the MSMEs to the supply needs of exporters and traders, and facilitates development of supply chain logistics such as roads ports, ROROs that integrates them to the global value chain. It is spearheaded by the Export Marketing Bureau and the Regional Operations groups of the DTI.

Q7: One of your priorities is consumer protection against unfair trade practices. Over four million Filipinos have joined direct selling companies as independent distributors in the Philippines. Many have fallen victims of illegal pyramiding scams using binary plans that required them to balance recruits than sales volume, a violation of Consumer Code of the Philippines against chain distribution plan. As a deterrent to other pyramiding companies, what is your thrust to run after these increasing numbers of pyramiding companies in the Philippines under your administration?

Through our Consumer Protection group, we shall develop an accreditation system with the SEC and private groups such as the Direct Selling Association of the Philippines (DSAP) that will review and accredit and control all forms of Multi Level Marketing (MLM), Direct Selling and other similar forms of selling and investments/recruitment programs. DSAP is an organization of legitimate direct sellers, where the officers and members police each other as they are guided by the 8-point test provided by their adviser Mr. Josiah Go on how to detect if the selling system is legitimate or not. Illegal distribution plans and any form of scam should stop since it victimizes a lot of ordinary people with their hard-earned money. We should have a positive list of accredited companies involved in genuine and legal multi-level marketing after undergoing a process of review and program presentation to a panel of experts from government and private sectors. With the help of other agencies, the public shall be adequately warned of the risks involved in dealing with uncertified enterprises. Public will be encouraged to file appropriate criminal or civil complaints against concerned pyramiding enterprises.

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