THE PHILIPPINE ECONOMY

Entrepreneurship in the Philippines

The national economy is composed of business enterprises,
households, and the government. These are the major In the Philippines, entrepreneurship is viewed as important to
sectors of the economy. The strength or weakness of one empowering the poor, enhancing production, and as an
sector affects the other sectors because of their impetus to innovation. The 1987 Philippine Constitution
interdependence. However, it is the government which recognizes entrepreneurship as an engine of economic
provides the leadership in improving the economy. In growth. Article XII Section 1 highlights the role of private
economic development, the bottom line is the quality of the enterprises in supporting equitable distribution of income
people of a given country. Knowledge, skills and values are and wealth, sustaining production of goods and services and
the main determinants of economic growth. Needless to say, expanding productivity, therefore raising the quality of life.
values constitute the key to economic success of any The Philippine Development Plan (PDP) further reinforces the
nation. The Japanese are risk takers, hardworking and self- thrust on entrepreneurship through trade and investment to
reliant. Such entrepreneurial qualities have made Japan a achieve the government’s goal of economic development and
prosperous nation. But above all, the Japanese love their job creation. Based on the plan, measures for macro-
country-including its culture, traditions, institutions economic stability, employment, trade and investment,
and products. agribusiness, power-sector reforms, infrastructure,
competition, science and technology, and anti-corruption are
THE COLONIAL RULE being pursued to strengthen Philippines’s competitiveness
and contribute to job creation.
The Philippine became the slave of three colonial masters;
Spain, United States and Japan. For more than three In 2011, there were approximately 830,000 business
centuries we were under Spanish rule, and about half a enterprises in the Philippines. Of these, 99.6 percent are
century under the American regime. The Chinese dominated classified as micro, small, and medium-sized enterprises
the retail trade business even during the Spanish time. (MSME) which are responsible for 38 percent of total job
Likewise, Japan invaded the Philippines and other Southeast growth.
Asian countries for economic reasons. It had problems such
as population explosion, shortage of raw materials and ENTREPRENEURSHIP DEFINED
surplus of factory products. Our economy was at its worst
during the Japanese time. Goods and services were extremely ENTREPRENEURSHIP, according to Professor Nathaniel Left, is
scarce. The production of sugar stopped for lack of foreign the capacity for innovation, investment and expansion in new
market. As a result, inflation became very high. This was markets, products and techniques.
aggravated by the printing of money by the Japanese
government. Most Filipinos starved. Rice sacks were used •“Entrepreneur” derives from the French words entre,
as clothing. The price of rice per cavan was P30 before the meaning “between,” and prendre, meaning “to take”
war. During the Japanese time, it was P3, 000. • Originally used to describe people who “take on the risk”
between buyers and sellers or who “undertake” a task such
The United States granted our political independence on July as starting a new venture.
4, 1946. Filipinos rejoiced and expressed their gratitude to
the U.S. government, only to realize later that our ECONOMIC DEVELOPMENT AND GROWTH EXPLAINED
independence was not meaningful. The United States still
influenced our political and economic policies. The Americans Development is a process while growth is a product. So,
imposed the Bell Trade Act of 1946. This gave the American growth is a result of development. In agriculture, the
businessmen the right to exploit our natural resources to application of fertilizers, insecticides, labor, machines and
operate public utilities and other businesses, and to enjoy the other productive inputs represents a process or
pre-war free-trade agreement. The Philippine government development. The results or outputs are crops like corn, rice,
accepted the Bell Trade Act in exchange for war damage or sugar. In simple terms, development is input while growth
payment. is the output.

THE ROLE OF ENTREPRENEURSHIP IN ECONOMIC DEVELOPMENT AND GROWTH THEORIES

DEVELOPMENT 1. LAISSEZ FAIRE THEORY- this theory explains that the
government should not interfere in economic activities.
There are various definitions of entrepreneurship. However, It is absolutely free- enterprise economy. The role of the
the key concept is INNOVATION. This refer to new or government is only confined in education, justice and
different ways of doing things, like technology, marketing, public works.
human relations, management, and so forth. When an 2. KEYNESIAN THEORY- The government should play the
individual creates a new product, it is innovation. When he key role in economic development, particularly in less
sells his product in a new approach, it is also innovation. developed countries, or those with depressed economic
 conditions. This theory contends that during economic production, such as land, labor, and capital. They
depression the government should put up. Massive properly mix these factors of production to create goods
public works, like construction of roads and bridges, and services)
other labor intensive projects. These generate large- 4. Introduce new technologies, new industries and new
scale employment resulting to more incomes to more products (aside from being innovators and reasonable
people. risk takers, entrepreneurs take advantage of business
3. RICARDIAN THEORY- This is the theory of David Ricardo, opportunities, and transform these into profits. So, they
an English classical economist. He believes that the key introduce something new or something different.)
factor in economic growth is land. This means that 5. Create employment (the biggest employer is the private
agriculture plays a major role in economic development. business sector. Millions of jobs are provided by
4. HARROD-DOMAR THEORY- This was conceptualized by factories, service industries, agricultural enterprises, and
Sir Harrod of England and Professor Domar of United the numerous small-scale businesses.
States. The key factor in economic growth is physical
capital like machines. The theory claims that more THE GOVERNMENT AND ENTREPRENEURSHIP
products can be produced through the use of machines.
5. KALDOR THEORY- Nicholas Kaldor maintains that the In underdeveloped countries, the government plays a major
key factor is technology. The theory explains that the and active role in economic development. Aside from setting
application of modern technology in the production of up the economic infrastructures, like roads, bridges,
goods and services has been responsible for the transportation, communication and electric facilities, the
economic success of the highly developed countries like government is directly involved in business and industry
United States, Japan, Great Britain, France, Italy, and where the private business sector has no or inadequate
Germany. investment.
6. INNOVATION THEORY- This was developed by Joseph
Schumpeter. He stresses the role of innovators or Although, entrepreneurs are risk takers, self-reliant, and
entrepreneurs in economic development. Schumpeter optimistic, there are factors which encourage or discourage
says that it is the innovator who has the courage and them to invest. Obviously, the primary factor or determinant
imagination to handle old systems, and be able to of investment is profit. It is very clear, therefore, that there is
transform the theory into reality. It is the innovator who a very strong and direct relationship between the
introduces change for the better. government and entrepreneurship. It is the government that
7. NON-ECONOMIC THEORIES- There are several other provides the basic incentives to entrepreneurship. In return,
theories which are non-economic in nature. Their key entrepreneurship accelerates economic development
factors are political stability, efficient public through more employment, production and consumption.
administration, open society, and positive cultural Precisely, this is the goal of government for the people.
values.
DETERMINANTS OF INVESTMENT
THE IMPORTANCE OF ENTREPRENEURSHIP
Profit is the first consideration in investment. It is profit that
Statistics in both rich and poor countries show that small stimulates businessmen to go into business.
enterprises are leading in the generation of jobs and wealth.
In the Philippines, most of our economic activities fall under THE ROLE OF THE GOVERNMENT
the micro and small business categories. There are many
retailers, vendors, and other small sole proprietors. During the 1700’s in Europe, particularly England, the Laissez
“The Harvard Business School is beginning to see that its role Faire system of government was practiced. The non-
is not just training general managers, but also training and interference of the government in economic activities led to
providing preparation for people to start their own business… the growth of capitalism. The capitalists, however, abused
It is a kind of a new freedom to go out and take some risks their powers and privileges. They exploited their workers in
and run your own show… It’s a kind of terms of low wages and long hours of work, usually 17 hours
a new frontier for people of some boldness and creativity.” a day. They also paid very low prices for the raw materials
produced by farmers. These miserable situations happened
CONTRIBUTIONS OF ENTREPRENEURS during the height of the Industrial Revolution in England. The
1. Develop new markets (The modern concept of role of the government is to promote the welfare for all
marketing, markets is people who are willing and able to sectors-producers, consumers, employees, businessmen and
satisfy their needs) the rest of the society and the economy. It is of course,
2. Discover new sources of materials (entrepreneurs are difficult to strike a happy balance of support among all
never satisfied with traditional or existing sources of members of society. But a good government always considers
materials) social justice as a basic yardstick in public administration.
3. Mobilize capital resources (entrepreneurs are the
organizers and coordinators of the major factors of
The Philippines is a highly entrepreneurial country. The main proprietorship, partnership or corporation whose total
reason that drives its entrepreneur spirit is its poverty. Small assets, inclusive of those arising from loans but exclusive
and medium-sized enterprises (SME) account for the largest of the land on which the particular business entity’s
share of Philippine entrepreneurs. SMEs, including micro- office, plant and equipment are situated, must have
enterprises, account for 99 percent of all business value falling under the following categories:
establishments and 60 percent of the exporting firms in the MICRO–less than–P50,000
Philippines. SMEs currently employ about 55 percent of the COTTAGE–P50,001–P500,000
Philippine labor force and contribute 30 percent to total SMALL–P500,001–P5,000,000
domestic volume sales. Women hold significant leadership MEDUIM–P5,000,001–P20,000,000
positions in national and local government, universities,
business corporations and family business enterprises in the 4. WHAT IS THE SMALL AND MEDUIM ENTERPRISE
Philippines. 51% of entrepreneurs in Philippines are female. DEVELOPMENT COUNCIL?
Challenges for entrepreneurs in Philippines include a lack of The council shall be the primary agency responsible for
research and development, inadequate access to technology, the promotion, growth and development of SMEs in the
financing—most entrepreneurs starting small business in the country by way of facilitating and closely coordinating
Philippines have difficulty acquiring capital, a lack of national efforts to promote the viability and growth of
marketing advice and logistical problems. The Philippines SMEs, including assisting relevant agencies in the
government sees that Entrepreneurial efforts will help ignite tapping of local and foreign funds for SME development,
economic growth, improve living standards, and build a as well as promoting the use of existing guarantee
worldwide market for Philippine products so they welcome programs.
foreign investors and offer incentive and support by lowering
tariffs, opening its
entire economy, including land ownership and “free trade.” TYPES OF SME SKILLS TRAINING

GOVERNMENT ASSISTANCE PROGRAM Meat Processing

Fish Processing
1. Peace and order Peanut Processing
2. Political stability Wine and Vinegar Processing
3. Price stability Mango Chip Processing
4. Taxes Skills upgrading on knitting (paghahabi)
5. Infrastructures Skills upgrading on Leather craft
6. Education and training Skills Upgrading of Shell Craft
7. Public administration Skills Upgrading on Ceramics
8. Production technology Skills Upgrading on Pottery
9. Marketing assistance Skills Upgrading on Banacbac Handicrafts
10. Financial assistance Skills Upgrading on Coco-midribs Handicrafts
Chalk Making
1. WHAT IS R.A. 6977, OTHERWISE KNOWN AS THE Bamboo Furniture Training
MAGNA CARTA FOR SMALL ENTERPRISES? Duck Raising and Hatchery
R.A. 6977, signed on 1991 January 24, is an act to Speed Sewing
promote, developed and assist small and medium scale Salt and tile making
enterprises (SMEs) through the creation of a Small and Basic Carpentry Training
Medium Enterprise Development (SMED) Council, the Skills Training on Rope Making
establishment of a Small Business Guarantee and Bamboo Craft (basketry)
Finance Corporation (SBGFC), the mandatory allocation Embroidery
of credit resources to small enterprises and the Soft Broom Making
rationalization of government assistance programs and Stuffed toy Training
agencies concerned with the development of SMEs. Sawali making
Loom Weaving (machine)
2. WHO WILL BENEFIT FROM THE MAGNA CARTA FOR Clay Hollow block Making
SMALL ENTERPRISES? Seagrass Basketry
Small and medium enterprises will benefit from the Rattan Basketry
Magna Carta for Small Enterprises Christmas Décor Making
Fruit Processing
3. WHAT IS SMALL AND MEDIUM ENTERPRISE? Candle Making
A small and medium enterprise is defined as any Banana Processing
business activity or enterprise engaged in the industry,
agribusiness and/or services, whether single 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.

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.
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philippines-opportunities-and-

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