Micro, small and medium enterprises (MSMEs) can expand their operations while creating new products for new markets as they diversify to seize opportunities overseas and survive the pandemic.

Jezreel Joy Eufemio-Cristobal of the United Nations Industrial Development Organization- Philippine Office (UNIDO) underscored the importance for MSMEs to take advantage of economic diversification.

“…Mainly because countries that depend on the production and export of small range products and services or those that sell products in only few overseas markets have found themselves growing at a slower pace compared to those peers who have been able to enter into a more diverse range of production activities and business operations,” she said in a webinar.

On the business side, Eufemio-Cristobal said the low rate of diversification leads to missed opportunities especially in the global market, as well as unnecessary internal domestic competition brought about by similar operating enterprises in a limited business space.

She said businesses or firms’ capacity to diversify operations also results in higher resilience in facing economic shocks, such as the one brought about by the coronavirus disease 2019 (Covid-19) pandemic.

“Economic diversification will be key for countries to be able to move forward from the pandemic and take advantage of growth opportunities. It can prepare countries to face potential future events, bringing about higher resilience to socio-economic shock,” she added.

Eufemio-Cristobal said diversification aims to move the economy away from a single income source towards multiple sources from the growing range of sectors and markets.

In efforts to diversify the Philippine economy, she said the country can look at the manufacturing sector as there is a high potential to increase export activities.

Eufemio-Cristobal particularly cited agri-based industries that can create options and flexibility in business operations and allow for greater participation of MSMEs in various global value chains.

“Along these lines, the country needs to also strengthen its quality infrastructure, facilitating the adoption of standards and access to state-of-the-art testing laboratories especially for MSMEs,” she added.

Apart from economic diversification, Eufemio-Cristobal also highlighted the opportunities for MSMEs in the green economy and sustainable financing.

She said the green economy accelerates the adoption of green, circular, and climate-smart approaches in MSME operations.

Eufemio-Cristobal further said the UNIDO in its Industrial Development Report 2022 has highlighted that environmental sustainability and social inclusiveness must become the key component of the economy in the post-pandemic period.

She said sustainable finance, on the other hand, involves investment decisions that take into account environmental, social and governance factors of an economic activity or project.

MSMEs who are ready to make these investments need to be supported by a responsive and sustainable financing system, Eufemio-Cristobal said.

“The road towards sustainability for MSMEs through economic diversification and green economy approaches and business model(s) will require investment, such as for instance putting cash into green energy projects or investing in companies that demonstrate social values, such as social inclusion on good governance,” she added.

Eufemio-Cristobal said there are several important opportunities identified to accelerate the growth of the sustainable finance market. These can be categorized as building the supply side, intermediation, demand side, or infrastructure of the market.