E-Commerce for SMEs: Making SMEs Competitive TodayJanette Toral
Ever since the Internet and e-commerce came about, there’s always one popular line that you’ll hear from almost every e-commerce evangelist and that is, e-commerce can make our SMEs competitive. But the reality is, you can’t just go to any SME and say that. Most likely, they’ll just stare at you and even say, “What do you know about my industry?”
That’s the point there. Even though e-commerce is great but it will be an irresponsible sweeping statement to say that it can apply to all SMEs. Even though it may, the question there is how? There are so many sectors that comprise the SME sector. According to the Small and Medium Enterprise Development Council, 99% of total establishments in the country are SMEs.
The Department of Trade and Industry named 10 priority sectors which are construction materials, electronics, food, giftware and holiday d’cor, home furnishings, IT & IT-enabled services, marine products, motor vehicle parts and components, organic and natural products, and wearables.
Those who get the chance to participate in international policy-makers forum often realize, even stronger in conviction that we are lagging behind in a lot of ways based on the subject of competitiveness, particularly the capacity development of our small and medium enterprise (SME) sector.
What must be understood is that no standard model can apply to all SME industries. Each one has unique needs. An e-commerce model that will suit the construction materials sector may not necessarily apply to electronics and food sectors. Each one trades differently from the other.
But one way or another, SMEs should keep on improving itself and see how technology can be of help. They have to keep on reinventing for long term competitiveness. With the advent of global and borderless trading, government trade promotion will not always be enough, neither the solution, competitiveness is.
With Internet, e-commerce, ICT, and the many benefits it brings to the table, can they be of value at all to our SMEs? Should we cut across sectors and bring all our SME industries online or do we focus on niches or the vital few where the country has the strategic advantage? Are the establishment of trading hubs and linkages the standard solution or business model per sector?
There’s so much hype on how the Internet and e-commerce can empower our SMEs. However, even if the Internet became more accessible than before, there are a lot of things that an SME must consider and invest in to maximize its benefits. This includes computers, software applications, supply chain management (SCM), enterprise resource planning (ERP), customer relationship management (CRM) tools, and so much more. As these cost too much, most SMEs who ventured into it limit their computerization to automation of basic work tasks and have the capability to send emails over the Internet.
Government is seen as an important catalyst in making SME advancement happen. It is expected to provide the necessary infrastructure and programs to promote investment and trade. However, as much as we kept saying such, actions contradict it.
Trade shows and missions
Take the case of local government trade shows and international trade missions, the fees that SMEs pay to participate in such is no different at all from the big industry players. That is the reason why you only see the big ones in these events and the small ones doesn’t exist.
If government is serious in helping the SME, it must strike a balance in ensuring that both are represented in these activities and not be isolated for not having enough resources.
Abuse of grants
I’ve been in the industry long enough to see how much grant money has been wasted on never-ending SME market study. All of these studies have recommendations on how they can be helped in improving but hardly any of them gets implemented. No wonder a big majority of our SMEs are not accommodating to researchers making these studies. They are seen as entities capitalizing on the situation of SMEs in getting grants, but do not really care in improving their sector.
I also frown on how some sectors of the academe have been raking money on doing these studies but hardly produced lasting results that benefits the sector.
Incentives given by government to encourage investment in the country is limited to the big players in the industry. Tax incentives are given in order to lure them. However, we can’t even extend such to our SMEs who gets taxed and has to go through government bureaucracy that foreign investors are cushioned from.
Bank loan, financing, access to grant are amenities that SMEs don’t have access to for they are mostly designed to be bureaucratic and unforgiving of one’s past.
Helping Philippine SMEs
For e-commerce to prosper, the SME sector needs to be educated on its potential and learn from the experience of others, which may not necessarily be Philippines-based.
Note that the Philippines has like 2 million computers today with 58% used in businesses. Most SMEs still use traditional office applications such as spreadsheet, word processing, among others in their daily business undertakings. Note that competitive developing countries like Thailand, Malaysia, are now using automated business applications that allows them to process information much faster than our SMEs.
Technology may be available but affordability comes in as an issue as well. An e-commerce initiative will usually require no less than 500,000 to complete the basic requirements. A full blown SME productivity tool will also require the same.
Government and business/trade associations have to get its act together if it wants to save the remaining and those who still desire to become an SME in this country.
If not, we will just remain envious and frustrated with what other economies are doing to help their SME sector. Let me name a few of these initiatives.
In Thailand, the government created its own Software Park of Thailand that assist software development houses in getting world-class certifications. Its government hardly procures software outside the country but outsource it to the local industry. It also heavily subsidizes training and certification that can lead to competitive local organizations. Several successful organizations came out of it and began bringing projects from abroad.
In the Philippines, we often see government projects being outsourced to fellow government institutions. Oftentimes, even without bidding. Doesn’t this contradict in providing opportunities to the private sector? If these projects fail, can they be sued or held accountable?
In Malaysia, several programs are in place to help its SME sector from its Small and Medium Industries Development Corporation that started as early as in year 2000. They are:
- E-Manufacturing Grant
Provides assistance to SMEs to acquire application software such as ERP, SCM and CRM. A matching grant of up to maximum of US$132,000.00 is given to each eligible company for expenses in software, implementation charge and hardware.
- Upgrading Engineering Design Capabilities Grant
To assist SMEs in developing their in-house design capability. A matching grant of up to US$79,000.00 is given to each eligible company and expenses includes software, related hardware and training.
- RosettaNet Grant
To assist domestic suppliers in electronic & electrical sector to link up with the multinational corporations. A matching grant of up to maximum of US$26,000.00 is provided to eligible company which include expenses in software, and licensing fee.
- Skills Upgrading Grant
To assist SMEs to acquire core competencies that focus on quality, new technology as well as knowledge in ICT. It will cover up to 80% on the cost of training
The likes of Commission on ICT, Department of Trade and Industry, and government banks should look at ICT assistance and loans beyond computers. If such mindset can’t be expanded, then what we will only have are SMEs with computers having basic office productivity tools installed, nothing more. It just automates the basic tasks but did not help in reengineering the business using ICT as a tool.
Banks who have been mandated by the Magna Carta for Small Enterprises to provide allocation of loanable funds to small enterprises can take this as an opportunity in providing technology loans to SMEs.
For e-commerce to fully work, inter-bank fund transfer (IBFT) across Megalink, BancNet, ExpressNet, and the rural banks is important to enhance the flow of money. Telecommunication companies did not interconnect by default, market forces took a high-gear position and dictated it. IBFT can also happen if market forces, the business organizations, will persistently clamor for it.
Frontline government agencies who are rendering services to businesses should also implement e-commerce, in order to extend public service online as well. The more government makes it easy and efficient for SMEs to transact, the higher the revenue they can achieve as well. At the same time, provide the necessary information efficiently when needed, such as market trends and opportunities, will greatly help exporters.
There’s a higher mountain to climb to achieve the full realization of e-commerce in our country. It’s not just about technology. It also requires leadership and innovativeness of players in the supply chain.
How I envy the Malaysian and Thailand SMEs for all the help and support that their governments are doing to empower their sector. In the Philippines, our SME has no one to rely on except itself and its ingenuity to survive and thrive.
There’s no doubt that our country has a lot of things to be proud of. I hope that one day, we can also take pride for having sustainable and useful programs in assisting our SMEs to become competitive in the New Economy. More than just never-ending SME studies, projects won through grants that die after the funds dry out, and pro-big trade shows and incentives.
The Philippine SME sector must be served well and saved. Let us not wait for the time to come where they will close shop and migrate to another country to pursue their entrepreneurship in pro-SME grounds.