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Santiago Campus


(The Role of Entrepreneurship in Philippine Economy)
MODULE 1
THE PHILIPPINE ECONOMY

The national economy is composed of business enterprises, households, and the government.
These are the major sectors of the economy. The strength or weakness of one sector affects
the other sectors because of their interdependence. However, it is the government which
provides the leadership in improving the economy.

In economic development, the bottom line is the quality of the people of a given country.
Knowledge, skills and values are the main determinants of economic growth. Needless to say,
values constitute the key to economic success of any nation. The Japanese are risk takers,
hardworking and self reliant. Such entrepreneurial qualities have made Japan a prosperous
nation. But above all, the Japanese love their country-including its culture, traditions,
institutions and products.
THE COLONIAL RULE

The Philippine became the slave of three colonial masters; Spain, United States and Japan. For
more than three centuries we were under Spanish rule, and about half a century under the
American regime. The Chinese dominated the retail trade business even during the Spanish
time.

Likewise, Japan invaded the Philippines and other Southeast Asian countries for economic
reasons. It had problems such as population explosion, shortage of raw materials and surplus
of factory products. Our economy was at its worst during the Japanese time. Goods and
services were extremely scarce. The production of sugar stopped for lack of foreign market. As
a result, inflation became very high. This was aggravated by the printing of money by the
Japanese government. Most Filipinos starved. Rice sacks were used as clothing. The price of
rice per cavan was P30 before the war. During the Japanese time, it was P3,000.


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(The Role of Entrepreneurship in Philippine Economy)
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The United States granted our political independence on July 4, 1946. FiIipinos rejoiced and
expressed their gratitude to the U.S. government, only to realize later that our independence
was not meaningful. The United States still influenced our political and economic policies. The
Americans imposed the Bell Trade Act of 1946. This gave the American businessmen the right
to exploit our natural resources to operate public utilities and other businesses, and to enjoy
the pre-war free-trade agreement. The Philippine government accepted the Bell Trade Act in
exchange for war damage payment.

THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT

There are various definitions of entrepreneurship. However, the key concept is INNOVATION.
This refer to new or different ways of doing things, like technology, marketing, human relations,
management, and so forth. When an individual creates a new product, it is innovation. When
he sells his product in a new approach, it is also innovation.

Entrepreneurship in the Philippines
In the Philippines, entrepreneurship is viewed as important to empowering the poor, enhancing
production, and as an impetus to innovation. The 1987 Philippine Constitution recognizes
entrepreneurship as an engine of economic growth. Article XII Section 1 highlights the role of
private enterprises in supporting equitable distribution of income and wealth, sustaining
production of goods and services and expanding productivity, therefore raising the quality of
life.
The Philippine Development Plan (PDP) further reinforces the thrust on entrepreneurship
through trade and investment to achieve the governments goal of economic development and
job creation. Based on the plan, measures for macro-economic stability, employment, trade
and investment, agribusiness, power-sector reforms, infrastructure, competition, science and
technology, and anti-corruption are being pursued to strengthen Philippiness competitiveness
and contribute to job creation.

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(The Role of Entrepreneurship in Philippine Economy)
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In 2011, there were approximately 830,000 business enterprises in the Philippines. Of these,
99.6 percent are classified as micro, small, and mediumsized enterprises (MSME) which are
responsible for 38 percent of total job growth.
ENTREPRENEURSHIP DEFINED

ENTREPRENEURSHIP, according to Professor Nathaniel Left, is the capacity for innovation,
investment and expansion in new markets, products and techniques.

Entrepreneur derives from the French words entre, meaning between, and
prendre, meaning to take
Originally used to describe people who take on the risk between buyers and sellers or
who undertake a task such as starting a new venture

ECONOMIC DEVELOPMENT AND GROWTH EXPLAINED

Development is a process while growth is a product. So, growth is a result of development. In
agriculture, the application of fertilizers, insecticides, labor, machines and other productive
inputs represents a process or development. The results or outputs are crops like corn, rice, or
sugar. In simple terms, development is input while growth is the output.

DEVELOPMENT AND GROWTH THEORIES

1. LAISSEZ FAIRE THEORY- this theory explains that the government should not interfere in
economic activities. It is absolutely free- enterprise economy. The role of the
government is only confined in education, justice and public works.

2. KEYNESIAN THEORY- The government should play the key role in economic development,
particularly in less developed countries, or those with depressed economic conditions.
This theory contends that during economic depression the government should put up

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(The Role of Entrepreneurship in Philippine Economy)
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massive public works, like construction of roads and bridges, other labor intensive
projects. These generate large-scale employment resulting to more incomes to more
people.

3. RICARDIAN THEORY- This is the theory of David Ricardo, an English classical economist.
He believes that the key factor in economic growth is land. This means that agriculture
plays a major role in economic development.

4. HARROD-DOMAR THEORY- This was conceptualized by Sir Harrod of England and
Professor Domar of United States. The key factor in economic growth is physical capital
like machines. The theory claims that more products can be produced through the use of
machines.

5. KALDOR THEORY- Nicholas Kaldor maintains that the key factor is technology. The theory
explains that the application of modern technology in the production of goods and
services has been responsible for the economic success of the highly developed countries
like United States, Japan, Great Britain, France, Italy, and Germany.
6. INNOVATION THEORY- This was developed by Joseph Schumpeter. He stresses the role
of innovators or entrepreneurs in economic development. Schumpeter says that it is the
innovator who has the courage and imagination to handle old systems, and be able to
transform the theory into reality. It is the innovator who introduces change for the
better.

7. NON-ECONOMIC THEORIES- There are several other theories which are non economic in
nature. Their key factors are political stability, efficient public administration, open
society, and positive cultural values.

THE IMPORTANCE OF ENTREPRENEURSHIP


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Statistics in both rich and poor countries show that small enterprises are leading in the
generation of jobs and wealth. In the Philippines, most of our economic activities fall under the
micro and small business categories. There are many retailers, vendors, and other small sole
proprietors.

The Harvard Business School is beginning to see that its role is not just training general
managers, but also training and providing preparation for people to start their own business It
is a kind of a new freedom to go out and take some risks and run your own show Its a kind of
a new frontier for people of some boldness and creativity.

CONTRIBUTIONS OF ENTREPRENEURS

1. Develop new markets (the modern concept of marketing, markets are people who are
willing and able to satisfy their needs)
2. Discover new sources of materials (entrepreneurs are never satisfied with traditional or
existing sources of materials)
3. Mobilize capital resources (entrepreneurs are the organizers and coordinators of the
major factors of production, such as land, labor, and capital. They properly mix these
factors of production to create goods and services)
4. Introduce new technologies, new industries and new products (aside from being
innovators and reasonable risk takers, entrepreneurs take advantage of business
opportunities, and transform these into profits. So, they introduce something new or
something different.)
5. Create employment (the biggest employer is the private business sector. Millions of jobs
are provided by factories, service industries, agricultural enterprises, and the numerous
small-scale businesses.

THE GOVERNMENT AND ENTREPRENEURSHIP


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In underdeveloped countries, the government plays a major and active role in economic
development. Aside from setting up the economic infrastructures, like roads, bridges,
transportation, communication and electric facilities, the government is directly involved in
business and industry where the private business sector has no or inadequate investment.
Although, entrepreneurs are risk takers, self reliant, and optimistic, there are factors which
encourage or discourage them to invest. Obviously, the primary factor or determinant of
investment is profit. It is very clear, therefore, that there is a very strong and direct relationship
between the government and entrepreneurship. It is the government that provides the basic
incentives to entrepreneurship. In return, entrepreneurship accelerates economic
development through more employment, production and consumption. Precisely, this is the
goal of government for the people.

DETERMINANTS OF INVESTMENT

Profit is the first consideration in investment. It is profit that stimulates businessmen to go into
business.

THE ROLE OF THE GOVERNMENT

During the 1700s in Europe, particularly England, the Laissez Faire system of government was
practiced. The non-interference of the government in economic activities led to the growth of
capitalism. The capitalists, however, abused their powers and privileges. They exploited their
workers in terms of low wages and long hours of work, usually 17 hours a day. They also paid
very low prices for the raw materials produced by farmers. These miserable situations
happened during the height of the Industrial Revolution in England. The role of the
government is to promote the welfare for all sectors-producers, consumers, employees,
businessmen and the rest of the society and the economy. It is of course, difficult to strike a
happy balance of support among all members of society. But a good government always
considers social justice as a basic yardstick in public administration.

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(The Role of Entrepreneurship in Philippine Economy)
MODULE 1
The Philippines is a highly entrepreneurial country. The main reason that drives its
entrepreneur spirit is its poverty. Small and medium-sized enterprises (SME) account for the
largest share of Philippine entrepreneurs. SMEs, including micro-enterprises, account for 99
percent of all business establishments and 60 percent of the exporting firms in the Philippines.
SMEs currently employ about 55 percent of the Philippine labor force and contribute 30
percent to total domestic volume sales. Women hold significant leadership positions in national
and local government, universities, business corporations and family business enterprises in the
Philippines. 51% of entrepreneurs in Philippines are female.
Challenges for entrepreneurs in Philippines include a lack of research and development,
inadequate access to technology, financingmost entrepreneurs starting small business in the
Philippines have difficulty acquiring capital, a lack of marketing advice and logistical problems.
The Philippines government sees that Entrepreneurial efforts will help ignite economic growth,
improve living standards, and build a worldwide market for Philippine products so they
welcome foreign investors and offer incentive and support by lowering tariffs, opening its
entire economy, including land ownership and free trade.

GOVERNMENT ASSISTANCE PROGRAM

1. Peace and order
2. Political stability
3. Price stability
4. Taxes
5. Infrastructures
6. Education and training
7. Public administration
8. Production technology
9. Marketing assistance
10. Financial assistance


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PRIMER: MAGNA CARTA FOR SMALL ENTERPRISES

1. WHAT IS R.A. 6977, OTHERWISE KNOWN AS THE MAGNA CARTA FOR SMALL
ENTERPRISES?

R.A. 6977, signed on 1991 January 24, is an act to promote, developed and assist small and
medium scale enterprises (SMEs) through the creation of a Small and Medium Enterprise
Development (SMED) Council, the establishment of a Small Business Guarantee and Finance
Corporation (SBGFC), the mandatory allocation of credit resources to small enterprises and the
rationalization of government assistance programs and agencies concerned with the
development of SMEs.

2. WHO WILL BENEFIT FROM THE MAGNA CARTA FOR SMALL ENTERPRISES?

Small and medium enterprises will benefit from the Magna Carta for Small Enterprises

3. WHAT IS SMALL AND MEDIUM ENTERPRISE?

A small and medium enterprise is defined as any business activity or enterprise engaged in the
industry, agribusiness and/or services, whether single proprietorship, partnership or
corporation whose total assets, inclusive of those arising from loans but exclusive of the land on
which the particular business entitys office, plant and equipment are situated, must have value
falling under the following categories:

MICRO less than P50,000
COTTAGE P50,001 P500,000
SMALL P500,001 P5,000,000
MEDUIM P5,000,001 P20,000,000


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4. WHAT IS THE SMALL AND MEDUIM ENTERPRISE DEVELOPMENT COUNCIL?

The council shall be the primary agency responsible for the promotion, growth and
development of SMEs in the country by way of facilitating and closely coordinating national
efforts to promote the viability and growth of SMEs, including assisting relevant agencies in the
tapping of local and foreign funds for SME development, as well as promoting the use of
existing guarantee programs.

TYPES OF SME SKILLS TRAINING

Meat Processing
Fish Processing
Peanut Processing
Wine and Vinegar Processing
Mango Chip Processing
Skills upgrading on knitting
(paghahabi)
Skills upgrading on Leather craft
Skills Upgrading of Shell Craft
Skills Upgrading on Ceramics
Skills Upgrading on Pottery
Skills Upgrading on Banacbac
Handicrafts
Skills Upgrading on Coco-midribs
Handicrafts
Chalk Making
Bamboo Furniture Training
Duck Raising and Hatchery
Speed Sewing
Salt and tile making
Basic Carpentry Training
Skills Training on Rope Making
Bamboo Craft (basketry)
Embroidery
Soft Broom Making
Stuffed toy Training
Sawali making
Loom Weaving (machine)
Clay Hollow block Making
Seagrass Basketry
Rattan Basketry
Christmas Dcor Making
Fruit Processing
Candle Making
Banana Processing

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(The Role of Entrepreneurship in Philippine Economy)
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TYPES OF SME MANAGEMENT TRAINING

Simplified Bookkeeping
Financial Management
Business Management
Marketing Management
Production Management
Product Planning and Development
Furniture Business Development
Strategic Marketing
Product costing and Pricing
Basic of Exporting
Consumer Education
Productivity Quality Improvement
Improve Your Business Training
Symposium on Livelihood Projects
Starting a Small Business
Subcontracting with Exporters
Organizing a Corporation
Value Formation Seminar
Teambuilding
Store Design/Merchandising
Effective Time Management
Leadership Training for Farmer
Leaders
Management Extension and
Consultancy
Advertising and Promotion
How to get started in Exports
How to negotiate with Buyers
Exports Management
Entrepreneurship Development
Seminar
Seminar on Bookkeeping and
Accounting
Seminar on Management & Simple
Bookkeeping
Cooperative Management and
Simple Bookkeeping

Nurturing the entrepreneurship paradigm
Entrepreneurship is more than just an economic term it is a way of thinking. Creating jobs,
empowering people, and giving individuals access to better lives for themselves and their
children is a wonderful gift. Today, it has become a dynamic, developing part of the economy
promoting inclusive growth. Entrepreneurship is a way of inspiring creative individuals to
pursue opportunities despite its risks.

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(The Role of Entrepreneurship in Philippine Economy)
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In closing, the challenge for countries like the Philippines is to accelerate both the political and
economic leadership that can muster social reforms through entrepreneurship. Entrepreneurs
have the power to achieve great things. Entrepreneurs will emerge as the well-oiled wheels
that will keep the economy going and the society efficiently running.



http://www.cipe.org/publications/detail/entrepreneurship-philippines-opportunities-and-
challenges-inclusive-growth

http://www.internationalentrepreneurship.com/asia/philippines/