THE PHILIPPINE ECONOMY
Entrepreneurship in the Philippines
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.
The United States granted our political independence on July
4, 1946. Filipinos 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.
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 government’s 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 Philippines’s competitiveness
and contribute to job creation.
In 2011, there were approximately 830,000 business
enterprises in the Philippines. Of these, 99.6 percent are
classified as micro, small, and medium-sized 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. 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
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… It’s 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 is 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
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 1700’s 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.
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,
financing—most 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.”
proprietorship, partnership or corporation whose total
assets, inclusive of those arising from loans but exclusive
of the land on which the particular business entity’s
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
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

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

challenges-inclusive-growth
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