A survey by the International Trade Center (ITC), an agency under the Department of Trade and Industry (DTI), showed that investments in research and development (R&D) helped small and medium enterprises cope better with the coronavirus disease 2019 (Covid-19).
The DTI and ITC unveiled the results of the Philippine SME Competitiveness Report on Wednesday, which also discussed how the Covid-19 pandemic affected Filipino businesses. The report also provided policy recommendations to the government.
The survey of 454 firms from Metro Manila, Central Luzon, Calabarzon (Cavite, Laguna, Batangas, Rizal, Quezon), and Cebu City from April to May this year showed that 68 percent of businesses are strongly affected by the Covid-19 crisis.
“Small firms are more vulnerable during the crisis,” ITC Research and Strategies for Exports project manager Valentina Rollo said.
Around 88 percent of the surveyed firms also said they experienced a drop in sales.
About 9 percent of the companies expected their business to shut down permanently due to effects of the global health crisis, the study showed.
Rollo said small and medium enterprises were twice as likely as large firms to predict their own closure in three months’ time.
Of the enterprises that said they expect their operation to shut down within three months, 6 percent were SMEs and 3 percent were large enterprises.
ITC Research and Strategies for Exports program officer Sarah Mohan said firms that invested in R&D before the pandemic were the resilient in the face of the Covid-19 pandemic.
Mohan said firms that invested in R&D developed new processes and products to adapt to the new business environment. But this required enterprises to have a strong innovation drive.
Of the surveyed firms, 58 percent also dedicated resources to R&D, with enterprises from Calabarzon earmarking higher innovation and resources in R&D. Calabarzon has a high concentration of business and industrial parks, particularly in Laguna and Cavite.
In the area of policy recommendation, ITC encouraged the government to give incentives for R&D investments and also shift support from existing business networks towards innovative startups.
“It’s clear that there continues to be a case for providing incentives to research and development. This helps keep up with the fast-moving market. We’ve seen it makes firms more resilient to crises whether it’s Covid-19 or the typhoon… Companies that have the habit of making research and innovation efforts are able to deploy those habits to cope with whatever happens,” Mohan said.