1. PRODUCTIVITY: TOOLS AND POLICIES
 [Greetings]
Mr. Sergio R. Ortiz-Luis Jr., President of the Philippine Exporters Confederation, Inc.
Distinguished exporter-members of PHILEXPORT
Colleagues in government service
Distinguished industry players and partners
Ladies and gentlemen, a pleasant afternoon to all.
I wish to thank PHILEXPORT, under the leadership of Mr. Sergio Luis-Ortiz Jr., for honoring me with this invitation to interact with you today.
The Philippine Micro, Small, and Medium Enterprises (MSMEs) sector is a highly valued sector of the country not only in sustaining economic growth but in strengthening the country’s social, economic, and broad network of investors, business partners, industry players and stakeholders. It is through this sector and that investors come to the Philippines. It is therefore important for us to convey to you the DOLE’s policies, thrusts and aspirations.
UNDERSECRETARY CIRIACO LAGUNZAD III Department of Labor and Employment
PHILEXPORT 2nd Quarter General Membership Meeting
17 April 2018, The Tent, Midas Hotel, Roxas Boulevard

2. …real backbone of our economy
…provide opportunities to those who could not have started business otherwise.
Worldwide, the Micro, Small and Medium Enterprises (MSMEs) have been recognized as the engine of economic growth and equitable development. MSMEs are dubbed as the real backbone of the country’s economy as it provides opportunities to those who could not have started business otherwise.

3. ROLE of MSMEs
MSMEs play a major role in the country’s economic development through their contribution in the following:
Rural industrialization
Rural development and decentralization of industries
Creation of employment opportunities and more equitable income distribution
Use of indigenous resources
Earning of foreign exchange (forex) resources
Creation of backward and forward linkages with existing industries
Entrepreneurial development
The major advantage of the sector is its employment potential at low capital cost. The labor intensity of the MSME sector is much higher than that of the large enterprises. The MSME constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rate of employment growth and account for a major share of industrial production and exports.
In the Philippines, the MSMEs play a vital role in the overall economic performance of the country. It is a highly valued sector of the country because of its crucial role in sustaining economic growth. The Philippine MSMEs help reduce poverty by creating jobs for the country’s growing labor force. They stimulate economic development in rural and far-flung areas. They even serve as valuable partners to large enterprises as suppliers and providers of support services. Moreover, the country’s MSMEs serve as breeding ground for new entrepreneurs and labor corporations.

4. MSMEs in the Philippines
The 2016 List of Establishments of the Philippine Statistics Authority (PSA) recorded a total of 915,726 business enterprises operating in the Philippines. This was 1.64% more than the 900,914 business establishments reported in Micro, small and medium enterprises (MSMEs) account for 99.57% (911,768) of the total establishments, of which 89.63% (820,795) were microenterprises, 9.50% (86,955) were small enterprises, and 0.44% (4,018) were medium enterprises. Large enterprises made up the remaining 0.43% (3,958). 
In terms of geographical spread of MSMEs, 58.4% of the total number of MSMEs in the country are located in the National Capital Region, CALABARZON (4-A), Central Luzon (Region 3), Western Visayas (Region 6) and Central Visayas (Region 7).
MSMEs generated a total of 4,879,179 jobs in 2016 versus 2,831,729 for the large enterprises. This indicates that MSMEs contributed almost 63.3% of the total jobs generated by all types of business establishments that year. Of these, 30.4% or 2,345,992 jobs were generated by micro enterprises; 25.7% or 1,981,316 by small enterprises; and 7.2% or 551,871 by medium enterprises.
MSME employment by industry generally follows the same structure as the number of establishments per industry, with large concentration of MSMEs in wholesale and retail trade, repair, manufacturing and financial intermediation.

5. ISSUES and CHALLENGES MSMEs Low access to national and global markets
Inadequate Infrastructure
Low access to national and global markets
Low level of innovation and R&D
Lack of Skilled Manpower
MSMEs
MSMEs Challenges and Constraints
As mentioned earlier, MSMEs are the lifeblood of the country’s economy. They stimulate economic activity, generate employment, prompt innovation, heighten competition and contribute largely to the country’s progress. However, Philippine MSMEs continue to face various constraints and serious challenges that prevent the sector from realizing its full growth and potential.
The performance of the MSMEs has remained constrained by various factors that prevent them from realizing their potentials and surviving and growing in a highly competitive environment. These include high cost of doing business, lack of access to finance and market information, and low productivity and competitiveness. While the poor business conditions have affected the performance and competitiveness of all enterprises, the impact is perceived to be more difficult for MSMEs given their relatively small size and limited resources. The non-financial barriers to MSMEs development translates to high cost of doing business or poor business environment, and discourage the formation of new MSMEs or the entry of existing MSMEs into larger markets, among others. Hence, in the latest “Doing Business 2018: Reforming to Create Jobs of the World Bank, the country’s ranking slipped to 113 this year from 99th in 2017 across the 190 countries covered by an annual World Bank Group report.
Across ASEAN, the Philippines was outranked by Singapore (second overall), Malaysia and Thailand (26th), Brunei (56th), Vietnam (68th) and Indonesia (72nd). In the ease of doing business indicators, the Philippines’ ranked 173rd in starting a business, 101st in dealing with construction permits, 31st in getting electricity, 114th in registering property, 142nd in getting credit, 146th in protecting minority investors, 105th in paying taxes, 99th in trading across borders, 149th in enforcing contracts, and 59th in resolving insolvency.
Another key challenge faced by the MSMEs is the low productivity of the sector due to lack of access to new technology, weak technological capabilities, and failure to engage in innovation and research and development activities.
High Cost of Doing Business
Low access to credits

6. Addressing the Challenges
Sustaining Gains
Addressing the Challenges
DOLE Enabling Policies: Sustaining Gains and Addressing Challenges in the MSME Sector
The Philippines is relatively well-positioned to take advantage of the MSMEs. How then can we capitalize on this growth potential? Knowledge, skill and innovation are key sources of competitiveness. While globalization and increasing regional integration has intensified the competitive pressures in both domestic and regional markets, this development has also presented new opportunities for MSMEs such as larger market exports and deeper participation in production networks or value chains that will strengthen and sustain economic and employment growth .

7. Socio-Economic Agenda
Relevant 0+10-Point
Socio-Economic Agenda
Priority Labor & Employment Agenda
Streamline the bureaucracy, promote the observance of the rule of law, and strengthen the justice system (including labor justice)
Full Respect for Labor Standards and Rights at Work
Increase competitiveness and the ease of doing business
Address Unemployment
and Under-
employment
Promote rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism
Strengthen Protection and Security of OFWs
Invest in human capital development and address jobs-skills mismatch
Hence, the MSME sector has a huge role to play in navigating these changes, which would require highly concerted efforts between and among stakeholders, the strategies of which are well encapsulated in the 0+10point socio-economic agenda of President Rodrigo Roa Duterte, which give priorities to addressing the critical constraints to the growth and development of the MSME sector.
Under the agenda, the economic and employment growth shall be achieved through prudent fiscal and monetary policies, tax reforms, investment promotion, competitiveness-enhancing measures, easing the cost of doing business, and entrepreneurship development.
Improve social protection programs, including the government’s Conditional Cash Transfer program, to protect the poor against instability and economic shock
More Focus and Accessible Social Protection

8. MSME Development Plan Vision
“A more globally competitive, regionally integrated, nationally resilient, highly sustainable and productive, innovative and dynamic MSME Sector performing as one of the most effective drivers of inclusive Philippine economic growth”
Focus Areas
Goals
Business Environment
Business Climate
Access to Finance
Business Capacity
Human Capital Development
Technology and Innovation
Business Opportunities
Access to Market
 Consistent with the Agenda, the Micro, Small, and Medium Enterprise (MSME) Development Plan , which was approved by the President on 04 April 2018, was formulated as the sectoral plan for the growth and advancement of the MSME sector. It is aligned with the Philippine government’s goal of boosting employment, business, and livelihood or “Trabaho, Negosyo, Kabuhayan” translating to “Malasakit”, “Pagbabago”, at “Patuloy na Pag-unlad” of the Philippine Development Plan (PDP)
The Plan envisions for “more globally competitive MSMEs that are regionally integrated, resilient, sustainable and innovative thereby performing as key drivers of inclusive Philippine economic growth.” It has three (3) focus areas, namely: business environment, business capacity, and business opportunities with the following 5 strategic goals: (1) improved business climate; (2) improved access to finance; (3) enhanced management and labor capacities; (4) improved access to technology and innovation; and, (5) improved access to market. 

9. Socio-Economic Agenda
Relevant 0+10-Point
Socio-Economic Agenda
Priority Labor & Employment Agenda
Streamline the bureaucracy, promote the observance of the rule of law, and strengthen the justice system (including labor justice)
Full Respect for Labor Standards and Rights at Work
Increase competitiveness and the ease of doing business
Address Unemployment
and Under-
employment
Promote rural and value chain development toward increasing agricultural and rural enterprise productivity and rural tourism
Strengthen Protection and Security of OFWs
Invest in human capital development and address jobs-skills mismatch
Consistent with this, the DOLE implements an 8-point Labor and Employment Agenda that is anchored on our basic mandate as an institution: (1) to promote employment and human resource development; (2) ensure worker’s protection and welfare; (3) to promote a sound, stable and dynamic industrial peace as a shared responsibility of our social partners.
Improve social protection programs, including the government’s Conditional Cash Transfer program, to protect the poor against instability and economic shock
More Focus and Accessible Social Protection

10. DOLE CONTRIBUTIONS to PDP and LONG- Term vision
Chapter 9: Expanding Economic Opportunities in Industry and Services through Trabaho and Negosyo
Chapter 10: Accelerating Human Capital Development
Chapter 11: Reducing Vulnerability of Individuals and Families
Chapter 14: Vigorously Advancing Science, Technology and Innovation
Chapter 19: Accelerating Infrastructure Development
Among the initiatives, which are anchored on the PDP strategies particularly those articulated in Chapter 9: Expanding Economic Opportunities in Industry and Services through Trabaho and Negosyo; Chapter 10: Accelerating Human Capital Development ; Chapter 11: Reducing Vulnerability of Individuals and Families;
Chapter 14: Vigorously Advancing Science, Technology and Innovation; and
Chapter 19: Accelerating Infrastructure Development, include:

11. DOLE PROGRAMS Employment intermediation Labor Market Information
Labor Market Signaling
Enhancing Skills for Employability and Competitiveness
The country continues to enhance employability and competitiveness of Filipino workers. Investment in education and skills training are at the forefront of the national agenda for development, particularly for skills relevant to the identified key employment generating sectors that include the MSME sector.
Labor Market Signaling
To improve skills and competencies, employment intermediation and labor market signaling are likewise strengthened to ensure that human resources are prepared for the demands of the domestic and global markets in terms of quantity, skills and competencies. The Philippine continues to adopt labor market reforms to sustain a job-led high economic growth that translates to job-rich development.

12. DOLE Productivity POLICIES and tools
Productivity Enhancement
The DOLE also implements a number of productivity tools and policies with the objective of assisting of boosting the competitiveness and productivity of enterprises particularly the MSMEs

13. Employability of workers and competitiveness of MSMEs enhanced
Productivity Training Program
Two-Tiered Wage System (TTWS) – Gain Sharing Program (Tier 2)
The DOLE, through the National Wages and Productivity Commission (NWPC) implements the Productivity Training Program and the Two-Tiered Wage System- Gain Sharing Program which seek to enhanced the employability and competitiveness of workers particularly those engaged in the MSME sector

14. Productivity Training Program
Employability of workers and competitiveness of MSMEs enhanced
Productivity Training Program
The Productivity Training Program is an integrated, human-resource driven, ladderized-productivity training programs to improve micro, small and medium scale enterprises competitiveness and up-scaling into higher value chains. The NWPC, through the 16 Regional Tripartite Wages and Productivity Boards (RTWPBs), is offering a package of training programs and technical assistance in a ladderized system to ensure that they transition to a more viable and competitive enterprises and comply with labor laws. The NWPC offers Productivity Toolbox for MSMEs to help boost the productivity of the sector and consequently transition to bigger and globally-competitive enterprises.

15. Productivity Training Program
2017 Accomplishments:
Productivity Training Program
ORIENTATION
TRAINING
4,282
9, 532
MSMEs
MSMEs
9,736
18,760
In 2017, the agency has achieved better than targeted results in the implementation the said Productivity Toolbox, reaching more than 13,000 MSMEs and 27,383 employers and workers.
Employers and Workers
Employers and Workers

16. Two-Tiered Wage System (TTWS) – Gain Sharing Program (Tier 2)
Employability of workers and competitiveness of MSMEs enhanced
Two-Tiered Wage System (TTWS) – Gain Sharing Program (Tier 2)
Protect vulnerable workers from undue low wages
Increasingly link wage and productivity growth
Employers’ right to fair and reasonable profits
Workers’ share in the fruits of production
In addition, NWPC likewise strengthens the implementation of the Two-Tiered Wage System (TTWS) or the process by which the minimum wage is determined and the link between wage and productivity of employees is put in place and continuously enhance the efficacy of the minimum wage policy.

17. Two-Tiered Wage System TIER 2 – INCENTIVIZING PERFORMANCE
2017 Accomplishments:
Two-Tiered Wage System
TIER 2 – INCENTIVIZING PERFORMANCE
1,051
MSMEs provided with technical assistance on designing/formulation of PBIS
109
In relation to this, for Tier 1, NWPC, in 2017, has issued 10 Wage Orders for workers in the private sector and 11 Wage Orders for Domestic Workers. For Tier 2, which is productivity-based incentives schemes that is implemented through the issuance of wage advisories by the RTWPBs, the Boards have been issuing advisories for priority industries/sectors in their respective regions. In 2017, the Boards provided technical assistance to 1,051 MSMEs in designing or formulating productivity or performance-based incentive schemes.
Further, with the intention to introduce innovation in the content and delivery of productivity programs, the NWPC rolled out Usapang 2Ps: Pasahod at Productivity as a nationwide social marketing strategy to heighten awareness on the importance of improving workplace productivity and its benefits to enterprises and workers. The agency also developed e-Learning productivity modules to enhance training accessibility and the e-Productivity Toolbox to improve the speed, efficiency and accuracy of program monitoring and evaluation.
MSMEs with PBIS installed

18. UNLOCKING MSMEs POTENTIALS
ENABLING TECHNOLOGY
MOTIVATED AND SKILLED WORKFORCE
STAKEHOLDERS COLLABORATION
INTUITIVE LAWS, REGULATIONS AND POLICIES
KEY DRIVERS
Areas of Collaboration among DOLE and other Public and Private Partners and Stakeholders
Employment Facilitation
The DOLE, in partnership with other concerned agencies and stakeholders can work together to expand and strengthen the human resources capacity of MSMEs through mentoring, group training and online training and by giving priority reskilling and human resource development to help MSMEs adopt to the fourth industrial revolution and the digital age.
Assisting Livelihood Undertakings and MSMEs
DOLE and its NWPC, DTI and other stakeholders can converge on assisting livelihood undertakings and business enterprises especially the MSMEs to grow and meet the demands domestic and international markets. Support may be in the form of financial and technical assistance covering product packaging enhancement and marketing and service quality improvement through productivity training and adoption of productivity technologies.
Apart from microfinancing, collaborative efforts to fund MSME training, entrepreneurship education, mentoring, shared-services facilities, equipment, product development, suppliers facilitation, design assistance, market development, local and foreign market promotion, retail-store concepts, trade exhibits and building of more Negosyo Centers are viable strategies to pursue.
CONCLUDING REMARKS
There is potentially a lot to gain from the MSME sector. However, it should be reiterated that there are also challenges that should be dealt with to minimize the constraints which hamper the MSMEs from attaining its full potentital. Sustaining meaningful dialogues in pursuit of crafting intuitive policies, strategic priorities and responsive programs should be consistently pursued by the government and its stakeholders to advance the concerns of sector and to realize the goal of maximizing the opportunities available for the sector and to take full advantage of the global value chain.
Thank you and good afternoon.

19. THANK YOU!