Small and medium enterprises (SMEs) are important in many developing countries, including the Philippines. One factor that can help SMEs achieve higher productivity is through internationalization by connecting them to global value chains (GVCs). However, SMEs face a host of obstacles in doing so. This Policy Note identifies the challenges and enablers of connecting SMEs to GVCs. Among others, it finds that Philippine SMEs are weakly linked to GVCs. Meanwhile, the challenges and enablers can be grouped into five themes: (1) competition in ASEAN and East Asia; (2) international standards, regulatory requirements, and local institutions; (3) role of the government; (4) international market demand and inputs supply; and (5) entrepreneurial mind-set. To address these issues, this study recommends the enhancement of port and airport operations as well as the improvement of credit terms of SME loans. It also encourages SMEs to find new market niches where competition is not yet too tough.
Barriers to Internationalization of Philippine SMEs
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