How regional integration can be implemented by Filipino MSMEs

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Filipino micro, small, and medium enterprise (MSME) businesses are often run by a one-person team who does all the research, logistics, customer service, sales, ICT, finance, HR, and most times, even the actual legwork. This leaves the business owner exhausted, having to don multiple hats.

Alongside all of these challenges, the recent pandemic forced many business owners to pivot and look for alternatives to maintain the profitability of their companies, or even just to remain afloat. Fortunately, many entrepreneurs harnessed the power of the internet and its unlimited resources and have pivoted to e-commerce which resulted in a smoother transition when the lockdowns began.

And with the internet, the world has been more connected than ever before. This interconnection and blurring of national borders through digital means is a phenomenon that MSMEs can fully take advantage of through regional integration. But what is regional integration and how can MSMEs implement to not only keep their businesses afloat but to also keep them growing?

What is regional integration?

The Pacific Economic Cooperation Council (PECC) defines regional integration as “the intra-regional freer movement of goods, services, labor, and capital across borders.” Nation-states from the same region enter into an agreement that fosters cooperation. Barriers to business interactions between regions are lessened to support growth.

An example of regional integration in action would be Asia-Pacific countries maximizing each other’s strengths and geographic advantages to trade goods and workforce.

On a smaller scale, business owners can leverage regional integration to grow the business and find available options outside of their usual locale in order to lower costs and increase profit. While it may seem daunting and complicated initially, taking the first few steps to plan ahead can build your confidence as you embark on this new direction.

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How does one get started with regional integration?

  1. Create a simple spreadsheet. To prepare for the massive amount of new knowledge that you’re about to gain, be ready to organize your data including costs, taxes, and other information that would impact your profit margin.

    The use and population of basic columns facilitate comparing at a glance. Having these figures will help you decide later on if regional integration suits your particular business.
  1. Prepare necessary documents. Government units require a number of documents for importation purposes. Begin by identifying the classification of the products that you plan to import. The Philippine Department of Trade and Industry (DOTC) classifies import goods into 4 different categories: freely importable, regulated, restricted, and prohibited.

    You may verify the classifications that you assign your products with the Bureau of Customs (BOC). Besides listing documentary requirements, the DOTC also enumerates other fees and tariffs to be collected. Additionally, seek out experts, brokers, and licensed firms to consult with, as well as other business owners that have successfully imported goods. Exhaust your network in identifying best practices and avoiding known pitfalls.
  1. Identify potential sources. Many nation-states are known for specializing in different export materials, but less publicized ones exist as well. Research online to identify neighboring nation-states that might possess an abundant supply of the raw materials (or even finished products for resale) that you would need; chances are, their rates would be much lower.

    Check if the discounts that they offer are significant enough when purchasing in bulk. If they are, apply warehousing techniques to your storage solutions to prepare for an influx of materials. Remember that besides overabundance, other factors exist as to why it is possible that other nation-states have lower costs such as cheaper labor, better technology when it comes to production, and favorable exchange rates.
  2. Consider exporting. Once you’re comfortable with importing, look into finding potential customers outside of the country. Customers are always looking for the best deals, in the same way, that you looked outside of the country to lower costs.

    Start with customers from nation-states that are also ASEAN members since the Philippines enjoys significantly reduced tariff rates with them, and then gradually expand your customer base. It entails another slew of research on documentary requirements and additional expenses, but having experience with importation, it will be easier this second time around.
  3. Compare transportation rates. Shipping products by boat is definitely cheaper than shipping by plane, but the tradeoff is that your goods will arrive at a later time.

    Are these delays workable and worth the money you save? Compare different shipping companies. Are there other measures that you can take to lower the cost of importation such as consolidated shipping?

Partner with a cloud logistics network such as LOCAD, which offers an end-to-end fulfillment solution that can help you in multiple ways once you begin applying regional integration to your business. By partnering with LOCAD, you are assured of support every step of the way as you grow and expand your business.

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