Start-ups need an environment to grow
in. In other countries, rather than just a one-to-one support, it’s about
helping create that environment where start-ups can collaborate, compete, work
together, work against each other, share personnel, cross-learn, etc. And the
world is gradually recognizing the start-up scene of South East Asia even if
it’s still not mature.
In the Philippines, the start-up scene is emerging, yet it is no secret that the country is filled with bureaucracy that has embedded in the system for several decades, which is impeding start-ups from rising rapidly. There are several questionable practices such as red tapes, oligarchs lobbying only for their monopoly, and lastly, out-dated laws or even the lack of regulations to begin with. Start-ups need an environment with not only entrepreneurs but also government support. Fortunately, a distinguished senator is looking for different ways to support that.
Sen. Paolo Benigno “Bam” Aquino IV is a senator and the previous Chairman of Trade, Commerce, & Entrepreneurship during the 16th Congress which is why he is very involved in putting together various startup bills. Throughout the course of the first 3 years of his term, they focused on micro, small and medium enterprise (MSME) development, and that led to the support of many different sectors—particularly small manufacturers, the startup sector, and the social enterprise sector—one that he is closest to since as he was a social entrepreneur before becoming a senator. For every sub-sector that he saw in the landscape, Sen. Aquino tried to put together programs and policies that could support the sector further; to name a few: Go Negosyo Act, Philippine Competition Act, Youth Entrepreneurship Act, etc…
“I like the openness of the startup industry.” Sen. Aquino said. “When I started out as a social entrepreneur around 2006, everyone had their own project, but were willing to share and help each other.” He continued. “I see parts of that in the startup sector. If the sector doesn’t move up, it’ll be hard for the rest of them to improve. Everybody’s in it together. And it’s refreshing!”
Prior to his current political career, Bam Aquino co-founded The Hapinoy Project—a multi-awarded social enterprise that provides micro-financing, training and access to new business opportunities to lift women micro-entrepreneurs out of poverty. They successfully helped over 10,000 sari-sari stores (neighborhood variety store), and in 2011 they were able to win UN’s Project Inspire Award—besting over 400 social enterprises around the world.
Sometimes great ideas aren’t able to get into markets because they’re in a country that doesn’t have a developed startup community. Thus, he hopes to have a better line towards larger international markets by being open to foreigners to setup in the Philippine startup community. “We need to stand out and get noticed by other countries through trade representatives abroad. Lots of our smaller companies can work with larger companies abroad and, as we gain expertise, we’ll be able to develop our local businesses.” Sen. Aquino said.
Legislations for the commerce sector
Now, on the 2nd half of his term, entering the 17th congress, one of his priorities is the startup bill. His team originally filed for this bill in the 16th congress, but was primarily introducing tax incentives. They started to revise the bill with feedback from startups themselves—the main avenue for their decisions. Through that year and a half, they came up with an improved version for filing in the 17th Congress. It now includes provisions for workspaces, making it easier for foreigners to set up their startups here; and incentives for Filipinos who have worked abroad in the digital space to come back and set up in the Philippines.
In the bill, a startup is limited to companies that use innovation. At first, it was exclusively for digital or tech startups; but he knew that it should go beyond the digital space, and include other startups that aren’t necessarily using digital, but are using innovation in their processes in terms of their suppliers, customers and business model.
The Go Negosyo Law sets up negosyo centers (business centers) in every local government unit for home-based for entrepreneurs them to be able to get the support they need. To date, they have 400 set up over the country. “If you’re an entrepreneur, you can go there and get your business name registered, go through business counselling, training programs, mentorship, access to capital, and discover ways to link your products to the market,” he expressed. In every center, the goal is to provide the three M’s: Money, Market, and Mentorship. According to Sen. Aquino, “It is very important that the smaller businesses are given the opportunity to be included in bigger companies’ supply chains.”
The Philippine Competition Act took a really long time to pass. It was first filed in 1987 but only got passed in 2015. In Japan, they had this kind of law after WWII, since there were many conglomerates at that time. These are basic laws abroad in terms of how the market is done, but it was only passed recently in the Philippines. It prohibits anti-competitive behaviour and abuses of dominant positions to prevent a marketplace where interplay between players isn’t on a fair level. For example: for a new tech company that would need Internet to develop, your direct competitor who is also an internet provider cannot refuse to sell you their goods or services to suppress your development and commerce activities. The Philippine Competition Commission was created to oversee the market and the behaviour of its players.
From a 2014 Standard & Poor’s (S&P) Ratings Services survey, it showed that only 25% of Filipino adults are financially literate. So their team came up with the Youth Entrepreneurship Act, which has not been implemented yet, but it mandates that in the new K-12 system, it must include financial literacy and entrepreneurship in the curriculum. The law also mandates the creation of a seed capital for students or graduates who would want to pursue entrepreneurship.
For the 17th congress, a lot of startups would be ecstatic to have the Small Business Tax Reform Act. It freezes a startup’s tax up for the first 3 years, tax comes later, but if you are a small business, there are certain reforms there where it would be easier to compute taxes and see BIR only once a year. The act simplifies the tax regulations that will help startups grow faster.
Acumen from Personal Participation
“There’s a favourite line that I read when I was still in social enterprise with my business partner: “Startups don’t die, they commit suicide”. Most of the time, startups fold up because the founders are just tired, they don’t want to fight any longer, they have lost their vigour. They often want to go back to the stable life of the corporate world,” Sen. Aquino said.
"We’re developing these laws to make it easier for startups and to support our entrepreneurs because very few of our businesses stay alive. I hope that as we try to push for these policies, entrepreneurs keep the faith and hold onto their dream. For future entrepreneurs: Don’t give up.” Sen. Aquino explained.
Hopefully, if that works, in the next couple of years, we can actually see this whole environment become well and more nurturing, where as we grow economically. Filipinos can be comfortable in seizing the opportunities and grow with it.