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the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development
Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee
the accuracy of the data included in this paper and accepts no responsibility for any consequences
of their use. Terminology used may not necessarily be consistent with ADB official terms.
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Outline
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
Two definitions
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
SMEs in the Philippines
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Typology
• Combined shares of
Types 2 to 5 firms in all
of manufacturing
generally increased after
the mid-90s
• Two-way trade became
more prevalent than both
pure exporting or pure
importing
• Still large share of Type 1
producers.
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
• Major traded items of SMEs are traditional and relatively low-tech products
• Major exports: tin, animal and vegetable fats and oils, alcohols, soap,
metals, fruit and nuts, yarns and textile fabrics, and furniture
• Major imports: food and agro-based products (e.g., meat of bovine
animals, wheat, feeding stuff for animals, animal and vegetable fats and
oils, and maize), paper and cardboard, metals, and chemical products (e.g.,
polymers of ethylene, inorganic chemicals, insecticides)
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
• Compared to large
manufacturers:
• SMEs* exported
fewer products to a
smaller number of
destinations.
• SMEs import a less
diverse basket of
products from fewer
sources compared to
large establishments.
*SMEs in the surveys with matched trade data
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs Stylized Facts
Summary
• SMEs are less prevalent than large manufacturers in all types of international transactions.
• GVC-oriented SMEs (i.e., Types 4 and 5) typically outperform both domestic-oriented
(i.e., Type 1) and partially-internationalized (i.e., Types 2 and 3) SMEs along many
important attributes.
• Compared to large manufacturers:
• SMEs export fewer products to a smaller number of destinations.
• SMEs import a less diverse basket of products from fewer sources.
• SMEs’ exports and imports are relatively less sophisticated.
• The heterogeneity of Philippine manufacturers is mainly driven by wide disparities in the
characteristics of SMEs.
• The productivity of Type 1 large firms is comparable or even better than the most
productive category of SMEs (i.e., Type 5).
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
Some definitions:
• Entrant: firm present in 𝑡𝑡 but not in 𝑡𝑡 − 1
• Dropout at time 𝑡𝑡: firm is present in 𝑡𝑡 − 1 but not in the current period.
• Net entry at time 𝑡𝑡: the difference between the number of entrants and the
number of dropouts
• Survival rate: percentages of firms that survived in year 𝑡𝑡 after entering
foreign markets in 𝑡𝑡 − 1
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
• SME entrants to
exporting/importing declining
since 2006.
• SME dropouts has outnumbered
the entrants starting 2008.
• Balaoing (2017): average
permanent exit of SMEs from
exporting is relatively higher
compared to large manufacturers.
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
• Similar pattern for manufacturing Figure 5. Entrants’ Second Year Survival Rate
SMEs:
• Higher survival rate in importing
• Declining trend through 2008, but
increasing after 2009
• SMEs that entered two-way trading
during the global financial crisis
seemed more badly hit than other
types of traders
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Philippine SMEs in GVCs GVC Entry and Exit
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Policy Implications
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
Policy Implications
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?
What Matters for the GVC Entry and Exit
of Manufacturing SMEs in the Philippines?
Adrian R. Mendoza
February 7, 2020
ADB Institute, Tokyo, Japan
ARMendoza What Matters for the GVC Entry and Exit of Mfg. SMEs in the Philippines?