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Stunting the growth of MSMEs.

There has been much publicity about developing our Micro, Small and Medium Enterprises so that we can have a more inclusive growth. We all certainly want to see a vibrant economy that encompasses a larger portion of the population but unfortunately, there are certain government policies that actually stunt the growth of MSMEs.

Too much bureaucracy, a high tax rate, not enough available financing, a high minimum wage and the exorbitant cost of utilities has all led to the stunted growth of small businesses in the Philippines. Small businesses here are typically owned and managed by the same person and to have them comply with all the local and national regulatory requirements means shutting down the business when the owner is running around to file all sorts of reports and get his business permits.

Among the things that an entrepreneur will have to get are his DTI and BIR registration and Mayor's permit. Of course, he will have to file all of his monthly and quarterly reports and payments to the BIR, SSS, Pag-ibig and Philhealth. Depending on the nature of his business, other requirements and permits will have to be complied with. All these things would typically require lining up to file, pay or even just to get the forms.

After working yourself to death, you now have to pay your income taxes which comes up to 32% very quickly at a net income level of only 500,000 pesos. You wonder where all this tax money is going to? After all, we still have to pay the 12% VAT, we have to pay real estate taxes, we have to pay high taxes on our fuel, electricity and practically everything else. Is it any wonder that many people find paying their taxes unappealing?

In starting up a business you would of course need capital and not everyone has money stashed away for this purpose. Unfortunately, bank financing is normally not available for people without a credit history or collateral. So what happens is that these entrepreneurs end up just having to rely on what little savings they have, whatever they can pawn, what they can borrow from relatives and sometimes even end up borrowing from loan sharks. Certainly not a good way to start a business.

Another big hurdle the entrepreneur will have to face is hiring people at a minimum wage that is one of the highest in Asia. After raising his limited capital and with limited resources, we still impose upon him our minimum wage. Is it any wonder why we have such a high unemployment rate? In addition, the entrepreneur will have to face the nearly annual increase in minimum wage regardless of whether his business makes money or not.

What business can run without electricity or water? Yet, our electricity and power rates are the highest in the region, which makes running a small business a riskier proposition for the entrepreneur. Faced with ever increasing costs, only the utility companies will make money. This is quite evident, since utility companies are the top companies in terms of profitability.

If you were planning to put up a small business, just thinking of all of the requirements and the risks that you will need to bear will already make you think twice before setting up the business. It is for this reason that we should salute our businessmen who went against all the odds and set up their own business. You can just think that if everyone became an employee, our unemployment and underemployment situation will be much worse. Our government should be finding solutions to the stunted growth of our MSMEs instead of adding to their burden.

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Title Annotation:Business News
Publication:Manila Bulletin
Date:Jul 1, 2015
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