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Decano, Garri Osia, Jeralvin L. Palada, Aaron Umengan, Jhon Shain G.


Department of Science and Technologys Small Enterprise Technology Upgrading Program (SETUP) Succeeded in Improving the Productivity of the Micro, Small and Medium Scale Enterprises (MSMEs)

I. Introduction

Small Enterprise Technology Upgrading Program boosting the competitiveness of Micro, Small and Medium Scale Enterprises (MSMEs) towards countryside development and inclusive growth. MSMEs is any business activity or enterprise engaged in industry, agribusiness, and/or services in single proprietorship, cooperative, partnership or corporation whose total assets inclusive of those arising from loans but exclusive of the land of which the particular business entitys office, plant and equipment are situated. MSMEs Micro Small Medium By Assets P1.00 Up to P3,000,000 P3,000,001 - P15,000,000 P15,000,001 - P100,000,000 By Employees 1 - 9 employees 10 - 99 employees 100 - 199 employees

(Source data: Philippine Institute for Development Studies; and Medium Enterprises' (SMEs) Access to Finance: Philippines)

MSMEs as an engine to countryside development and inclusive growth:

99.6% of registered business enterprises 35.7% Contribution to GVA Test Beds for Innovative Products and Services

Employs 61.2% of Labor Force Provides Economic Activities at Countryside

Breeding Ground Of Successful Companies

99.6% of registered business enterprises Number of Establishments As of 2011 count, there are 820,255 business enterprises operating in the Philippines. Of these, 99.6% (816,759) are micro, small, and medium enterprises (MSMEs) and the remaining 0.4% (3,496) are large enterprises. Of the total number of MSMEs, 91.0% (743,250) are micro enterprises, 8.6% (70,222) are small enterprises, and 0.4% (3,287) are medium enterprises.

Sectoral Distribution Majority of the 816,759 MSMEs in operation in 2011 are in the wholesale and retail trade, repair of motor vehicles and motorcycle industries with 383,636 business establishments; followed by manufacturing with 111,765; human health and social services, financial and insurance, and other service industries with 109,440; accommodation and food services with 105,123; and, information and communication, administrative and support services, professional

scientific and technical, education, arts and recreation industries with 85,554. These industries accounted for about 97.2% of the total number of SME establishments.

Geographical Spread of MSMEs Majority of the MSMEs in operation in 2011 can be found in the National Capital Region (NCR), with 211,974 business establishments; Region 4-A (CALABARZON) with 122,562; Region 3 (Central Luzon) with 83,279; Region 7 (Central Visayas) with 50,078; and Region 6 (Western Visayas) with 47,166. These top five (5) locations accounted for about 63.1% of the total number of MSME establishments in the country.

35.7% contribution to GVA (Gross Value Added) In terms of value-added, the MSME sector contributed 35.7% of the total with manufacturing contributing the largest share of 6.87%. Wholesale and retail trade and repair contributed 6.58% followed by financial intermediation with a share of 6%. Within the sector, small enterprises accounted for the largest share of 20.5%. Medium enterprises followed with a share of 10.3% while micro enterprises registered a share of 4.9%. Among small enterprises, wholesale and retail trade and repair contributed with the most with a share of 4.07% followed by manufacturing with a share of 3.82% while financial intermediation was next with a share of

3.35%. For medium enterprises, manufacturing accounted for the biggest share of 2.77% followed by electricity, gas, and water with a share of 1.92% and financial intermediation with 1.87%. For micro enterprises, wholesale and retail trade and repair represented the largest contribution of 1.73%.

Employs 61.2% of countrys labor force MSMEs generated a total of 3,872,406 jobs in 2011 versus 2,473,336 for the large enterprises. This indicates that MSMEs contributed almost 61.0% of the total jobs generated by all types of business establishments that year. Of these, 28.0% or 1,778,353 jobs were generated by micro enterprises; 25.9% or 1,642,492 by small enterprises; and 7.1% or 451,561 by medium enterprises.

Provides economic activities at countryside Economic activities like agricultural production and trading, marine weaving and handicrafts production and exportation, housing development, crop production (cereals, cash crops, vegetables), large and small animal-raising (poultry, rabbits or pigs), bee-keeping, fish culture, milling (hand mills), hulling, food preservation (cold storage and drying, juice, jam and bread making), processing equipment. The manufacture of farm implements, rural construction, wood and metal workshops, masonry and welding, motor repairs, weaving, dyeing, basketmaking, embroidery, shoe-making, and sewing. The selling of basic commodities such as salt, sugar, milk, matches and soap, the buying and selling of agricultural commodities and handicrafts, the selling of various inputs, the buying and selling of agricultural and pare-agricultural implements and equipment, grain shops and banks, village pharmacies and import-export activities.

Breeding ground of successful companies in the future MSMEs as the smallest unit of business sector, serves as the building blocks and stepping stones for big companies and firms in the future.

Test beds for innovative products and services e-Marketing: Bridging island products to the mainstream, the activity is part of the regional agencys efforts to further support the adaptors of Small Enterprise Technology Upgrading Program (SETUP)the DOST program that provides a package of intervention, including interest and collateral-free funding for technology upgrades to micro, small, medium enterprises (MSMEs).While the SME sector is recognized as the focal point for growth that will ensure that the Philippine economy moves forward despite the threats of an unfavorable global environment, the overall fiscal condition of the country prevents it from being given utmost financial support. Development programs have been laid out but resources are not readily available because of competing demands for government support. It is also in this light that the government is open to learn new modalities in gathering and analyzing data. The administration has given outmost policy attention to SME development and hopes that that through new and better development initiatives, stakeholders can move the program forward.

Unfortunately, their full potential has not been maximized due to: Low productivity Lack access to technology Poor access to market information Lack of access to finance SMEs cannot obtain financing from banks and other sources in order to start, innovate, grow and develop their enterprises. The present survey, which was carried out among 97 firms in Central Luzon covering garments, textiles, automotive, electrical and electronics, and food manufacturing and other industries; illustrates the experiences of MSMEs in seeking bank credit financing, capital lease, equity financing, government and trade supplier credit. Overall, the results reflect the difficulties faced by SMEs in accessing finance. For both firms with access to finance as well as those that did not make any finance request, financing obstacles (12%) posed as one of the top four serious problems for the growth of their businesses along with increasing competition, rising business cost, and instability of consumer demand. The current survey shows the continued dependence of SMEs on internal sources of financing not only during the start-up phase but also to finance the current operations of the

business. To keep their business operations running, firms have continued to rely on personal savings of business owners (29%), retained earnings (22%), and loans from individuals (11%). Finance sources for start-up operations consisted mainly of personal savings of owners (37%), loans from friends or relatives of business owners (20%), retained earnings (9%), and loans from individuals unrelated (8%). Commercial or personal loans and lines of credit from financial institutions including credit cards accounted for 12% of the total. Close to 41% of the respondents intend to expand the size and scope of their business in the next two years while 44% do not have intentions of expanding. 67% said that the companys current financing to fund the expansion plan through internal funds alone is not sufficient. 23% said the owners will fund the expansion by sharing equity in the business, 67% by making a loan request, and 21% through other ways such as borrowing from relatives and friends. Previous surveys also showed a substantial proportion of firms that plan to borrow in the future. The proportions ranged from 52% under the PEP to 96% for the NATCCO survey. However, that despite a large majority of firms that expressed plans to borrow from banks in the future, the continuing dependence of firms on internal sources of financing may seem to suggest a gap between the plans of firms to borrow and the actual amount of funding made available by banks. High cost of doing business

With these conditions affecting the instability of our economy, the Department of Science and Technology launched the Small Enterprise Technology Upgrading Program (SETUP). DOST as a technology provider is the premiere science and technology body in the country charged with the twin mandate of providing central direction, leadership and coordination of all scientific

and technological activities, and of formulating policies, programs and projects to support national development. It is the implementing agency that gives funding assistance to Small and Medium Enterprises (SMEs) through Small enterprise technological upgrading program (SETUP) to upgrade production facilities and machineries to increase productivity.

II. Body As an answer to call of President Arroyo in making our economy a progressive one, DOST launched this thing as Small Enterprise Technology (SETUP). What is DOSTs SETUP? It is the nationwide strategy of the Department of Science and Technology which encourage and assist the Micro, Small and Medium Scale Enterprises (MSMEs) to adopt appropriate technology innovations to: improve their operations and expand the reach of their business; to increase their productivity and competitiveness towards progress and inclusive growth in the country side. It responses to the publics demand to improve access to technologies and breakthroughs developed by the different facilities of DOST. It was first launched during the Arroyo administration and DOST once again promote it at the Nutricomnet Media Forum last November 16 at the DLeonor Hotel, for the benefit of the private partners in attendance. The Program enables MSMEs to address their technical problems and improve productivity and efficiency through: Infusion of appropriate technologies for operation advancement Participating MSMEs will be assisted in assessing their technology needs and appropriate technologies recommended for adoption. Once identified, source(s) of the technology will be determined and negotiations for the acquisition and installation of the technology will be done. Human resource training, technical assistance and consultancy services Participating firms shall be provided with technical training on key production aspects such as Hazard analysis and critical control point (HACCP) particularly for food processing; Good manufacturing practices (GMP); Quality/environment management system (QMS/EMS) as well as training on specific technical skills such as machining for furniture, handloom weaving, seaweed culture and tissue culture production, among others. They shall be also provided with continuing technical and productivity consultancy services including CP/ETV and Effective Energy Management/Energy Audit to ensure successful adoption of technologies through DOSTs pool of science and technology experts from its various agencies and members of the R&D network including academic institutions. Design of functional packages and labels Participating firms shall be assisted with design and selection of appropriate packaging materials to increase shelf-life and marketability of their products. DOST established the Packaging R&D Center under the Industrial Technology Development Institute (ITDI) to assist

MSMEs in developing functional designs for packages, identify and develop suitable or alternative packaging materials especially from indigenous sources. Assistance in the establishment of product standards including laboratory testing Participating firms shall be assisted with product testing for them to be able to meet certain standards that will allow them to compete locally and globally. DOST, establish a network of regional testing laboratories in cooperation with the state colleges and universities and private testing centers. Database management system Several databases vital to MSMEs are now being developed/maintained which includes list of available technologies and necessary equipment per technology including specification at the national and regional level, list of S&T experts, list of accredited fabricators and list of testing laboratories including services and cost. These databases will be accessible through the SETUP website that is currently being developed. Provision of limited funds for technology acquisition Participating firms shall be assisted in the acquisition of needed equipment and/or technology to improve their production efficiency.

This assistance focuses on priority sectors like: Food Processing

(Trappist Monastic Food Products)

Furniture and Lifestyle Products

(Wood Tech Builders) Gifts, housewares, decors and handicrafts

(TAPs Handmade Products)

Marine and aquatic resources

(Amanda's Marine Products)

Horticulture and agriculture

(Liwanag Meat Dealer) Metals and engineering

(Rafols Machine Shop)

Who may avail SETUP? Any company or individual firm, wholly owned by Filipinos with the same goal of adopting and applying appropriate technology to enhance productivity and sustain our economic undertaking can apply for assistance from DOST.

SETUP has been carried out in different in different regions in the country. It has been successful throughout the year. Here are some of the firms assisted by DOST that outstands at all. Tartland Baguio Pasarabo (CAR) The Tartland Baguio Pasarabo is a sole proprietorship owned and managed by Mrs. Angelita Dela Cruz-Reyes. It started as a home based, past time baking business in August 2003. The company is registered under single proprietorship and is located at Lot 2, Concepcion Drive, Amparo Heights, Camp 7, Baguio City. Over the years, Tartland Baguio Pasarabo has expanded its product line from just boat tarts and lengua de gato to leche flan, cheesecakes, chocolate coated lenguas, raisin oatmeal cookies, and garlic pretzels. These other products are not regularly produced, though, since the production line is mainly booked for Lengua de Gato.

Maglaya's Wood Craft (REGION 1) They become beneficiary since 2009 and then received P112, 000 funding assistance from DOST. As a result, their productivity has improved through producing woods with quality cut and size. The DOST provided them machines that processes the woods into refined and firm handicrafts for furniture and decorations.

RJS Furniture Shop (REGION 2) RJS Furniture Shop was assisted by SET-UP through the provision of a kiln dryer which improved the quality of the raw materials used in furniture making. This intervention has increased income by 500% from the gross sales of P800, 000 annually to P4M/year and increased number of workers from 4 to 10. This increase in gross sales and employment was realized

because of the improvement in the quality of the furniture since the raw materials used are kilndried

Jaydex Farm- tilapia hatchery (REGION 2) A successful SET-UP assisted SME in Quezon, Nueva Vizcaya is the Jaydex Farm engaged in tilapia hatchery and production. The farm has been producing tilapia fingerlings. With SET-UP interventions through Consultancy on Agriculture Productivity Enhancement (CAPE) program on aquaculture technology, the farm has increased its volume of production of fingerlings. Jaydex Farm is now known in the province as a source of quality tilapia fingerlings.

TAPs Handmade TAP's Handmade Products is owned and managed by Mrs. Teresita A. Policarpio. The business was started and registered on August 12, 1999 with a very meager start-up capitalization of Php15, 000. It started producing handicraft products (e.g. bags, trays and placemats) made from sea grass, and ticog mats. Initially, the company employed two (2) in-house workers and commissioned sixteen (16) housewife weavers producing only sea grass assorted bags in the year 2000 for local markets only. The firm keeps track of product design trends by actively participating in exhibits and fair in major cities of the country and by attending product design development seminars with the Design Center of the Philippines. TAP's Handmade Products availed of SETUP assistance in 2004. With the SETUP-acquired industrial sewing machines which enbaled TAP's to produce seamless curves in their products and to process thick materials, the company's products achieved a higher level of quality and acceptability.

III. Conclusion We therefore agree that the DOSTs SETUP has been succeeded in improving the productivity of MSMEs. It has been justified by all the data weve gathered that through their assistance and technology interventions, business firms especially the Micro, Small and medium Scale Enterprises are now at least half of their income, outgrowth and outcomes compared before when they had no aids received. Through DOST, firms are now progressive and their products became competitive even abroad, therefore MSME's now can contribute higher in the economy that resulted in Inclusive Growth in the Philippines and now they are helping the government in its campaign to alleviate poverty in the country side known as Rural Areas.


Rafaelita M.Albada, 2012 February, Small and Medium Enterprise (SME) Access to Finance: Philippines, Discussion Paper Series No. 2012 05; Retrieved from: Jo B. Bitonio, Small and Medium Enterprises in the Philippines; Retrieved from: Luisa Lumioan, S&T Media Service, DOST-STIIL, Tuesday, 24 September 2013 08:41, DOST forum urges technopreneurs to go into online marketing, Department of Science and Technology; Retrieved from: Department of Trade and Industry, 2011, Micro, Small and Medium Enterprise (MSME Statistics); Retrieved from: Mrs. Angelita Dela Cruz-Reyes, Tartland Baguio Pasarabo, Upgrading Of Tartland Baguio Pasarabo, Retrieved from: Small Enterprise Technology Upgrading Program (SETUP) Retrieved from: C& oc_download%26gid%3D6%26Itemid%3D53&ei=cb9LUtCmNsXUrQez6oHYBw&usg=AFQjCNFumP mU1rQkt8GuaVhemuPsh4X_Vw&bvm=bv.53371865,d.bmk Department of Science and Technology, Thursday, 01 August 2013 06:05, i- SETUP Na!, Retrieved from: