Selling to the world

I recently wrote of how the products of women home weavers of raffia fiber in Tubigon, Bohol, find their way to buyers across the globe. The fact is, growth possibilities of the smallest of firms can be virtually limitless, as they need not confine their reach to their immediate surroundings. Fast-food giant Jollibee, now counting thousands of branches here and abroad, started out as an ice cream parlor in Cubao, Quezon City, in 1975. One only has to dream big, as did Jollibee owner Tony Tan and his family way back then, and match that with hard work.

Most small firms seem content to stay small. Many an informal business owner prefers to stay under the radar, as the hurdles and obstacles multiply once the business tries to go formal. Sadly, government itself mostly puts those hurdles and obstacles in the way, from needlessly cumbersome documentary requirements imposed by both the national and local governments, to multiple fees and taxes that eat up much of one’s earnings. It’s enough to discourage the faint of heart from getting into business at all, at least formally. And that’s why many would rather stay informal and underground.

They say that the most critical period for a small firm is the first three years, and how it surmounts the challenges within that period spells its fate. Once (or even before) it gets beyond that difficult period, it can consider going international. There are three ways to do this. One is to individually sell its products directly to buyers abroad. While that was perhaps unthinkable before the age of the internet, this is now as easy for one to do as it is for a multinational giant with a global marketing network. All one needs is an e-commerce platform to connect to buyers worldwide, and a good logistics provider to deliver one’s product to them.

Another way is to team up with other small firms, and be part of a cluster of otherwise competing firms who can then sell in volume to buyers abroad, where orders tend to be large, especially from institutional buyers like department stores. This proves to be the Waterloo of most small Filipino businesses, for whom clustering and teaming up seem to be the hardest thing to do. Even with our much-vaunted bayanihan (cooperative) spirit, Filipino entrepreneurs, it is said, tend to have a kanya-kanya (individualistic) mentality. I’ve heard it said, sadly, that bayanihan is for disasters, but kanya-kanya is for normal times.

The third way for a small firm to internationalize is to be part of a global (or regional, as in the Association of Southeast Asian Nations, or Asean) value chain. That is, sell its products to a value-adding firm or processor that in turn sells its products in foreign markets. The women home weavers of Tubigon may not even know how far out in the world their product eventually goes, and yet they are in fact world-connected. And in the world of e-commerce, small firms have the option to source their inputs from overseas as well, thereby creating their own global value chain.

Other than basic documentary and tax hurdles, what other obstacles lie in the way for small firms to internationalize? In accessing e-commerce, barriers include our slow and still not too widely available internet, lack of online payment systems, weak logistics, and cumbersome trade clearance processes. On clustering, we need to overcome the kanya-kanya mindset, and a third party like the government or a nongovernment organization often needs to step in to lead small producers to band together. Once together, they also need help to be matched and linked to foreign buyers. On linking to global value chains, small firms need help to match and link them to large, globally connected firms. Government must also make it easy for small and large firms alike to clear their inward (input) or outward (product) shipments, by streamlining trade clearance processes and requirements.

As chair of Asean this year, the Philippines is championing the cause of micro, small and medium enterprises in the region’s closer economic integration. There is much that Asean needs to do collectively to this end, but we have a lot of our own homework to do to walk our own talk as well.

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