Contemporary Economic Issues Facing the Filipino Entrepreneur

Contemporary Economic Issues Facing the Filipino Entrepreneur

Objective

• Understand economics as an applied science.

• Analyze contemporary economic issues affecting Filipino entrepreneurs.

• Evaluate socioeconomic impacts of business on various sectors:

  • Consumers

  • Suppliers

  • Investors

  • Government

  • Households

  • International trade

Logo Quiz

• Identify organizations represented by logos:

  • DFA: Department of Foreign Affairs, manages international relations and impacts on trade.

  • DOE: Department of Energy, influences energy sectors vital for businesses.

  • DOLE: Department of Labor and Employment, regulates labor forces affecting business operations.

  • Senate: Legislative body that drafts laws impacting economic policies and business regulations.

Exploring Economic Data

Currency Exchange Rates (as of Feb 08, 2021)

• PHP to USD: 48.06

• PHP to Euro: 57.88

• Comparison of Philippine Peso against various currencies highlights market performance.

Understanding Entrepreneurship

Definition of Entrepreneurship

• Entrepreneurship involves starting a business and assuming risks.

• Entrepreneurs are innovators who exploit gaps in the market.

  • Characteristics:

    • Visionary

    • Risk-taker

Role of Entrepreneurs

• Ideas often lead to new products/services, dramatically influencing societal interactions, e.g., social media.

• The uncertainty surrounding new ideas positions entrepreneurs as significant risk-takers compared to standard business owners.

Innovation Strategies of Entrepreneurs

• Creation of new products/services responding to consumer needs; e.g., power banks for mobile users.

• Improvement of existing products to align with consumer preferences; enhancing current market offerings.

• Process improvement for efficiency; e.g., car wash services in strategic locations.

The Filipino Entrepreneur

• Filipinos demonstrate strong enterprise.

• Successful entrepreneurs often start from humble beginnings, displaying resilience and risk-taking.

• Hard work and perseverance lead to eventual success.

Governance Support for Entrepreneurs

Department of Trade and Industry (DTI)

• Governs business registrations and trade policies.

• Hosts educational programs fostering entrepreneurship.

Youth Entrepreneurship Act (Republic Act No. 10679)

• Passed in July 2015 to support young individuals (18-30 years).

• Integrates financial literacy and entrepreneurship in education.

Philippine Center for Entrepreneurship (PCE)

• Non-profit advocating for entrepreneurship, notably through the "GoNegosyo" program.

Types of Business Structures

Sole Proprietorship

• Single owner; profits are personal income.

Partnership

• Two or more owners; profits divided among partners.

Corporation

• Separate legal entity; ownership via stockholders.

• Conglomerates involve multiple corporations under one ownership.

New Business Registration in the Philippines

• Registration timelines vary by business structure:

  • Sole Proprietorship: Shorter process (8 steps).

  • Corporation: More complex (15 steps).

Steps for Business Registration

1. DTI: Register business name.

2. Barangay: Obtain clearance.

3. Municipality: Get a business permit.

4. Bureau of Internal Revenue (BIR): Apply for TIN.

5. Social Security System (SSS): Register as self-employed.

Economic Issues and Challenges

Financing

• Interest rates impact financing decisions for consumers and businesses:

  • High rates discourage borrowing, reduce spending.

  • Low rates encourage investment.

• Funding options:

  • Personal financing: Savings, loans from family, etc.

  • External financing: Investments from third parties, including crowdsourcing.

Cost of Rent

• Physical store rent significantly impacts operating income.

• Factors influencing rent: real estate prices, location, foot traffic.

Labor Costs

• Minimum wage laws increase operational expenses.

• Reviewed by the National Wages and Productivity Commission (NWPC).

Taxes

• Common taxes for entrepreneurs:

  • Percentage Tax: varies by industry and sales limit.

  • VAT: 12% on goods and services.

  • Capital Gains Tax: 5%-10% for selling assets.

  • Income Tax: Ranges from 5%-32% based on income level.

Labor Migration and Unemployment

Labor Migration

• Driven by high domestic unemployment (currently at 6.4%).

• OFWs seek better opportunities abroad, contributing to national GDP.

Unemployment Effects

• Business cycles lead to job losses; reduction in production affects national income.

• Reduced government funds limit public projects; potential borrowing from abroad.

Inflation

• Rising prices do not affect all goods equally but represent economic instability.

• Fixed-income earners suffer; less disposable income leads to decreased demand, further impacting jobs.

Questions for Discussion

• Effects of tax collection shortfall on society.

• Explore five public goods and services funded by taxes.

• Discuss the value of public goods versus tax contributions.

Evaluation

• Multiple Choice questions in Learning Kit.