In Defense of Small Businesses

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by Ike Señeres

AS WE see vivid images of super typhoons devastating our islands, we should also be reminded of the very strong economic storms that are already hitting our country every day now, causing daily damage that could cost more than a series of storms and earthquakes could possibly cause. As we talk about the apparent lack of preparations to address these natural disasters, we should also be reminded that we are not prepared for these economic storms either, with practically none of the so called “safety nets” in place.

It is a good thing that natural storms could be forecasted. Economic storms on the other hand do not need any forecasts, because these are certain to come, and in fact they already have. As we speak, local products are being clobbered in the local markets, and scores of small businesses and small factories have already closed. The damage is already being felt, even before the ASEAN Free Trade Area (AFTA) is fully in place by 2015, and even before all the World Trade Organization (WTO) agreements will be fully implemented.

One way or the other, the natural storms that are coming to our shores would have something to do with climate change and global warming, even if it could be argued that storms would naturally happen even without these two factors. That said however, regardless of what side of the argument you are with, there is no argument that the effects of climate change and global warming would definitely affect small businesses and small factories, as it has already happened in many cases. When we say small businesses, it should already include the business of farmers and fishermen.

I remember that when the issue of “safety nets” was discussed many years ago, there was a consensus that the government should not count all projects that all the projects that are in the normal course of public services delivery. What that means is that the government should come up with new and original “safety nets” that would be on top of, and different from what are normally provided by them. At that time, nobody really knew what that meant, and that is still the case now.

In the lack of understanding what “safety nets” would really mean, I would instead define it to mean anything and everything that would make a local product survive the onslaught of foreign products. Actually it should not be limited to plain and simple survival alone, because it should objectively mean success in the local and foreign markets, defined in terms of gross sales and market shares. I will add to that the fact that this boils down to product competitiveness. If that sounds to you like a sink or swim scenario, you are right, because that is what it really is, and much more than that, it is actually a life or death situation.

By comparison, I would say that dealing with a natural storm is easier than dealing with an economic storm. On the part of many local politicians, that could be as simple as delivering a few relief goods and taking lots of pictures. There is really no need for a closure, because the actions would end as soon as the evacuation centers are vacated, and that is it. In the case of economic storms however, the first line of casualties are not people, so there is really no rush for dramatic photo opportunities.

In the case of economic storms, the local products in the local markets are the first to die, and their deaths would ultimately result in the death of the factories, being the second line of defense. It could be said that the third line of defense would be among the ranks of the workers who would lose their incomes as their jobs would also die. Complicated as the sequence would appear to be, the cause of it all is the death of local products, and that is where we should fight back first, to make our products more competitive, so that these could stand up strongly to the foreign invaders and win the fights too.

Making products more competitive is a no brainer, because there is a science behind that. As a matter of fact, many big local companies have already perfected that science, and many of their products are now doing very well in the local and global markets. The rules of the marketing game are very clear. Aside from having a good product, what are needed are good product positioning, good branding, good labelling, good packaging and good advertising. There is no way out of these rules, because companies would have to play the game or die.

Again by comparison, the big companies could very well stand up on their own, and would therefore not need any help from the government. Obviously, the only ones that would need help from the government are the small businesses and the small factories. This is not really a new discovery, because we have known this all along. For so many years now, we have also heard many government agencies reporting that they are implementing programs along this line, but nothing seems to stick, and we are not seeing local products winning in the local and global markets.

The lack of financing is often said to be the cause of local product failure. That could be true, but in reality, any product doing well in the market should not have any problem in getting investors. And if the product is really doing well, the cash flow would be good too, and the only need for more financing would be for expansion purposes. We should really aspire to produce more local products that are global winners. Otherwise, we will just be a consumer economy, found at the lower end of the value chain, with no value added of our own.

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