MANILA, PHILIPPINES - I have often lamented that Filipinos tend to be geared toward finding a job rather than creating jobs, and are too oriented toward earning incomes (i.e., wages or salaries) rather than creating wealth. It's no surprise, then, that our unemployment rate is significantly higher than in most of our neighbors. If only more Filipinos would be entrepreneurs rather than employees, then we probably wouldn't have as much unemployment and poverty in our midst.

Are Filipinos indeed not entrepreneurial enough? Are too many of us content with working for others--including and especially for foreign firms and foreign lands?

Surprisingly, an international comparison actually ranks the Philippines among the highest in business ownership, with four out of 10 Filipinos (39.2 percent) owning some kind of business, second only to Peru (49.6 percent). The London-based Global Entrepreneurship Monitor (GEM) Research Consortium is the largest single study of entrepreneurial activity in the world, covering 42 countries in various stages of development. The Philippines participated in GEM for the first time in 2006, through the Philippine Center for Entrepreneurship (PCE).

The above finding seems to imply that contrary to my lament above and common perception, Filipinos are actually quite entrepreneurial, and among the most so across countries of the world. But are we really?

On closer examination of the GEM results, we find that the surprise ends once we compare the nature of the businesses that we have with that in other countries.

Business quality
Four kinds of enterprises are identified in the GEM survey, namely: extractive (e.g., agriculture, forestry, fishing and mining); transformative (construction, manufacturing, transportation, wholesale distribution); business services, where the primary customer is another business; and consumer-oriented (e.g., retail, restaurants, lodging, health, education, recreation, etc.). The survey found that Filipino business owners are mostly in customer-oriented and extractive businesses, with our country ranking ninth and third respectively in terms of incidence. On the other hand, we rank very low (39th out of 42 countries) in transformative businesses and in business services (41st).

GEM considers level of innovativeness (newness of product and technology, competitor differentiation) and growth expectations (employment and expansion plans) as the traits that distinguish a business as being "entrepreneurial." Unfortunately, it is in these and other related measures of entrepreneurship where we move to the bottom end of the list.

Bottom dweller
We are third from the worst performer in product newness (after Hungary and Brazil), and the worst among participating countries in competitive advantage. In contrast, Thai and Indian businesses rank very high in introducing new products. We are also near the bottom on number of businesses that export. Quite notably, six out of 10 Filipino businesses report not having any employees, suggesting that most business owners are in business primarily to support themselves and their families. In fact, our established businesses rank the lowest in job creation among the 42 countries, with only 3.3 percent employing any workers at all.

The Philippine survey also showed that very few businesses (only one in every 20) make use of any bank financing; in fact, only about one out of three deal with banks at all, even just to deposit funds. And yet, lack of financing comes up to be the most widely cited impediment to starting and maintaining a business.

Deepening enterprise
The GEM results affirm that Filipino businesses are mostly small (micro) in scale and may be characterized as lacking in originality and innovativeness, reflecting the often-lamented gaya-gaya (copycat) syndrome. They are also predominantly inward-looking, largely nonjob creating, and fiscally conservative.

The findings suggest that while business prevalence is already wider in the Philippines than in most countries, it is in deepening entrepreneurship where our bigger challenge lies. To this end, we need deliberate efforts to make banks more responsive to the particular needs of start-up and growing enterprises, while also improving the capability of businesses to make use of the banking system. Research and development especially focused on the needs of small and medium enterprises must be strengthened in public research institutions, inasmuch as SMEs normally do not have the capacity to do R&D on their own. Finally, assistance in tapping export opportunities would also be important if our enterprises are to contribute not only to output (GDP) growth, but to sustained employment growth as well.

Comments welcome at chabito@ateneo.edu. For information on the GEM study, e-mail gemphilippines@gmail.com.

This article was first published in The Philippine Daily Inquirer on May 4, 2008.