Filipino firms that invest in research and development have been less affected by COVID-19, finds a new International Trade Centre report. Those easily able to make new products and services are better placed to quickly adapt to new market conditions. This indicates that to help SMEs weather crises, governments can focus on innovation skills for those outside the mainstream.
The report shows that 60% of R&D-intensive businesses surveyed in 2019 were strongly affected by the 2020 pandemic – while for non-R&D-intensive companies, 83% were strongly affected.
Promoting SME Competitiveness in the Philippines: Compete, connect, and change to build resilience to crises finds that most small Filipino businesses perform strongly in measures of competitiveness for the knowledge economy.
The report is based on two surveys – one on competitiveness and the other on the business impact of COVID-19 – conducted with the Department of Trade and Industry of the Philippines, through its Bureau of Small and Medium Enterprise Development.
Firms in the paper, retail, food, and metal industries are especially innovative, and that helped them cope with the pandemic. Many turned to online sales instead of firing staff, avoiding bankruptcy.
Yet microenterprises and youth-led firms in the Philippines fall short when it comes to innovation. And while the report found that 80% of SMEs are satisfied with the skills of their workers, a key enabler of innovation, employee skills in many smaller Filipino firms don’t match company needs.
‘Helping these companies become more competitive would unleash their potential to flourish in the post-COVID-19 era,’ the report says. ‘The “new normal” in trade will stress resilience to shocks, embrace digital opportunities, provide inclusive employment opportunities, and prioritize environmental sustainability.’
Extend business training, incentives to innovate
SMEs employ 60% of the Philippines’ workforce, where the economy is expected to shrink 2% this year after growing 5.9% in 2019. While the country generally excels in business dynamism, a critical next step is to extend programs for skills, research, and innovation to companies outside the mainstream.
Skills training for firms headed by youth and women can help them obtain skills to innovate. Likewise, incentives for research and development can help firms compete in lucrative markets. These skills have the added benefit of boosting firm resilience.
Other report recommendations include championing the positive role of business support organizations, which get critical market and business support information to small companies. Also, government investment in digital trade facilitation and expanded e-payment infrastructure can reduce exposure to shocks to the cash economy and boost the competitiveness of remote businesses.
Download Promoting SME competitiveness in the Philippines: Compete, connect, and change for resilience to crisis: www.intracen.org/publication/SME-competitiveness-Philippines
About ITC – The International Trade Centre is the joint agency of the World Trade Organization and the United Nations. ITC assists small and medium-sized enterprises in developing and transition economies to become more competitive in global markets, thereby contributing to sustainable economic development within the frameworks of the Aid-for-Trade agenda and the United Nations’ Sustainable Development Goals. For more information, contact [email protected] or visit www.intracen.org.
