Sector Competitiveness

The VC approach:
Propelling sectors to new heights

Context

Value chain promotion was adopted as a business and investment (BIC) model by the Private Sector Promotion Program (SMEDSEP) sometime 2006 given the improved competitiveness that bringing together various sector players generates. Today, the increasing number of consumers demanding for more sophisticated products and services that no company can produce by itself dictates for greater cooperation among actors in subsector value chains.

Approach

In its final phase, SMEDSEP under its third component focuses on improving the competitiveness of selected subsectors using the value chain promotion approach. The component builds on the results achieved by the Program in its second phase, where the value chain approach, as jointly implemented by the Department of Trade and Industry (DTI) and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) has been widely accepted not just in the Visayas regions but also in other regions in Luzon and Mindanao (Box 2). The approach is based on the ValueLinks methodology where VC development follows a sequence of steps which lead from an initial orientation and awareness creation seminar for interested VC stakeholders to a series of analysis and planning workshops, interspersed by phases of field work, to the design and implementation of a VC upgrading project.

The typical Value Chain development process is depicted below, however the sequence and combination of steps is flexible and depends on the particular circumstances of a value Chain and its actors. The process methodology is iterative. VC practitioners have to move between implementation and analysis.

Results

Under Phase 3, the Component plans to upgrade selected subsector value chains (for example Engineered Bamboo, Tourism and Creatives) that will address specific MSME needs such as appropriate business development services as well as access to finance to assist in the expansion of production capacities and enhancement of capabilities to match quality requirements of institutional buyers. The case of Piña Mantra, an association of fourteen piña weaving manufacturers, serves as an example on how the value chain promotion can help local enterprises access new markets. Their initiatives towards the standardization of their Piña weaving process and the international recognition of the Piña quality seal built up the production capacity of their weavers, leading to increase incomes. In Antequera, basket weavers after being linked with an exporter during one of their local and regional economic development (LRED) and VC workshops reported a fifteen percent to 75 percent increase in their production volume.

The upgrading interventions are supported by other initiatives in the Component such as the institutional anchoring of a gender sensitive value chain approach in DTI, the creation of networks of VC trainers and other BIC service providers, and the strengthening of VC steering bodies and the VC facilitation competencies of DTI staff. It is expected that the value chain upgrading and capacity development interventions address the systemic constraints in the business and investment enabling environment of particular subsectors. And as the systemic changes impacts on the economic system beyond individual enterprises, and the enhanced competitiveness of the value chain improves rules and regulations, relationships between stakeholders, government incentives and business service delivery.