1 | Entrepreneurship Ventures in the Philippines 1

BACHELOR OF TECHNOLOGY
BUSINESS 1 BUSINESS PLANNING

Mary May P. Paleyan

SSU Mercedes Campus

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PREFACE

The Entrepreneurship in the Philippines views as empowering the power to use

the resources into economic ventures. This module aims the students to have an overview

on how to use their resources and engage into business ventures. This module also discuss

the engine on economic growth of the country. The students will able to develop

knowledge on how to start their own business and factors that will affect the economic

growth with government support.

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UNIT 1: ENTREPRENEURSHIP VENTURES IN THE

PHILIPPINES

1.0 Learning Objectives

a. Identify the different business models
b. Understand the basic role of entrepreneurship in the economy of the Philippines.
c. Know the rules governing business in the Philippines.

1.1 Introduction

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.

Name at least 5 successful business industries in the Philippines.

Very good. I think you’re ready for our discussion.

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1.2 Topics/Discussion

1.2.1 Entrepreneurship in the Philippines

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.

Enterprise development and competitiveness

Enterprise development in the context of competitiveness not only entails

the ability to produce products that can be accepted globally but also the level of
support given to enterprises to help them produce, innovate, and gain market
access.

While relatively mature and free, enterprise development in the Philippines

is beset with critical challenges. These challenges are found within the context of
pillars identified by the United Nations Development Programme in its report
Unleashing Entrepreneurship: rule of law, physical and social infrastructure,
domestic macro environment, and global macro environment; a level playing field,
access to financing, and access to skill development and knowledge.

If the challenges remain unresolved, gaps in enterprise development have

the potential to thwart the country’s competitiveness and ability to effectively
function within global production networks.
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Rule of Law

Rule of law, which encompasses regulatory structures, policy environment,

and enforcement of regulations, is one of the more important dimensions in
assessing the competitiveness of Philippine enterprises. According to the World
Bank’s 2013 Doing Business Survey, the Philippines ranks 138 of 185 economies
with regards to the ease of doing business. Except for the indicator “trading across
borders” where the Philippines fared in the top third of the rankings (#53), the
country sits at the bottom third in all other enterprise development indicators such
as starting a business (#161), dealing with construction permits (#100), registering
property (#122), getting credit (#129), protecting investors (#128), paying taxes
(#143), enforcing contracts (#111), and resolving insolvency (#165). Along these
lines, it can be clearly noted that the Philippines’ regulatory environment for
enterprise development is still weak and needs further reform, harmonization and
standardization.

Taking the case of business start-ups for instance, when entrepreneurs draw
up a business plan and try to get under way, the first hurdle they face is complying
with the procedures required to incorporate and register the new firm before they
can legally operate. The Philippines requires at least 15 procedures and takes some
30 or more days to start a business. Malaysia requires nine procedures and 24 days
while Taiwan requires eight procedures and 48 days. The rest of the Southeast
Asian region averaged 8.7 procedures and 46.8 days to start a business.

Access to Credit

Another important dimension is access to financing. While specific laws

such as the MSME Magna Carta and Barangay Micro Business Enterprises (BMBE)
development specifically mandate financing for enterprises, obtaining said funds
is a different story. Most lending portfolios require collateral accompanied by
tedious documentation and other technical requirements that are difficult for
MSMEs to comply with.

An enterprise survey conducted by the Universal Access to

Competitiveness and Trade (U-ACT) in 2008 revealed that access to capital and
financing are two of the most problematic issues for enterprises, primarily MSMEs.
Seventy-two percent of the total respondents, or nearly three out of four, observed
that investment and/or capital are currently difficult to obtain. On the other hand,
five out of 10 surveyed MSMEs regarded access to and cost of credit as problematic,
in relation to their businesses. In fact, 14 percent strongly stressed that credit
availability and cost pose a serious problem to the operation of their businesses.
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Internationalization and global production networks

The rapid integration of economies and globalization of markets has

influenced the evolution of entrepreneurship over the years. Thus, from the
traditional concept of supporting the various factors of production,
entrepreneurship now entails the capacity to see an opportunity, come up with an
idea, and organize the capital, knowledge, partners and managerial skill needed to
develop and sustain business activities through internationalized value chains.

Taking advantage of liberalized trading environments is an emerging

challenge for Philippine enterprises. This is compounded by the reality of limited
opportunities for productivity and innovation. The World Economic Forum (WEF)
Global Competitiveness Index identified infrastructure, labor market efficiency,
innovation, technological readiness, intellectual property protection, R&D
spending by private companies, and availability of scientists as key areas in
business and enterprise development where the Philippines is lagging.

Enterprises need to be supported by strong social and physical

infrastructure, which include among others, labor productivity, laboratories,
business incubators, business planning, marketing and branding, and
conformance to international standards. All these should be linked to the supply
chain while at the same time economic clusters found in local economies need to
be developed to allow specialization and product complementarity.

Role of enterprise networks

In addressing the above mentioned challenges, there is a need to rally

behind national advocacy to push entrepreneurship to the next level. This means
nurturing micro-entrepreneurs from purely “survival” into “opportunity and
innovation driven” enterprise owners. This puts a premium on the role of
enterprise organizations such as chambers of commerce, industry associations and
dedicated enterprise networks.

The OECD Working Party on SMEs and Entrepreneurship in its 2009 study
on “Barriers and Drivers to SMEs Internationalization” undertaken by Kocker and
Buhl points out that institutionalization of networks/social ties and supply chains
is a key driver of SME international competitiveness. The study noted “the
importance of network/social ties and supply chain links in triggering an SME’s
first internationalization step and extending internationalization processes.”

In the Philippines, apart from institutions like chambers of commerce and

industry clubs, entrepreneurship advocacy is mainstreamed by the creation of
enterprise networks like the Philippine Center for Entrepreneurship (PCE). PCE’s
concrete goal is to spawn the creation of so-called “Go Negosyo Communities”
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everywhere. These are communities where the academic, business and

government sectors are drawn into a triangle of almost seamless collaboration. In
such an ecosystem, there is constant networking, mentoring and cooperation
among professors, entrepreneurs, industry experts and venture capitalists, with
the government providing support through a viable policy infrastructure. Every
“Go Negosyo” community is distinguished by its ability to produce a continuous
stream of start-up ventures.

PCE also seeks to embed strong entrepreneurship lessons into the school
curriculum. If the goal is to develop a culture of enterprise and cultivate
tomorrow’s competitive entrepreneurs, they must start at a young age. Primary
and secondary schools can teach the values and develop the mindsets of an
entrepreneur. At the college level, enterprise networks are looking at how to assist
in the area of curriculum enhancement, providing manuals, training the teachers,
and involving real entrepreneurs in the learning process.

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.

Laws Protecting Businesses in the Philippines

1. REPUBLIC ACT NO. 8289

MAGNA CARTA FOR SMALL ENTERPRISES
Republic Act No. 6977,
As Amended by Republic Act No. 8289

AN ACT TO STRENGTHEN THE PROMOTION AND DEVELOPMENT OF, AND

ASSISTANCE TO SMALL AND MEDIUM SCALE ENTERPRISES, AMENDING
FOR THAT PURPOSE REPUBLIC ACT NO. 6977, OTHERWISE KNOWN AS THE
"MAGNA CARTA FOR SMALL ENTERPRISES" AND FOR OTHER PURPOSES.
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2. Republic Act No. 9178 November 13, 2002

AN ACT TO PROMOTE THE ESTABLISHMENT OF BARANGAY MICRO

BUSINESS ENTERPRISES (BMBEs), PROVIDING INCENTIVES AND BENEFITS
THEREFOR, AND FOR OTHER PURPOSES.

It is hereby declared to be the policy of the State to hasten the country's

economic development by encouraging the formation and growth of barangay
micro business enterprises which effectively serve as seedbeds of Filipino
entrepreneurial talents, and intergranting those in the informal sector with the
mainstream economy, through the rationalization of bureaucratic restrictions, the
active granting of incentives and benefits to generate much-needed employment
and alleviate poverty.

"Barangay Micro Business Enterprise," hereinafter referred to as BMBE,

refers to any business entity or enterprise engaged in the production, processing
or manufacturing of products or commodities, including agro-processing, trading
and services, whose total assets including those arising from loans but exclusive of
the land on which the particular business entity's office, plant and equipment are
situated, shall not be more than Three Million Pesos (P3,000,000.00) The Above
definition shall be subjected to review and upward adjustment by the SMED
Council, as mandated under Republic Act No. 6977, as amended by Republic Act
No. 8289.

For the purpose of this Act, "service" shall exclude those rendered by any
one, who is duly licensed government after having passed a government licensure
examination, in connection with the exercise of one's profession.

Exemption from the Coverage of the Minimum Wage Law – The BMBEs
shall be exempt from the coverage of the Minimum Wage Law: Provided, That all
employees covered under this Act shall be entitled to the same benefits given to
any regular employee such as social security and healthcare benefits.

Upon the approval of this Act, the land Bank of the Philippines (LBP), the
Development Bank of the Philippines (DBP), the Small Business Guarantee and
Finance Corporation (SBGFC), and the People's Credit and Finance Corporation
(PCFC) shall set up a special credit window that will service the financing needs of
BMBEs registered under this Act consistent with the Banko Sentral ng Pilipinas
(BSP) policies; rules and regulations. The Government Service Insurance System
(GSIS) and Social Security System (SSS) shall likewise set up a special credit
window that will serve the financing needs of their respective members who wish
to establish a BMBE. The concerned financial institutions (FIs) encouraged to
wholesale the funds to accredited private financial institutions including
community-based organizations such as credit, cooperatives, non-government
 1 | Entrepreneurship Ventures in the Philippines 9

organizations (NGOs) and people's organizations, which will in turn, directly

provide credit support to BMBEs.

All loans from whatever sources granted to BMBEs under this Act shall be
considered as part of alternative compliance to Presidential Decree no, 717,,
otherwise known as the Agri-Agra Law, or to Republic Act. No. 6977, known as
the Magna Carta for Small and Medium Enterprises, as amended. For purposes of
compliance with presidential Decree no. 717 and Republic Act No. 6977, as
amended, loans granted to BMBEs under this Act shall be computed at twice the
amount of the face value of the loans.

To minimize the risks in lending to the BMBEs, the SBGFC and the Quedan
and Rural Credit Guarantee Corporation (QUEDANCOR) under the Department
of Agriculture, in case of agribusiness activities, shall set up a special guarantee
window to provide the necessary credit guarantee to BMBEs unde rtheir respective
guarantee programs.

The LBP, DBP. PCFC, SBGFC, SSS, GSIS, and QUEDANCOR shall annually
report to the appropriate Committee of Both Houses of Congress on the status of
the implementation of this provision.

The BSP shall formulate the rules for the implementation of this provision
and shall likewise establish incentive programs to encourage and improve credit
delivery to the BMBEs.

Technology Transfer, Production and Management Training, and

marketing Assistance – A BMBE Development Fund shall be set up with an
endowment of Three Hundred Million pesos (P300,000,000.00) from the Philippine
Amusement and Gaming Corporation (PAGCOR) and shall be administered by
the SMED Council.

The Department of Trade and Industry (DTI), the Department of Science

and Technology (DOST), the university of the Philippines Institute for Small Scale
Industries (UP ISSI), Cooperative Development Authority (CDA), Technical
Education and Skills Development Authority (TESDA), and Technology and
Livelihood Resource Center (TLRC) may avail of the said Fund for technology
transfer, production and management training and marketing assistance to
BMBEs.

The DTI, in coordination with the private sector and non-government

organization (NGOs), shall explore the possibilities of linking or matching-up
BMBEs with small, medium and large enterprises and likewise establish incentives
therefor.
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The DTI, in behalf of the DOST, UP ISSI, CDA. TESDA and TLRC shall be
required to furnish the appropriate Committees of both Houses of Congress a
yearly report on the development and accomplishments of their projects and
programs in relation to technology transfer, production and management training
and marketing assistance extended to BMBEs.

1.2.2 Models: Traditional: Sole; Partnership; Inc Emerging Tech Start-ups Social
Entrepreneurship Angel Investing Others

Different Forms of Business Organization

Sole Proprietorships

A sole proprietorship (pruh-PRY-uh-tur-ship) is a legally defined type of

business ownership in which a single individual owns the business, collects all
profit from it, and has unlimited liability for its debt. In the eyes of the law, the
owner and the business are one and the same. Most small businesses operate as
sole proprietorships, particularly new ones. The vast majority of all businesses in
the United States are sole proprietorships.

Advantages

The sole proprietorship is the simplest and least expensive option for
business ownership. Because the owner and the business are one and the
same, business income and costs are reported on the owner’s personal
income tax return. This means less paperwork and easier tax accounting for
the sole proprietor. The sole proprietor is also the sole decision maker, with
complete control over the management of the business.

Disadvantages

In a sole proprietorship, only one individual is responsible for the

business. That person has to carry a heavy workload—raising the financial
backing to set up, operate, and expand the business. The sole proprietor has
unlimited liability for any business debts. As noted previously, this means
that the owner’s personal money and possessions (house, car, and so on) are
at risk if they are needed to pay business debts. Sole proprietors often find
it difficult to borrow money or attract investors. If they are unable to work,
or make poor decisions, the business could fail. Lenders and investors are
reluctant to take that risk.

Because of this lack of access to outside cash, sole proprietors often

find it difficult to expand their businesses.
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Partnerships

A partnership is a legally defined type of business organization in which at

least two individuals share the management, profit, and liability. The most
common form of partnership is a general partnership. In a general partnership, all
partners have unlimited liability. Like sole proprietors, general partners are
personally responsible for business debt. Because they assume personal financial
risk, general partners usually take an active role in a business. A limited
partnership is structured so that at least one partner (the general partner) has
limited liability for the debts of the business.

The other partners have no say in the company’s day-to-day operation but
are only investors.

Advantages

A general partnership is much like a sole proprietorship as far as

establishment and taxes are concerned. Setting up and maintaining a
general partnership is relatively simple. It requires little paperwork
compared to a corporate structure. The primary advantage of a general
partnership compared to a sole proprietorship is that a general partnership
can rely on the entrepreneurial skills and financial backing of at least two
individuals instead of just one. This makes it easier for a partnership to
borrow money or appeal to outside investors. Also, general partnerships
can attract and motivate employees with the incentive of becoming partners
in the business at some point in the future.

Disadvantages

Because general partners have unlimited liability, they risk losing

personal money and possessions to pay business debts. Partnerships have
three main disadvantages compared to sole proprietorships. First, profit is
split between the partners. Second, each partner is responsible for the
business-related actions of all the others. And, third, partners may have
trouble agreeing on how the business should be operated.

Corporations

A corporation is a legally defined type of business ownership in which the

business itself is considered a type of “person” (often referred to as an “entity”)
under the law, and limited liability is granted to the business owner(s). Although
a corporation may have only one owner, most have more than one. The owners of
a corporation are called its shareholders or stockholders. A share of stock is a unit
of ownership in a corporation. Corporations sell shares to raise money. They may
 1 | Entrepreneurship Ventures in the Philippines 12

limit share ownership (within the founder’s family, perhaps) or offer it to the
general public. Shareholders are said to have equity (financial ownership) in the
corporation. In other words, anyone who owns at least one share is an owner.

Each share may earn its owner a dividend, which is a portion of the
corporation’s profit. Most corporations are C corporations, which are taxed as an
entity by the federal government. The majority of states require a corporation to
have a board of directors, consisting of one or more individuals responsible for
making decisions about how the business should be operated.

Advantages

Shareholders have a limited liability. They risk only the money they
invested in the corporation. Shareholders can end their ownership by selling
their shares to someone else. Shares also trade hands when shareholders die.
The life span of a corporation is not tied to the life span of its owners. Many
of America’s largest corporations have been in business for decades.
Management of a corporation is delegated to the board of directors, who
typically hire the corporation’s officers. All of this means corporations can
raise money more easily than sole proprietorships and partnerships.

Disadvantages

The primary disadvantage of corporations is that they are more

difficult and expensive to set up and maintain than other business
structures. Corporations are regulated under state laws, so to incorporate
means to set up a corporation in accordance with the laws of the particular
state where the business is located. In general, corporations must follow
very specific procedures for keeping records and selling shares. In addition,
corporations are not taxed the same way as sole proprietorships and
partnerships. Corporate profit is taxed twice. A corporation pays taxes on
the profits it earns. Then the shareholders pay personal taxes on corporate
dividends received.

Great job. We’ve finished Unit 1. That ends our discussion for the
Entrepreneurship Ventures in the Philippines.
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Exercises 5

I. Identification

Direction: Write the correct answer on the space provided before each number.

_____________________ 1. It is legally defined type of business ownership in which the

business itself is considered a type of “person” (often referred to as an “entity”) under the
law, and limited liability is granted to the business owner(s). Corporation

_____________________ 2. It is legally defined type of business organization in which at

least two individuals share the management, profit, and liability. Partnership

_____________________ 3. The most common form of partnership. General Partnership

_____________________ 4. It is legally defined type of business ownership in which a

single individual owns the business, collects all profit from it, and has unlimited liability
for its debt. Sole Proprietorship

____________________ 5. An Act to Promote the Establishment of Barangay Micro

Business Enterprise (BMBEs), Providing Incentives and Benefits Therefor, and for other
Purposes. RA 9178

____________________ 6. The ___________________ recognizes entrepreneurship as an

engine of economic growth. 1987 Philippine Constitution

____________________ 7. It refers to any business entity or enterprise engaged in the

production, processing or manufacturing of products or commodities, including agro-
processing, trading and services, whose total assets including those arising from loans but
exclusive of the land on which the particular business entity's office, plant and equipment.
Barangay Micro Business Enterprise

____________________ 8. The _________________ shall formulate the rules for the

implementation of this provision and shall likewise establish incentive programs to
encourage and improve credit delivery to the BMBEs. BSP

___________________ 9. An Act to Strengthen the Promotion and Development of, and

assistance to Small Medium Scale Enterprises, Amending for that Purpose Republic Act
No. 6977, Otherwise known as the “Magna Carta for Small Enterprises” and for Other
Purposes. RA 8289

____________________ 10. It a type or partnership which is structured so that at least one

partner (the general partner) has limited liability for the debts of the business. Limited
Partnership
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Activity 5

1. You want to start a sole proprietorship retail business that employs several people.
Research the steps necessary to comply with local government requirements for
setting up your business. Summarize your research. Be creative. You can use a
diagram, a flowchart, a 1-2-3 list, or any other method to summarize your research.

2. Imagine that your classmates are wealthy investors interested in putting money in
a new business that could be franchised around the country. Prepare a short
presentation in which you try to convince them that your business idea would be
a great franchising opportunity.
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Performance Rubric
Your essay will be graded based on this rubric. Consequently, use this rubric as a
guide when working on your essay and check it again before you submit it.
Criteria VGE GE SE LE N
(5) (4) (3) (2) (1)

1. The introduction is inviting and it gets the reader’s

attention. Opinion statement is clear.
2. There is one clear, well-focused topic. Main ideas are
clear and are well supported by detailed and accurate
information.
3. The purpose of writing is very clear, and there is
strong evidence of attention to audience.
4. The author uses vivid words and phrases. The choice
and placement of words seems accurate, natural, and
not forced.
5. All sentences are well constructed and have varied
structure and length. The author makes no errors in
grammar, mechanics, and/or spelling.
Legend:
VGE – To a very great extent; GE – To a great extent; SE – To some extent;
LE – To a little extent; N – Not at all
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1.3 References:

Mariotti, S. (2010). Entrepreneurship Owning your Future 11th Edition. Pearson Education,
Inc.

Online References:

https://www.cipe.org/resources/entrepreneurship-philippines-opportunities-
challenges-inclusive-
growth/#:~:text=In%20the%20Philippines%2C%20entrepreneurship%20is,an%20engine
%20of%20economic%20growth.&text=In%202011%2C%20there%20were%20approximat
ely%20830%2C000%20business%20enterprises%20in%20the%20Philippines.

Entrepreneurship in the Philippines: Opportunities and Challenges for Inclusive Growth

11.15.2013 ARTICLES RYAN PATRICK G. EVANGELISTA

1.4 Acknowledgement

The images, tables and information contained in this module were taken from the
references cited above.
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