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The role of global value chains (GVCs) as channels for the growth of micro, small and medium enterprises (MSMEs) was emphasized at a policy forum hosted recently by the World Bank (WB)-Philippine office and state think tank Philippine Institute for Development Studies (PIDS).

"Three quarters of world trade is in intermediate goods and services," explained WB Senior Economist Olivier Cattaneo. "It's much harder [for MSMEs] to export directly than indirectly."

For the Philippines, GVC participation presents an opportunity for its leaders to improve the quality of jobs in the country and for MSMEs to access international markets.

"It's not only about entering GVCs but also about upgrading once you're in GVCs," said Cattaneo. To explain this point, he enumerated the vertical transfer from lead firms to MSMEs of the following benefits: skills and management capacities, technology upgrades and innovations, access to finance, access to global markets and increased connectivity, and an overall improved business environment.

Compared to its peers in the region, Catteneo concluded that the Philippines "could do better". In the past years, the pattern has seen a decline in Philippine exporters using foreign input, and an increase in Philippine input in other countries' exports. This means the Philippines has become "less integrated in the global value chains", moving further away from the end consumer, and, thus, away from control of the market.

Noticeably, another character of Philippine GVC participation, according to Cattaneo, is "less GVC integration in electronics, but more in services".

This is no coincidence. PIDS Senior Fellow Ramonette Serafica noted that there has been "an increase of services intensification" in various industries across the country, whether they are already service chains or manufacturing chains. Most of the Philippine MSMEs are concentrated in three industries"retail and wholesale, accommodation, and foods services and manufacturing.

"In each of these industries, there are also subvalue chains occurring," Serafica pointed out, "Although not explicitly identified, they also need broadband services, financial services, and other services to implement the various activities along the value chain."

Goods manufacturing involves services like product development, manufacturing, distribution, sales, and after-sale services. The most popular service outsourced and acquired by MSMEs is finance and accounting.

"Services make up [on average] a quarter of the value added in value chains," said Serafica, underlining the role and the integrated value of services sector.

Even the gamut of business upgrading, whether it is in product development or process improvement, requires services such as research and development, marketing, logistics, and internet broadband services, among others.

Increased GVC participation may increase MSMEs' exposure to global economic risks. However, this downside comes hand-in-hand with the promise of increasing MSME capacity to grow, innovate, improve their performance, and access resources that can help develop their resilience to economic and other shocks. ###

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Policymakers should push for an integrated approach to urban environment resilience.

This is how Dr. Marife Ballesteros, acting vice president of state think tank Philippine Institute of Development Studies (PIDS), summarized the discussion on urban environment resilience last September 22.

"When we look at resilience, we should not merely be concerned with the sectoral aspects but with the integrated policy approach," she explained.

The said discussion was part of the Second Annual Public Policy Conference on Risks, Shocks, Building Resilience, which is the highlight of the celebration of the 14th Development Policy Research Month (DPRM). Resilience in agriculture, health, and macroeconomy was also covered during the one-day event.

The DPRM is celebrated across the country every September in view of Malacaang Proclamation No. 247 issued in 2002. It promotes public awareness and appreciation of the importance of policy research in the formulation of public policies, programs, and projects.

This year's celebration focused on the importance of building the country's resilience, aptly captured in the event slogan, "Angkop na Kahandaan: Matatag na Ekonomiya at Lipunan".

'Most glaring' problems in the Metro

Ballesteros said that a clear understanding of the nature of resilience must first be addressed before policy recommendations can be made.

"Risks are complex, but so is resilience," explained Ballesteros, who served as the moderator for the session on building urban environment resilience.

In order to target urban resilience specifically, studies should focus on the metropolitan areas, such as Manila, where urban environment problems are "most glaring", she added.

A panelist also raised the need for an integration of disciplines, where social sciences must be combined with the natural sciences to maximize their strengths in crafting policy solutions.

"We are so trained as specialists, economists, political scientists, physicists, but the reality is that the problems we are facing are all interconnected," said Dr. Emma Porio, sociology professor from the Ateneo de Manila University who discussed risk and resilience in Metro Manila during the session.

"In a sense, when you think of urban resilience in the city, you have to think of the city as a system," she added.

She explained policymakers should look at the interaction of the geophysical, political, economic, and social aspects so as to understand vulnerability and the potentials of building resilience in Metro Manila.

PIDS President Gilberto Llanto earlier urged the policy makers to look beyond natural hazards and acknowledge that the sources of risks are many and that those risks are interconnected.

Porio also challenged the current manner of looking at the socioecological and political development in governance in understanding urban environment.

"Floods do not recognize political boundaries, but we always make planning and data analysis according to political administrative boundaries," she explained.

Significant policy gap

Apparently, the Philippines still has a lot to do in terms of building resilience.

"There is a significant policy gap in terms of structures, laws, and mindsets," Ballesteros said.

The session called for the review of Republic Act 10121 or the Philippine Disaster Risk Reduction and Management Act of 2010, which Ballesteros considered "not adequate".

Porio added that the present governance system only reacts to the current needs of this generation. "It does not think whether your grandchildren will have resources in the future," she explained.

In terms of climate adaptation, Porio said the government should come up with convergent and integrative ways of addressing the issue. "Right now, what we have is a fragmented system of governance at different levels," she added.

Porio explained that "our policymakers continue to put ourselves in an increasingly risky situation because of their decisions."

Manila is considered the most exposed city to natural disasters in the world, according to the 2016 Natural Hazards Vulnerability Index from the United Kingdom-based risk analyst, Verisk Maplecroft. ###


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The World Bank Group partnered with state think tank Philippine Institute for Development Studies (PIDS) in a forum aimed at strengthening the potential of the Philippines' small and medium enterprises in the local and global markets.

Titled "Increasing Philippine SMEs' Participation in the Global Value Chains", the forum coincided with the celebration of the 14th Development Policy Research Month (DPRM), which centers on the theme "Investing in Risk Reduction for a Resilient Philippines".

"Building resilient systems in our country would not be complete if we disregard our micro, small and medium enterprises. After all, they are the lifeblood of the Philippine economy," said Dr. Sheila Siar, PIDS director for research information, in her opening remarks.

Data from the Philippine Statistics Authority show that MSMEs represent 99.6 percent of all enterprises in the country, accounting for 36 percent of the gross domestic product in 2014. Sixty-three percent of the total jobs generated by all business establishments were contributed by the MSME sector.

"There is no doubt that MSMEs are the backbone, the heart, and the lungs of the economy," said Cecile Fruman, Trade and Competitiveness Director of the World Bank Group. She added that MSMEs are critical to the country's economic growth, employment creation, and poverty reduction.

However, many factors threaten their competitiveness in the global market. These include low rate of business entry, low productivity, and the stagnation of the sectors structure.

The more productive medium-sized enterprises, for instance, only account for 0.4 percent of the total number of MSMEs in the country, compared to micro enterprises, which comprise 90.3 percent of the sector.

"Very few firms are really able to get into that medium segment," Fruman added.

Vulnerable to natural hazards, disasters

One possible reason to the stagnation of the MSMEs' structure is their vulnerability to disasters.

"Micro enterprises, particularly, are more vulnerable to natural hazards and disasters than medium and large enterprises," Siar explained. "They are usually the ones severely affected by strong typhoons, floods, and earthquakes."

Unfortunately, there is no standby government support to refinance businesses in the Philippines in the event a disaster occurs, according to World Bank Senior Financial Sector Specialist Nataliya Mylenko.

Moreover, despite a law requiring banks to allocate at least 10 percent of their credit resources to MSMEs, local banking system's compliance remained low at 9.2 percent for the first quarter of 2016, based on data released by the Bangko Sentral ng Pilipinas. This is because formal financial institutions generally regard MSMEs as high-risk clients.

"The banks actually would just opt to pay the penalty instead of giving loans to MSMEs," said Dr. Romeo Balderrama, president of the Philippine Homestyle and Holiday Decor Association, one of the company-representatives of the MSME sector in the forum.

Development Bank of the Philippines Vice President Benel Lagua said his institution is willing to engage in disaster financing. However, it can be a "little bit costly" to them.

Mylenko explained that while the government carries the cost related to reconstruction and recovery, it fails to sufficiently cover MSMEs after calamities.

"There needs to be an element of public subsidy [to support them]," she argued.

'More systematic thinking' needed

Mylenko, however, clarified that the financing issue is only one part of the problem Philippines MSMEs are facing.

"There are also issues on regulation, skills, and innovation," she said.

She added that since disasters are inevitable in the Philippines, a "more systematic thinking" is needed.

Relatedly, PIDS President Gilberto Llanto underscored the importance of "resilience thinking" in a press conference earlier this month. "There is a need for us to broaden our understanding of risks and resilience. We need to look beyond natural hazards and acknowledge that the sources of risks are many and that those risks are interconnected," said Llanto.

This year's DPRM highlights the crucial role of building multiple resilience systems, including at the level of MSMEs.

PIDS will also conduct other events related to promoting resilience thinking. The Second Annual Public Policy Conference on "Risks, Shocks, Building Resilience" will be held on September 22. This will be followed by a policy forum on social protection and risk management at the University of San Carlos in Cebuy City on September 29.

The DPRM is celebrated across the country every September in view of Malacanang Proclamation No. 247 issued in 2002. The proclamation declares the observance of a DPRM to promote and draw public awareness and appreciation of the importance of policy research in the formulation of sound policies, programs, and projects. The proclamation also designated PIDS as the lead government agency in the yearly celebration of the DPRM. ###

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Local researchers and representatives from government agencies and the private sector brought mining, governance, and disaster-related issues to the fore during the 2nd Mindanao Policy Research Forum held in Butuan City on September 1, 2016. Researchers from Caraga State University (CSU) and Father Saturnino Urios University (FSUU) steered the discussion with their presentations on responsible mining in Mindanao, geographic information system (GIS) for local government units (LGUs), and disaster risk reduction and management (DRRM) initiatives.

On responsible mining

In her presentation, Dr. Raquel Balanay of CSU said that the mining process starts in exploration and ends in rehabilitation. Her study, which started in 2012, revolved in infusing a science and technology-based program to achieve responsible mining in Mindanao. This particular study involved eight components: (1) terrestrial biodiversity assessment, (2) aquatic biodiversity assessment, (3) profiling of artisanal and small-scale gold mining, (4) documentation of contamination pathways, (5) rehabilitation of mined-out areas, (6) processing of chromite and laterite ores, (7) development of alternative technologies for small-scale mining, and (8) generating web-based information system for responsible mining. These components were aimed at confronting issues related to mercury and cyanide pollution, erosion, environment degradation, and landscape destruction, among others.

"The ultimate goal of the program is to implement a socially acceptable, economically viable, environment-friendly, and sustainable mining in Mindanao," said Balanay. This, she added, entailed crafting of policies on wildlife conservation and pollution management, and addressing the lack of information on the concept behind responsible mining.

However, Balanay admitted that responsible mining has no universal definition yet. This echoed the sentiments of REACH Foundation Executive Director Arceli Nagpala, who served as one of the discussants in the forum. According to her, the parameters that make mining "responsible" should first be identified. She suggested for a national government vision for mining, where planning starts at the regional level.

On developments in local government

Technological developments in local governance in Butuan City were also highlighted during the forum. Engr. Michelle Japitan, also from CSU, led the presentation on the Comprehensive Land Information Management System (CLAIMS) that is being implemented in the city. By harnessing the technological benefits of GIS, the CLAIMS-GIS Project is able to address Butuan's need for an integrated and automated systems for real property unit mapping, assessment, and tax collection. The project optimizes the use of these maps for various spatial mapping endeavors, particularly in crafting comprehensive land use plans and other disaster risk assessment applications.

"It has been one of the goals of the city to develop Butuan as a "Smart City". The CLAIMS-GIS Project could be the springboard that will launch never-before-seen Butuan City technologies," said Japitan.
Other developments instituted in the local government of Butuan were: (1) a barangay system profiler that performs geotagging on households; (2) a tree-tracker application for the Department of Environment and Natural Resources, which locates and monitors planted seeds; and (3) a disaster aid tagger and access system that designates households to evacuation centers, among others.

On disaster risk management

As co-organizer of the forum, FSUU's Dr. Shirlene Medori Alegre, director for Graduate Studies and Research, and Mr. Jeffrey Carin, director for Community Involvement and Advocacy, presented the universitys security and safety measures, and its DRRM initiatives.

"School safety ensures the continuity of providing quality education for students. This requires a dynamic and continuous process instigated by school administrators and participated by all stakeholders. Disasters can be prevented and mitigated with the spirited application of knowledge, creativity, and resourcefulness," said Alegre. Thus, disaster preparedness should be an integral part of educational planning, she added.

Carin, meanwhile, highlighted the need for appropriate, relevant, and responsive solutions to face immediate and identified problems that impede growth. According to him, the integrated community involvement and advocacy framework that FSUU is implementing aims to promote a holistic program that instills development values in their students. The framework also addresses disaster risk reduction and management facets that include preparedness, relief operations, and rehabilitation programs.

Aware of the importance of collaboration, Carin said, "We cannot conduct these programs without tapping government agencies, civil societies, and the private sector." This call was received favorably by the OIC-Assistant Regional Director of the Department of the Interior and Local Government (DILG)-Region 13, Donald Seronay, who said that the government and the academe are conducting overlapping projects that could be resolved by collaboration.

"DRRM and climate change adaptation are an integral part of managing local governments. Higher education institutions that conduct DRRM-related trainings are already helping LGUs in achieving DRRM competencies," Seronay said.

Way forward

Attended by more than 100 participants from different sectors in the region, the 2nd Mindanao Policy Research Forum was jointly organized by state think tank Philippine Institute for Development Studies, Mindanao Development Authority (MinDA), FSUU, and the Commission on Higher Education-Caraga. The event officially kicked off the celebration of the 14th Development Policy Research Month, which focuses on the theme "Investing in Risk Reduction for a Resilient Philippines".

According to Dr. Alexander Campaner, who served as moderator of the forum, the gathering of Mindanawon researchers, policymakers, and public and private stakeholders aims for more collaborations in research and policymaking for the benefit of Mindanao.

Director Reyzaldy Tan of MinDA closed the forum by encouraging the participants to walk the talk in DRRM, and in nurturing resilient communities in Mindanao.