BRYAN T.

BAGUISA

MBA 111-SPECIAL TOPICS IN BUSINESS ADMINISTRATION

EFFECT OF ASEAN INTEGRATION TO MSMES

Small Medium Enterprises (SMEs), including micro enterprises are integral to the economic

development and growth of the ASEAN Member States. They constitute the largest number of

establishments and contribute significantly to the labor force of ASEAN Member States (AMS). SMEs

enterprises are important in terms of income and employment generation, gender and youth empowerment

through their diverse business participation, and their widespread presence in the non-urban and rural areas.

SMEs are thus the backbone of ASEAN and SME development is fundamental towards achieving long-run

and sustainable economic growth and narrowing the development gap.

Philippine SMEs are urged to be regionally and globally competitive and increase their productivity

for the AEC and beyond. Various programs are already in place to help the Philippine SMEs, among them

are: clustering, SME Roving Academy, Doing Business in Free Trade Agreements Campaign, and Shared

Service Facilities of DTI; set up or Manufacturing Productivity Extension for Export Promotion of the

Department of Science and Technology; industry roadmaps care of BOI; inclusive finance / Credit Surety

Fund of the Bangko Sentral ng Pilipinas; Halal industries of the Bangsamoro and DTI; and the trade

facilitation for SMEs of the Bureau of Customs.

MSMEs provided a huge number of employment and had a huge potential as suppliers, making it

very crucial for the AEC to create a single market, production base, freer flow of goods, services and capital

services among the 10-member ASEAN. Create new lines of products, better efficiency in production

processes, as well as in intensifying promotion efforts—ensuring that MSMEs’ products are competitive

and relevant to the ever-changing market demands. Promotes productivity, innovation capacity, and digital

technology skills.
Major challenges to ASEAN MSMEs

Deficit of international managerial skills used to be assigned to micro and small enterprises, with

limited access to well-skilled and experienced staff that manifests itself in aversion to risk, change, as well

as focus on survival, and domestic market. Functional constraints result of MSMEs’ limited experiences

and capacities in regards of addressing foreign markets’ demand and standards, while discouraging

potential creditors from lending to such enterprises due to higher risk of failure. Another issue is the

information gap on foreign markets, including their characteristics, regulatory and institutional frameworks,

trade and investment agreements impacting overseas business activities, as well as inability to process

available data in appropriate manner, that results in inefficiency and additional pool of risks. The latter

challenge relates directly to government policies and regulations, that may discourage MSMEs from

internationalizing, namely, home-country restrictions imposed on exports, and outward foreign direct

investment by local enterprises, as well as requirements set by host-markets in regards of the form of the

foreign enterprise’s market presence, for instance, establishment of subsidiary or joint venture with the

local entity. There is also an issue of local competitors within foreign markets, equipped with unique local

knowledge and domestic channels of distribution. The way the host government interferes in the market

game, addresses the fairness of rivalry, and treats foreign business operators will obviously affect

internationalizing MSMEs, their strategies, as well as schemes of operation.