the fate of bicol (philippines) abaca handicraft industry
TRANSCRIPT
The Fate of Bicol (Philippines)
Abaca Handicraft Industry in the Global Market
Masterarbeit
Zur Erlangung des akademischen Grades
eines Magisters der Sozial- und Wirtschaftswissenschaftlicher Fakultät
der Karl-Franzens-Universität Graz
vorgelegt von
Manuel Lobrigo
am Institut für Internationales Management
Begutachter ao. Univ.-Prof. Mag. Dr. Manfred Fuchs
Graz, 2008
The Fate of Bicol (Philippines)
Abaca Handicraft Industry in the Global Market
Master Thesis
Presented to the
Department of Social and Economics Sciences
at the Karl Franzens University
by
Manuel Lobrigo
at the Institute for International Business
Adviser: ao. Univ.-Prof. Mag. Dr. Manfred Fuchs
Graz, 2008
.
KA R L- F R A N Z E N S - U N I V E R S I T Ä T G R A ZDEKA NA T DER SOZIA L- UND W IRTSCHA FTSW ISSENSCHA FTLICHEN FA KULTÄ TPRÜFUNGSA M T
Ehrenwörtliche Erklärung
Ich erkläre ehrenwörtlich, dass ich die vorliegende Arbeit selbständig und ohne
fremde Hilfe verfasst, andere als die angegebenen Quellen nicht benutzt und die
den Quellen wörtlich oder inhaltlich entnommenen Stellen als solche kenntlich
gemacht habe. Die Arbeit wurde bisher in gleicher oder ähnlicher Form keiner
anderen Prüfungsbehörde vorgelegt und auch noch nicht veröffentlicht. Die
vorliegende Fassung entspricht der eingereichten elektronischen Version.
Datum: Unterschrift:
TABLE OF CONTENTS
Abstract ................................................................................................................. 1
1 Introduction ……………………………………………..……………….…………... 2
Hypothesis ……………………………………………………….…………….. 4
2 Background Information ………………………………………….……….………. 6
2.1 About Abaca ………………………………………………….………………... 6
2.2 The Abaca Handicrafts ……………………….………………….……………10
2.3 The Bicol Region ………………………………..…………….……………….11
2.4 The Abaca Handicraft Industry …………………..……….………………….12
3 Empirical Studies ………………………………………...…….…………………...18
3.1 Methodology: Interview ........................................................................…...18
3.1.1 Sub-contractor A …………………………………...…….…………………...19
3.1.2 The Abaca Farmer ……………………………………………………………..25
3.1.3 The Twine Maker of Malilipot, Albay …………………………………………27
3.1.4 The Exporter E: A Success Story in the Abaca Cottage Business ……….30
3.2 Industry Benchmark: The Experience of China …………………………….35
A Comparative Approach to Abaca Industry’s
Performance: Looking up at China’s Experience………………...…………36
4 Theoretical Reflections …………………………………………………………….41
4.1 Strategy of Small Firm ………………………………………………………...41
4.2 Mainstream Theories of Globalization ………………………………………43
4.3 Development Theories ………………………………………………………..44
4.4 Theories of Alternative Development ………………………………………..45
5 Discussion ………………………………………………………………...…...……47
5.1 Informal Sector ……………………………………………….……..…...…….47
5.1.1 How the informal sector does business ………………………………..……51
5.1.2 Low Productivity ……...………………………………………………..………52
5.1.3 Poverty ……………………...………………………………………..…...……56
6 Conclusion ……………………...………………………………………. …………58
7 Recommendation …………….………………………………………..…………..63
8 Reference ...................................................................................................... 64
9. Appendix …………………………………………………………………...…...….70
Interview Questionnaires …………………………………………..……...…70
1
Abstract
This paper explores the struggle of the Bicol (Philippines) Abaca Handicraft
Industry for a successful integration to the global market. As any modern industry
contests all means to expand, protect its market and promote growth, the
Handicraft Industry is faced by both modern and traditional challenges. The
modern challenge is marked by hyper-competition where a form of alliances or
cooperation has taken in place as a defensive mode to keep strong and stay in
the market. The traditional challenges are exemplified by the kind of stereotypes
that the industry is being faced. The Bicol Abaca Handicraft Industry still belongs
to the informal sector. The attributes of an informal sector stays in contrast to the
formal sector especially when it comes to efficiency and optimization of the
production functions. The handicraft industry must eventually address both. It
seems to be an impossible task to carry both challenges as each side is hard
enough to conquer. Considering the high degree of resiliency to stay in the export
market, the industry has managed to keep afloat for decades now. It is a major
interest in this study to look at the dynamics present in the industry and in order to
get a critical point of view on how the industry is performing.
2
1 INTRODUCTION
The aim of this study is to gain insights of the performance of Bicol Abaca-
Handicraft Industry the way it is conducting its business. The industry has a very
interesting feature with contrasting context, on one hand being traditional in nature
and yet on the other hand having global reach.
The abaca handicraft industry in comparison to other community based industries
has always been export oriented. It means that majority of its output is intended
for foreign market. This characteristic is rather an exception as normally, the
community based industries only cater to the needs of the local or domestic
market.
This characteristic is also one of the reason why this study is being pursued and
of great interest. The abaca handicraft industry is well integrated to the global
market for decades now starting from the time in the 50s when most of the third
world countries like the Philippines were struggling to modernize their economy.
The handicraft industry has withstood the times also when the country has tried to
uplift its economic status through import substitution – a strategy of utilization of
indigenous technology. As most neighboring Asian nations have geared towards
an export-oriented strategy with success like for the countries of Singapore,
Taiwan, South Korea and also lately of China, the Philippines has also promoted
such strategy but with just marginal results. The Philippines is still confronted with
a huge surplus of labor force that is absorbed by the informal sector.
The informal sector has played a major role for employment of the labor surplus in
the formal economy. The assumption that the informal sector is transitionary or
temporary as jobs would be created by those economic strategies did not
materialize.
The persistence of the informal sector has prompted the scholars and different
development institutions to look at the dynamics within the sector. The informal
sector although unfavorably defined, was identified as possible seedbed for
3
entrepreneurs. The challenge lies at the transformation of the activity in the
informal sector into a viable and vibrant business entity.
The Bicol Abaca Handicraft Industry has experienced the different approaches for
economic prosperity in the Philippines. Up to the present, the Bicol Abaca
Handicraft industry still categorically belongs to the informal sector as the core
activity of the sector is based on piece works done informally by the household
members (cottage-based production).
Now, the Bicol Abaca Handicraft Industry is faced with the onslaught of
globalization. Globalization is characterized by fierce competition as trade barriers
are eliminated. Technology and information have also played the driving factors to
globalization.
It is interesting to explore the fate of the Bicol Abaca Handicraft Industry under the
context of global market because the industry represents a potent example on
how a traditional industry is struggling to fight for its market share.
The Bicol Abaca Handicraft Industry is unique under the perspective of
globalization. The Handicraft Industry is on one hand belongs to an informal
sector and yet on the other hand, it is an export oriented industry which should
rather indicate as an established industry.
The Handicraft Industry is already one step ahead towards integration to the
formal economy but its struggle is still characterized by the kind of challenges
present under the concept of informal sector.
The treatment of exploration to the fate of the Abaca Handicraft Industry will be
done in a different perspective with emphasis on informality as the main feature of
the industry.
Since literature about the Bicol Abaca Handicraft Industry is limited, the first part
of the study will be about background information of the industry. Empirical
research will be made based on interviews, industry observations and
4
benchmarking. The empirical findings must then complement the theoretical
considerations of this study. The generated findings will also supplement the
much needed information in achieving a blueprint of the abaca handicraft industry
in the Bicol region.
Hypothesis:
The starting point of this study is to check and compile all relevant information that
has connections to the activity of the Bicol abaca handicraft industry. This
information would serve as preliminary assessment of the activity of the industry.
Based on these assessments, a critical view would pave the way into the
exploration of the competence of the industry. Competence here is referred to the
viability of the industry to stand competition and to pursue its own goals for the
market. From these initial findings, I would like to attempt to answer or give hints
on the question: Did the abaca handicraft industry exhaust its means towards
successful integration to the global market?
It is important to acknowledge the long standing presence of the industry in the
Philippines’ early industrialization attempts. The abaca handicraft industry has
even garnered a second place in extent of total Philippine exports in the earlier
years in the seventies. The arrival of globalization propelled by trade liberalization
has gradually changed the environment of the industry. The industry is being
driven into the corners but it has managed still to exist. This kind of historical
background proved the capacity of the industry to survive. I would therefore
hypothesize that the industry still possesses a chance to get a much deserved
niche in the global market. The relaunch or rebirth of the industry towards
successful global market integration is still a possibility.
Going through the course of this study, it is relevant to check the position of the
Bicol abaca handicrafts industry. The industry itself is on global context
surrounded by different interest groups. These external players exercise different
extent of influence and interaction to the industry. There are international and
national forces. The international forces are comprised of market competitors and
institutional lobbyists. On national level, the industry is affected by macro- and
5
microeconomic factors and development programs initiated by the government
and non-government organizations and institutions. The social and cultural
environments are also factors that have intrinsic influence to the industry. How are
they interacting with the industry and on what scope are they exercising their
authority and influence? How does the industry react to them? The relation of the
industry with its environment of interest groups is asymmetrical in a way that the
externalities are huge power blocks to reckon with as compared to the kind of
stereotype the informal sector is in.
The next thing to do is to deal extensively with the nature and content of the
industry itself. A quick comparative analysis between a typical structure and
organization of a successful industry to that of Bicol abaca handicraft industry
would shed light to the performance of the industry towards integration to the
global market. This kind of reality must be addressed and rationalized. The
deficiencies in the industry must be viewed differently into a window for change
and development. There is still enormous space for growth and expansion. The
questions to the industry would run this way: Are there reasons to be satisfied with
the previous performance of the industry up to the present? If not, what can still be
done to bridge the future of the industry? There is indeed a great degree of
resiliency in the industry as it absorbs the changes in environment, the periodic
shocks brought about by the contraction in the market and the struggle to survive
competition. The transformation into a dynamic enterprise with the capacity to
expand and grow is definitely a kind of cardinal rule that must be pursued by the
industry.
Getting through now in general about the perspective of the Bicol abaca handicraft
industry towards its integration into global market, I would hypothesize that the
industry with all the interventions and its survival it had in the past, it is still living
up to its identity of just being an informal sector and the treatment of the industry
has always been based on what is the industry all about and what is not, instead
of shaping the industry on what it can be.
6
2 BACKGROUND INFORMATION
2.1 About Abaca
Abaca under its scientific name musa textilis belongs to banana family. The plant
can be easily mistaken for edible banana plant because of striking semblance to
it. The abaca plant is cultivated mainly because of its fiber. Its fiber became
popular worldwide under the name “Manila Hemp” which was earlier primarily
used as cordage for the shipping industry.
The abaca plant is endemic to the Philippines. It is believed to have originated
from the Bicol region. The plant thrives in the region due to its volcanic soil and
also due to its frequent rainfall activity. There were attempts of cultivating the
abaca plant in Sumatra Indonesia, India, Borneo, Central America and some other
countries at the peak of cordage industry in the 1920s but the activities were not
relevant to Philippine share of abaca in the global market. A Japanese in the
person of Furukawa successfully cultivated abaca in Ecuador at the time the
World War II ended. At present the Philippines covers more than 80 percent of
worldwide abaca requirements1.
There is a general perception that abaca belongs to hemp family (abaca as being
coined “Manila Hemp”). Abaca has indeed strains of hemp but its plant family is
unrelated to cannabis sativa – the scientific name of the hemp. All the other
commercial natural fibers and abaca share a common characteristic of being a
bast fiber. A very prominent characteristic of abaca is the stiffness of its fiber.
Abaca is then a hard fiber and hemp in general is a soft fiber. The abaca fiber
bears also a quality of relatively long staple length, tensile strength and cellulose
content. These unique attributes of Abaca could be well established as
competitive edge towards any bast or fiber based natural products. But there is
no guarantee that the abaca based natural products could be free from possible
product substitutions. The fiber sisal for example could be easily mistaken for
1 See: Villafuerte-Abonal, Lalaine ABACA Philippines. (Apples of Gold Publishing:
Philippines,2006) p.17
7
abaca fiber and sisal-made crafts can be a very good substitute to abaca-made
crafts. With regards to fiber affordability, sisal is much cheaper than abaca fiber
and its world production is more than doubled in comparison to abaca. Other
natural fibers such as henequen, maguey, jute, kenaf, flax, coir, and raffia for
example may pose as possible material substitute to abaca when it comes to
crafts use. In general, synthetic fiber like polypropylene has conquered the global
market for natural fiber as a substitute. But due to the rising price of crude oil and
also due to environmental concerns on biodegradability, the natural fibers could
gain better preference in the future. The global market reacts positively to
affordability (price), quality, and immediate availability. There is also a rising
concern and interest in the environmental tolerance and sustainability of products
among consumers.
Practically, the abaca fiber as raw material enjoys competitive advantage to the
Philippines due to high degree of exclusivity of its agricultural production and use.
Although there were reports that other neighboring countries like Thailand
attempted to get license from the government to cultivate it but due to protests
and objections especially of exporters, this was not realized. On the other hand
there is also serious threat from Indonesia as the country is keen in developing
massive plantation of abaca.2 There are also reports on increased hectarage of
abaca production in Ecuador. Its quality is reportedly better and consistent and it
commands cheaper selling price.3
The cultivation of abaca is relatively simple. Cultivators do not need to plow the
soil for abaca plantation. Abaca plantation only demands occasional weeding. Its
present and longstanding challenge to production is the persistence of diseases
and pests especially the presence of viral diseases like Abaca-Mosaic and Abaca
Bunchy-top. Natural calamities like Typhoons also pose a threat to regular and
steady supply of abaca raw materials. The preliminary abaca plantation requires 2
to 4 years time to ripen but since abaca grows shoots, the harvesting could take
place within 4 to 8 months after the initial crop. The trunk of the abaca plant is
2 Source: Fiber Industry Development Authority (FIDA - Philippines) Website: http://fida.da.gov.ph/
Nov. 6, 20073 See also: FIDA Website
8
then harvested for fiber. The Abaca Fiber Extraction Process is done through
Hand-Stripping, Spindle-Stripping and Decortications. The Hand-Stripping Method
produces an output of 15 to 25 kg. of fiber per man-day compared to Spindle-
Stripping which could produce fiber of 80 to 120 kg. per man-day. The grading of
the fibers is categorized into two: those grades under Hand-stripped and those
under Spindle-stripped. The fibers are either graded or classified as Normal (S2,
S3, I, G, H, JK, M1) and Residual (Y, OT) or Excellent (AD, EF, S2, S3) Good (I,
G, H), Fair (JK, M1) and Coarse (L).4
Table below shows some classifications of abaca uses according to its grades.
Table 1 :Uses of Abaca according to Grade/Type
USES OF ABACA GRADES/TYPES
Cordage Products (ropes, twines, marine cordage, binders, cord) S3, JK, G, S2, M1Pulp and Paper Manufacture (tea bags, filter paper, envelopes, time cards, book binders and parchment paper) I, S2, GCigarette paper, currency paper, chart, file folders, envelopes, time cards, book binders and parchment paper JK, Tow, G, M1Micro glass, air filters media, x-ray negative,optical lens wiper, vacuum filter, oil filter) S2, I, G, JKNon-woven paper, medical gas mask, and gowns, diapers, hospital linens, bed sheets S2, I, G, JK
Handmade paper, (paper sheets, stationeries, all purpose cardwastes, lampshades, balls, dividers, placemats, bags, photo frames, albums, flowers, doormats) All grades includedFibercraft (handbag, hammock, placemats, rugs, carpets purses, wallets, fishnets, doormats) AD, EF, S2, GHand-woven fabrics (sinamay, pinukpok, tinalak, dagmay) High gradesSacks, hotpads, hemp coasters, baskets S3, H, Lupis and BacbacWallpaper, wallcover S2, JK, Y2, G
Others(wire insulator and cable) JK, M1, Y, TowSource: Briefing Folder on the Abaca Industry in Bicol region, FIDA, 2003http://bicol.da.gov.ph/Opportunities/abaca%20profile/abaca-template.html May 26, 2006
Aside from the traditional use of abaca for fiber crafts, the fiber is also being used
for other industrial purposes such as cordage, pulp and paper, furniture and
4 Source: Bicol-Department of Agriculture Website:
http://bicol.da.gov.ph/Opportunities/abaca%20profile/abaca-template.html May 26,2006
9
ABACA FARMERS
COOPERATIVE BARANGAY
TRADER
TOWN TRADER
GRADING AND BALING
ESTABLISHMENT (GBE)HANDICRAFT PROCESSING
FOREIGN
BUYERS
LOCAL
BUYERS
FOREIGN
MARKET
LOCAL
BUYERS
FOREIGN
BUYERS
textiles. Industrial end products could range from sausage casings, stencil papers,
currency notes, grocery bags, and up to automobile parts. The abaca fiber has
also other potentials for industrial applications like as substitute for glass fiber to
line chassis in automobile industry, as reinforcement to concrete composites in
construction industry, and abaca fiber board as construction material.5
The table below shows the abaca commodity flow in the Bicol Region. There are
three major recipients of abaca. The Grading and Baling Establishment (GBE)
prepares the abaca for export in raw and natural form. The second recipients are
the companies who engage in the processing of abaca for industrial purposes.
These companies engage mostly in pulp and paper production. The third recipient
is the handicraft manufacturing sector. It is in this sector where the abaca gained
the most value added and where the absorption of labor force is the greatest. All
three recipients are geared towards utilization of abaca for export.
Table 2: Commodity Flow of Abaca in the Bicol Region6
5 See: Villafuerte-Abonal, Lalaine ABACA Philippines. (Apples of Gold Publishing:
Philippines,2006) p.30
6 Source:lhttp://bicol.da.gov.ph/Opportunities/abaca%20profile/abaca-template.html May 26, 2006
10
2.2 The Abaca Handicrafts
The locals of the Bicol region have already engaged in abaca crafts like fabrics for
clothing, sandals as footwear and nets for fishing long before the colonization of
the Spaniards of the Philippines in 1565. Historical records proved that Governor
General Guido de Lavezaris (1569-1576) mentioned about the abaca clothes
produced in the Province of Albay.7 In this regard the abaca handicrafts must not
only be viewed as commercial product but they also carry a strong cultural
heritage. The abaca handicrafts also project a strong cultural link to Bicol which
are domestically identified as the regions’ produce.
The abaca handicrafts can be classified into housewares, giftwares, and
Christmas and seasonal decors. Under housewares, they comprise of products
such as curtains, hammock, table runners, placemats and coasters, bowls and
trays, vases and planters, rags and carpets, wallpapers and coverings, storage
boxes, lamps, draperies/window blinds, throw pillows, and so on. Under giftwares
and novelty items, they comprise of products such as gift bags and boxes, hats
and bags, sandals and slippers picture frames, candle holders and so on. Under
Christmas and seasonal decors, they comprise of products such as Christmas
angels, cards and wreath, assorted Christmas items and giveaways, Valentine
items like heart shape decors and packaging, Halloween items like spiders and
webs, brooms, etc., and Easter decorations like baskets, eggs, and so on.
Practically all fiber grades are being used in the production of abaca handicrafts.
Bacbac which is the dried outer leaf sheath of abaca plant, and Lupis which is the
third and fourth layer of the abaca plant are also being utilized for crafts use aside
from the fine fiber of the abaca plant. When speaking of abaca handicrafts, it
means that the principal raw materials of the crafts are abaca. Some other natural
fibers like raffia, natural vines, and other materials like leather or synthetics could
be well accentuated or combined to produce a unique and distinctive crafts. For
7 See: Villafuerte-Abonal, Lalaine ABACA Philippines. (Apples of Gold Publishing:
Philippines,2006) p.21
11
example a combination of abaca and leather for hand bags are created for high-
end market.
2.3 The Bicol Region
The Bicol Region or locally known as “Bicolandia” is one of the 17 regions of the
Philippines. The term Region is just an administrative component that primarily
groups the 81 provinces of the Philippines. The Regions themselves do not
generally possess any local government with the exception of Autonomous
Region in Muslim Mindanao. The Bicol Region comprises of six provinces
namely; Albay, Camarines Norte, Camarines Sur, Catanduanes, Masbate, and
Sorsogon. With the exception of the Island of Masbate, the other five provinces
actively engage in the production of abaca and the manufacturing of abaca
handicrafts.
The region has a population of 4,686,669 (May 2000 census) and a density of
265.1 per km². The basic literacy rate for Bicol is 95%. The Bicol Region is
situated about 400 km. southeast of the capital city Manila. The region has a labor
force of 2.1 million as of July 20068. The figures translate to a general labor force
participation rate (LFPR) of 67%9. The employment rate in accordance to official
labor force is 94.2 percent. The agricultural sector absorbs the bulk of
employment at about 45.6 percent. The service sector absorbs 42.6 percent and
the industry sector has an employment of 233,000 or 11.8 percent labor force
absorption.
8 Source: Bicol - National Census and Statistics (NCSO) Office Website:
http://www.census.gov.ph/Bicol/LFS/index.html, Feb. 7, 20089 The inclusion of individuals into the labor force started at age of 15 and above. The labor force is
referred to either employed or unemployed.
12
2.4 The Abaca Handicraft Industry
The Abaca handicraft industry has evolved due to earlier abundance of Abaca raw
materials in the region. The locals make use of the versatility of the fiber to create
diverse products. In the time being the industry was able to transform its produce
into an export commodity. Up to the present the Abaca handicrafts industry has
remained to be export oriented.
The Industry has created a wide array of “specialized”-segment in production
process. From the procurement of the raw materials up to the end production, the
industry utilizes an outsourcing scheme and a ladderized level of production. It
also has created a form of clustering. The process of twine making for example is
concentrated in a certain municipality (town).
In general, the abaca handicraft industry is being understood as a cottage
industry, on the ground that the cottage industry relies heavily on home workers
as source of labor.
“A cottage industry is an economic activity which is carried mainly in the homes for
profit and which is mainly done with the help of the members of the family10.”
The home workers provide a strong workforce to the handicraft industry and since
orders come irregularly, the flexibility of home workers to accept piece work any
time when needed proved them to be advantageous to handicraft industry. The
characteristic of the abaca handicraft industry is identifiable to the cottage industry
as the cottage producers normally work on a part-time basis. The activity is done
mostly by women making use of their spare time aside from their household
chores and rearing of children. This form of activity is commonly exercised in the
rural areas and where the occupation of the family is based on agriculture. The
handicraft making provides additional income to the household. The income from
10 Taylor, Eduardo, Small and Medium Industries in the Philippines: An Overview (Diliman, Quezon
City: Institute for Small Scale Industries, University of the Philippines,1983) pp.8-10
13
it although meager, supports the peasants in lean times especially in between
harvesting periods.
The most prominent player in the industry is the business operators. They are
formally linked to the export market. The business operators are locally referred to
as the “Exporters” (the English term is adapted to local language as there is no
equivalent translation to it). These Exporters engage in putting-out system where
the different processes or levels of production where being outsourced to home
workers.
The typical practice in the industry is that the Exporter procures the abaca raw
materials and other input materials to be processed. It is also a common practice
that the tools needed are being supplied.
Since it is logistically impossible and costly for the business operators to directly
manage and distribute the materials to be worked with in every household,
business operators utilize an overseer known locally as “Poste” (means pole or
post) who would coordinate the home production. The overseers are strategically
positioned in different location mostly handling a group of home workers of a
certain village or group of villages. The business dealings between the overseer
and the business operator are normally done informal. The relationship of the two
is mostly based on trust and word of mouth. There is practically no formal contract
that would regulate the character of business dealings of both and the overseer is
not employed to the business operator. The business operator could only rely on
the personality and also experience with the overseer. An overseer earns through
commission and also through the piece work that she/he personally assume. The
business operator expects from an overseer loyalty and exclusivity.
It is common that through the overseer, cash or in terms of goods must be
advanced to the home workers for their daily subsistence and it is not uncommon
that full payment was given even before the piece work is finished and delivered.
The good and trustworthy relationship between the overseer and the business
operator is crucial to the success of an outsourcing contract since the business
operator must finance the production and make advance payments.
14
The nature of dealings with an overseer and that of the home workers are done
with a strong consideration of a cultural set-up. One must know well the mentality
of the locals on how the piece work is done. The risk in putting-out is when
materials are supplied and full or partial payment is already done but no finished
product was ever delivered. This could be the case when the home worker has
already received the payment for a job that is still to be done. Disinterest on the
side of home workers might be easily aroused when there is no more
compensation to be received for the piece work. It must be in the capacity of the
overseer to recoup the capitalization that was disbursed to the home owner. The
mode of control is to apply pressure to the homeowner to finish the piece work.
The last resort sometimes takes place through the help of local government
executive in the village locally referred to as Barangay Captain or Chieftain. The
local executive acts as mediator to the demand. The piece worker, out of
embarrassment of being summoned, would oblige in order to save his/her
reputation.
When there are bulks of orders and the local overseer could not handle the piece
work, the Exporter or business operator resort to a form of sub-contracting. The
sub-contractors serve as supplier either of a finished product or of a certain
handicraft component to the Exporter. The sub-contractors also supply raw
materials and handicrafts to factory manufacturers in Metro Manila and other
Regions.
The Sub-contractors are independent producers or supplier of handicrafts which
also have overseers and its respective hold of home workers. The difference
between the exporter’s overseer and the sub-contractor lies on the extent of
responsibility. A sub-contractor enjoys certain autonomy with regards to the
production. An overseer typically does not assume responsibility over the outcome
of the piecework whether it is rejected or of low quality. An overseer merely acts
as facilitator of orders to the home workers. The home workers though are still
personally liable to their produced crafts if it will be accepted or rejected. On the
other hand, a sub-contractor has direct liability towards the Exporters or factory
manufacturers with regards to the outcome of the orders. The Exporter or
manufacturers may also provide supports like those given to an overseer like
15
partial payments, raw materials and tools but the production runs on sub-
contractor’s own disposition.
The Exporters carry the “formal”-nature of the abaca handicraft industry while the
Home workers bear the informal sector of the industry. There is no official account
on the existing number of home workers who engage in handicrafts making but
taking into consideration the labor absorption of almost 50% of the more than 2
million total labor force in the region of the agricultural sector, this could translate
into hundreds of thousands for both existing and potential home workers.
Aside from the Exporters and Sub-contractors, a specialized segment of
handicraft production has evolved. The processes such as weaving, twine making,
metal framing and coloring/dyeing provide a specialized input to the industry. In
the process of weaving, the weavers supply regular or standard weaved products
such as sinamay and burlap to the industry. The sinamay and burlap are nets-like
weaved abaca fiber. They are used to produce different sort of products for gift-
and homewares.
The weaving activity is done by women in the household. The process of weaving
is tedious and very labor intensive since everything is done by hand. A weaver
must invest in weaving equipment. The weaving equipment can be made and
assembled by a local carpenter. It can be considered as a major investment for a
weaver in relation to its family income. Aside from investment, a weaver must also
allocate a fix place of at least 4 sq. meters in the household for the equipment.
The decision to become a weaver must be well calculated considering its
investment and the space it must acquire in a household that normally has already
limited space for the family. The preparation of abaca fiber for weaving is
laborious. Firstly, it must be combed or carded to take off unordered fibers, and
then each end is manually tied to form a continuous thread. Some household
women have specialized in this kind of work process and so the weavers have an
option to outsource the threaded abaca fiber known locally as “Sinugot”.
Exchanges to this sort of goods are possible through the local market or it can be
processed by an overseer who could organize the division of work. The weavers
normally have a fix buyer of the finished Sinamay or Burlap otherwise they could
16
look for buyers at a local market. In every town there is a fixed day in a week
allocated as a market day. It is to this day where local agricultural products are
being sold. The price of the weaved-products fluctuates depending on the price of
abaca and also depending on the demand of the product.
Another specialized segment of the industry is the twine-making. The abaca-twine
can be used to create diverse novelty items such as bags, baskets, hammocks
slippers and others. Although abaca-twine can be made mechanically, the
handicraft industry still prefers those manually made. Manually-made twines are
still cheaper compared to those mechanically made. Twine makers for example in
the province of Albay is concentrated in the town of Malinao. This could be
explained by means of spill over during the peak of abaca products for export. The
demand for abaca-twine was up that the neighbors started to acquire the skill of
twine-making in order to grab the chance of generating income to the family. Both
men and women engage in the twine making.
An important tool to the twine making is the spindle-machine. A spindle-machine
can be assembled from used bicycle parts. Twine-making is done outdoor
because it needs distant space to stretch the fiber. The weather is then crucial as
it could hamper at any time the production.
The Metal Framing is an exclusive input segment to the handicraft industry. It
supplies the industry various creations of metal frames that serve as a skeletal
structure for boxes, trays, and other novelty items. The main raw material for the
metal frame is the galvanized iron (G.I.) wire. The galvanized wire is being
straightened and the ends are joined through welding contact by means of electric
current. The process is simple and routine. Investment to this input segment is
relatively big. The specialized welding machine and electric transformer are
needed for the process. The activity of metal framing is dependent solely to the
availability of electric current. As the region struggles towards steady power
supply, the work tempo is being dictated by the availability of electricity.
Another specialized segment to the industry is the Abaca Dyeing and Coloring.
Dyeing and Coloring can be outsourced in the handicraft industry. The industry
17
relies on this outsourcing segment due to its form of specialization. Dyeing and
Coloring demands know how on the application of dyes and colors to create
different color combinations and shades. The process of abaca bleaching is also
being carried by this segment as a form of standard preparation for dyeing.
Capital investment to this segment is primarily executed through the purchase of a
large dyeing drum which is made of a thick stainless steel. The process of dyeing
and coloring is done through cooking method. The cooking method is done
conventionally using firewood. Although the segment has established to cater to
the special needs of the industry, it struggles to survive due to the uncertainty or
irregularity of contract.
An input niche to the industry which is the wood frame production also
continuously supplies the industry with needed wood moldings. The wood
moldings although is not directly associated to handicrafts, it renders an
indispensable role in the production. The wood molding provides the shape of any
handicrafts especially in the production of bags, storage boxes, vases and bowls
and so on. This segment of frame production specializes on carpentry works that
cater to the needs and specifications of the handicraft industry. This segment was
able to establish due to orders from regular clientele who are the Exporters.
18
3 EMPIRICAL STUDIES
3.1 Methodology: Interview
A face to face interview was conducted with the purpose of getting
preliminary impression of the activity done by the industry’s participants and
in order to gain a first hand knowledge of the activity in the handicraft sector
from its formation up to its future plans. The purpose of the interview is also
to look at the dynamics manifested in the different segment level.
The Interview with Sub-contractor A represents a more or less standard
activity present under sub-contracting scheme with inputs on challenges it
encounters in its course of business.
An interview of a typical abaca farmer was also conducted considering the
crucial role of the farmers in steady supply of abaca raw materials and the
interviewee-farmer was intentionally chosen with a lengthy background
experience on abaca farming in order to get an idea on how abaca farming
has evolved through the years.
The interview on the twine making is chosen as an example of an
established input segment of the abaca cottage industry. Although the
Interviewee-couple is an example of a success story -success is referred
here to the improvement of their lives relative to the standard of living in the
community; their achievement is accompanied with growth constraint. The
Interview delivers as an example the kind of limitations the twine making
encounters.
The interview on Exporter E represents an extra-ordinary performance in
defying the clichés that the industry has carried all along.
19
The author has deliberately understated the relevance of mentioning the
actual names of interviewees as emphasis on issues and context of activity
is at foreground. Nevertheless the content is wholly based on the
expression by the interviewed persons.
3.1.1 Sub-Contractor A
Subcontractor A has acquired her sub-contracting business through her initial
exposures to the handicraft industry. She had worked at first as a marketing
officer at Bicol Handicrafts Cooperative. She received her training in marketing at
the cooperative through mentoring from experienced members. As she realized
that her marketing capability alone was not enough to carry-on her task, as she
must explain to the potential buyers the whole process of the products she is
marketing, she then expanded her training in the production process and product
costing.
The cooperative where she was employed has experienced major business
turbulence because of mismanagement (alleged corruption) although the
cooperative in itself is functioning effectively. The cooperative made a drastic
approach to solve its indebtedness to banks through cost-cutting and that meant
giving up its office to save for its rent and relieving its employees. The
cooperative members have decided to go on their own after acknowledging their
respective share of the debt to be paid on installment basis.
Sub-contractor A on her part decided to start on her own as sub-contractor,
capitalizing on her exposure during her employment at the cooperative and
utilizing her buyer contacts in the cooperatives. She managed to get her first
subcontracting job through information in the cooperative that somebody was
looking for a supplier of seashells and Karagumoy-Palm. Since every member of
the cooperative had its own line of products, the order was out of exclusivity of
members (each cooperative member does not carry same line of products with
the other to avoid conflict) so she took over of the order. Later on she expanded
her product scope with Sinamay and other abaca-based products. Her decision to
carry on with subcontracting job was in line with her family duties. She did not
anymore bother to seek for other alternative employment.
20
One major attribute of subcontracting is its uncertainty when an order would come
but she managed to stay in the business because her husband has a fixed income
to sustain their daily subsistence. On the other hand her having a small family of 4
heads (2 siblings) minimizes the burden of household expenditures.
She managed to get her initial capitalization of P 30,000.00 from a loan grant of a
local university that promotes entrepreneurial activity where she became a
member and another P20000 came from the cooperative. The whole amount of
P50000 was used to bank roll her first order. When there is a purchase order (PO)
from a buyer and she needs to finance the production, an investor, who is a family
friend lend them the money with interest of about 24% nominal rates per annum.
The investor could assume up to 100,000 pesos investment. In some occasion the
buyers would give 50% partial payment attached to the purchase order. Her
Sinamay-Customer even provides 100% payment attached to the purchase order
but her profit margin would only run about 2% of the whole order.
When asked about her possible plan for expansion of the business, she has
referred to outside opportunity as driving factor. She has been very cautious not to
be indebted much and she would rather resort to roll up her capital – that means
that she is not inclined to accept parallel orders that would entail bigger foreign
capitalization at one time.
Looking back from the start of her sub-contracting, in the course of four years in
the business, she has now a rolling capitalization of about 100,000 pesos or her
business has grown doubled. Such performance rather suggests just an average
achievement for her as it does not make greater impact to her family’s standard of
living.
Her business would evolve through the entry of a purchase order (PO). The first
thing she does is to study the pricing of the PO. Normally the price is already
being fixed in the PO otherwise both parties must still discuss on how it will be
fixed. The next thing is to agree about the delivery date. Subcontractor A
demands that the delivery date must be arranged based on her term, considering
21
her capability and also the possible default risk by means of natural events like
rain or other circumstances. If the buyer does not agree to her given completion
date, she would only accept a fraction of the purchase order. It is up to the buyer
to find other subcontractor who would fill in the purchase order. When the
purchase order is finalized and sealed, her next step is to pool her workers and
explain the details of the piece work. She would always highlight the importance of
quality and due date to her workers. In some cases the piece workers procure the
needed raw materials by themselves which can be found in the forest.
When asked about her major challenge in her course of activity, she singled out
the attitude of the workers. She pointed out as an example when Fiesta (Feast) in
the village comes; the workers are prone not to catch the due date by setting their
priority to the feast instead. Her coping mechanism is to redistribute the unfinished
piecework to other workers. It would cost her extra time and a higher
transportation and communication cost for monitoring.
Aside from poor work ethics that the workers suffer from, subcontractor A also
pinpoint the kind of consideration she must give to the workers in a way that is
actually unreasonable to her business dealings. There is a kind of embedded
seniority in rural culture where the elderly must be respected by all means. At her
having a younger age (middle thirties) compared to her older piece workers
(mostly women), she has a hard time getting the mistakes or short comings
straight on the table. She would exert great diplomacy and dispensation so as not
to create resentment to her.
The reasons or explanations that are given to her more often serve not for regret
or acceptance of fault but more of a scapegoat. For example, when she scolded a
home worker why the craft is undersized, the worker would reply that it was the
fault of the daughter or son who made it or when asked why the measurement is
different than suggested, he/she would reply that he/she lost track of the
measurement (a case of either losing the copy of measurement or not
documenting the suggested final measurement). Such attitude indicates
unwillingness to accept responsibility or a manifestation of reluctance to stand for
responsibility.
22
In one case, a home worker produced more pieces than agreed because she
simply needs more money for the fare of her children to school. Such unsolicited
overproduction is a burden to her planning and projections. It is impossible for her
to refuse the excess because the materials are her supply and it could sour their
social relationship. The given reason is also expected to be accepted as it
suggests the social responsibility of the sub-contractor towards the home workers.
Some home workers would visit her and ask about any piece works, she would
gladly accommodate but when the deadline comes, there is no finished job.
Sometime she has already given a sample to copy but then a home worker would
still do on her own.
There are a lot of implicit cultural and behavioral manifestations that must be dealt
with in her interaction with the home workers.
It is inevitable on her part to take over the quality control. On average her rejects
accounted to about 25% of home workers’ produce. This would suggest an
enormous waste of productivity not only on the part of the home workers but also
on the part of the sub-contractor. To avoid or to reduce such waste, sub-
contractor would initiate a first batch of piece works. Those pieceworkers who are
able to comply or finish earlier and with acceptable results will be given more and
those who have faulty craftsmanship will be given a reduced load and keenly
monitored. Again considerations must be given to everybody in order not to
estrange the relationship with the home workers in the village.
The activity of a sub-contractor is also a logistic challenge as home workers are
spread to remote parts of the province. She employs a trustee called “Corridor”
which means gateway (the word is of Spanish origin). A Corridor is responsible in
facilitating the piece works. The job ranges from arrangement of advances and
payments, consolidation of completed piece works, transfer of information and
instructions and also the delivery of piece works to the sub-contractor. A Corridor
earns through commissions from the whole piece works under her responsibility
and also from the piece works she/he herself has assumed. A Corridor carries an
average of 10 households and every household comprises of about 5 home
workers.
23
The average educational attainment of trustees (Corridor) is elementary level
graduate and some have reached high school level and most of her home workers
have only attained basic reading and writing comprehensions (reaching only about
third elementary level). Those who were able to reach or graduate college in the
village or community would not anymore dare to engage in handicrafts.
Handicraft-making in the village is regarded with very low status and it is being
understood as a low income generating activity. Instead those elites in the village
would leave for greener pasture going to cities.
Subcontractor A conducts business to trustees and home workers just through
word of mouth and instructions are given informally by means of demonstration.
Problems could arise in such system when there is a need for specifications of the
contract and when specific instruction must be considered. Her coping mechanism
to that is to give repetitive reminders and clarifications in order not to forget.
There is also reluctance on the part of home workers to be obligated by any
written contract where they must sign. Subcontractor A explains that home
workers shy away such type of commitment because of their carefree attitude of
not bothering to compel.
It is clear that training and skills enhancement are badly needed by these home
workers but based on her experience whenever she attempts to invite the workers
for a meeting, the very first question is if there are supports to be given like cash,
goods or household supplies for free. She said that if she would invite prospect
participants of 50 persons only about 5 to 10 would come.
It is hard to promote enthusiasm and initiative to the village home workers and to
let them understand the importance of innovation, development and scientific
upgrade of their skills. It must be understood that most of the focus of these
workers are survival on day to day basis rather than investing for the future.
Subcontractor A narrates her experience with her earlier job at the government
sector initiating livelihood projects at the rural areas. Attendance was very
24
disappointing although the seminar would already take place in the village with
free meals during the duration. The most common excuse was that they do not
want to loose their precious time that they could otherwise use in the household or
farm.
The village peasants have failed to understand the enormous economic potential
in gaining more information and better skills that could improve their lives. Dealing
with such mental set up and awkward perception is also a very big challenge for
the handicraft industry. Those who attended would just be skeptic of the possibility
to acquire the livelihood that although they may have understood the processes
but they doubt they could start on their own as they fear they will just forget
everything when they go back to their places. Such scenario is understandably
been the case as the transfer of information was made orally.
Subcontractor A identifies her competitive edge in the business with quality and
price. She strongly believes that her struggle for quality and pricing based on
market demand supports her fight for her niche in the handicraft industry. She is
also quick to include her role with social responsibility in providing means of
income to home workers. She struggles to balance her entrepreneurial acumen
with social justice reiterating that the income from the piece works must at least
cover for the daily needs of the households of home workers. She hopes that her
business would prosper and that in effect success will trickle down to her home
workers through improved remuneration and incentives.
At present her business is considered informal but she plans to register at the
local government for the reason of getting a formal identity and therefore having
formal representation to prospective buyer – which are mostly exporters and
handicrafts manufacturers. Although such plan has relevance to her business but
the enforcement is dependent on her financial capability as she must pay for fees
and clearances. At present she does not have any idea yet on how to bank roll her
business registration.
When asked about her major challenges in her present business condition, she
has referred to capital, competition and facility as her deficit. She is only moving
25
with limited capitalization and her facility is just a provisory space in her house.
She also has difficulty coping with competition whenever bidding from potential
buyer takes place. It is often that other competitors engage in dumping price just
to get the contract.
Sub-contractor A nevertheless hopes in the future to be able to establish her
business. Her long term plan is to procure or build better facility. She will need
improved facilities like warehouse, coloring and dyeing facility, working area and
transport vehicle. With such facilities, she hopes to improve the production
processing and also better management of raw materials and supplies as she
could stock up to prevent shortage and for speculative purposes.
When asked about her wish for her future and her family, she hopes to get a
modest and yet comfortable living condition, that she could be able to help others,
and that their children finish college education. Business wise, she still expressed
positive outlook for her handicraft activity but she acknowledged the difficulty to
establish.
3.1.2 The Abaca Farmer
I conducted an interview of a traditional abaca farmer in order to gather
information about the reliability of abaca supply and also to look at the production
dynamics in the supply chain of abaca.
The Couple A has engaged in the Abaca production since their marriage in the
year 1954. They narrate about the bountiful harvest of abaca in the earlier years.
Their abaca plantation at that time stretched as much as 27 hectares situated at
remote sloping locations on mountainous area in Tabaco, Albay. They recall of
harvesting several bales (each bale weigh about 120 kilos) of abaca every week
as compared to present harvesting capacity of just 50 kilos. The workers at that
time were also very much skilled that they could produce a greater output on a
given man-hour day.
When asked about the capability of present abaca farm workers, they lamented
that the present workers could only strip abaca on meager volume as they are no
26
longer attuned to the work. The reason to this was that the present workers who
rather gained basic education became too weak for the hard work compared to
their earlier capability as being well trained and well exposed to the abaca
stripping work.
The couple (wife 71 years old and husband 72) still engages in abaca plantation
at present with the help of their seven grown up siblings and also with the help of
other village agricultural land tillers. Their present problem is the maintenance of
the plantation especially the weeding of grass. They are also quick to add about
the disease (bunchy-top mosaic) that is plaguing abaca. In one occasion the wife
recalls of the one-hectare plantation that was ravaged by the disease in the year
1984. The whole plantation became useless in just a short time span. They were
able to get assistance from the government on eradication of the disease but even
up to now the problem still persist.
Another problem of the abaca plantation is the recurrence of natural calamities
like typhoons. The Bicol Region sits astride the Philippine typhoon belt. In Dec.
2006, the Bicol Region was ravage by a super typhoon effectively destroying all
abaca plantations. The couple resorted to planting seasonal vegetables at the
moment to support their daily subsistence. It would take at least one and a half
year’s time for the abaca to recover. The couple receives free seedlings from the
government but the type of cultured seedlings would need at least 2 years for the
initial harvest.
Most of the work at the abaca plantation is the maintenance. Virtually all the
processes are done manually even in harvesting. A trader has offered a
harvesting machine in order to increase production but the family could not afford
to shoulder the maintenance cost and the gasoline it will need. On the other hand
the meager production will not economically sustain the lease of the machine.
The couple maintains a strong connection to their abaca buyer/trader in as much
as that they could advance money to finance the plantation. Although the couple
clarified that they do not pay any interest from the loan but it is understandable
that all their abaca harvest must be committed to the respective buyer/trader. This
27
mode of arrangement is a strong manifestation of Filipino trait of indebtedness.
The couple may have positively assessed the interest free loan but they seem to
neglect their loss of bargaining power and the free choice of a buyer with highest
bid.
When asked about their future prospect of the abaca plantation, there seems to
be no plan to regain the earlier abundance of abaca. Their age is understandably
a great hindrance to any possible future plans but addressing the concern for their
children and grandchildren, they passively commented that the family will still
continuously engage in abaca farming for as long as it is possible.
There is an interest on the side of the Philippine government to restore the abaca
production in the Bicol Region. In fact the last time, the couple has received 20
sacks of abaca seedlings and some monetary assistance for the planting. A
government agricultural employee would periodically inspect and control the
progress but the scheme did not get any boost for the abaca production. The
couple has acknowledged their dependency to the government support and
assistance, that without them, their abaca production should have already ceased.
There seems to be some mode of reluctance or aversion on the part of the couple
or their family to take the abaca problem in their hands. There was an offer of a
bigger financial support to refinance the abaca plantation but they are not willing
to assume the interest rate of the capitalization as they fear it could get out of
control and instead it could drove them into chronic indebtedness.
3.1.3 The Twine Maker of Malilipot, Albay
I conducted an interview of a Family whose main source of income is making
twine in the twine making - cluster town of Malilipot, Albay.
The couple was able to start the business of twine making through the wife before
they were married in the year 1979. In her younger age of 16, she has already
engaged in small time production of abaca twines. As they get married in the year
1985, the couple decided to expand the production with an enough capitalization
28
of 1,000.00 pesos which primarily was used to buy the abaca fiber as raw
material.
The husband has later joined the business at the time (1993) when he was laid off
due to unionization of the workforce in an industrial cordage factory where he was
employed. On a given peak demand of abaca twines, the couple was able to
employ up to 150 piece workers. During the interview, employment was at around
30 piece workers.
The remuneration is based on a per kilo finished twine. Since the couple does not
practice bookkeeping, the viability of the business is done based on rough
calculations. The marginal revenue on additional kilo abaca twine could fetch as
much as 8.00 pesos and on hard times it could fall as much as 4.00 pesos. The
price fluctuation is affected by the price of abaca fiber but not much by the strong
or weak demand of abaca twine by the exporters. The couple does not need per
se any capitalization for abaca fiber since at one point the exporter-buyers or their
reliable clients supply the fiber and on other occasion an abaca trader would
advance to him the fiber with later payment for as long as the fiber is
manufactured.
An average skilled piece worker could earn as much as 200 pesos per day based
on an 8 man-hour-day. When I asked the husband about any better job
alternative other than twine making, he compared his salary at the factory to that
on what he earns in the business. Having a net profit of 2 pesos per kilo times
1000 kilos per week; he could earn as much as 8000 pesos in a month – an
amount that is four times higher than the salary he normally receives in the
factory. Moreover, he owns his time in the business.
The difficulty in the business during interview was the supply of abaca. The
shortage was due to the recent super typhoon. The pattern of shortage of raw
material always came when natural calamity such as typhoon ravage the Bicol
region.
When asked about outsourcing in other regions such as the Visayas or Mindanao
Regions, the husband quickly points out the transportation risk of being robbed or
29
it would be too costly. The irregular supply of abaca could be understood as a loss
of productivity of the twine making sector but business-wise, the couple’s business
is resilient to such difficulty because of minimal fix cost.
The assembled spindle machine, warehouse, twining facility and the purchased
small truck may have carried a sort of capitalization cost but the couple did not
realize their loss to such investment when production was under capacity or when
for a time being it must be shut down. It is because the couple does not have
credit capitalization pressure. This kind of attitude was manifested in the general
aversion of the couple to get any credit loan for any possible expansion of the
business. On the other hand the workforce carries the burden of unemployment
and the couple’s business is free from any obligation to piece workers.
When asked about the future outlook of their business, the couple plans to acquire
a bigger truck in the next 5 years to be financed through savings. The husband
believes that twine making will stay for longer period citing its persistence for
decades now although demands fluctuate. He also cited the changing market
trend that consumers are more aware and would prefer biodegradable product
substitutes such as those made of abaca twine.
The issue of competitiveness of abaca twine products in the market was not
discussed since the couple is only supplier of inputs to exporters. Based on ocular
inspection of facilities and the description of the husband about their twine making
processes, the mode of production has remained the same for years.
Innovativeness in the production process and differentiation of product twines is
not anchored in their business philosophy.
The couple has nevertheless manifested a strong self-reliance and is generally
risk averse. On one hand their self-reliance had helped them to stay in the
business but on the other hand their risk aversion may have been the result of a
limited capacity and information in judging business potentials and risk.
30
3.1.4 The Exporter E:
A success story in the abaca handicraft business
The abaca business of Exporter E was started by her grandfather way back in the
year 1950. As her grandfather retired in the business in 1972, Exporter E took
over of the business together with her husband and later on became a family
business. She described the move to take over and to pursue the business with
emphasis on social responsibility of employment of the workforce.
She felt that she is committed to employment of their otherwise would be
displaced workers. Her mother was a pioneer in introducing the Sinamay weaving
in Kalibo, Aklan. The product line of her mother focused on placemats and her
father joined later specializing in doormats. She also has adopted and still carries
those products up to the present. Although her ancestral origin came from the
Iloilo (situated in the Visayas), she has preferred to establish her business in the
Bicol region specifically in Daraga, Albay.
One of the strength of her business was her earlier exposure to handicrafts
making and in general the strong entrepreneurial support within her family. She
started exporting at the age of 24 – taking pride as one of the youngest exporters
at that time. Although she does not have much capital at the start but she was
optimistic and believed in the skills of the artisans in the Bicol region. She also
has struggled to improve the business and there was an adherence to
professionalize the handicraft activity. In fact, her son who graduated in
Mechanical Engineering was able to specialize in abaca dyeing in which was a
breakthrough in bringing out a more qualitative, differentiated and better products.
When asked about the difficulty in market entry for handicrafts for export she
reiterated that compared to the time she started the business, it was before much
easier than today on the grounds that due to globalization, competition became
stiffer.
China for example has dominated the market as she said. There was also a rise
of synthetic and machine made products as substitute to handicrafts. These
31
substitutes are much cheaper than the natural handicrafts so there is no way to
compete with the price but considering the biodegradability of abaca handicrafts
and its other natural characteristics, she said that a wider appreciation of the
qualities of abaca is a must in order to still get orders from buyers.
At present the abaca handicraft industry is struggling to stay in business. The rise
of peso to the dollar has suffered the affordability of Philippine handicrafts to the
buyers and the damage of the super typhoon “Reming” in the Bicol Region not
only halted the supply of abaca but also displaced a lot of handicraft workers but
Exporter E is still optimistic about the future of the industry. She believes that
there has always been a niche for the natural products. It is just a matter of time
and timing that the Philippine handicrafts or the Bicol handicrafts for that matter
again regain its old glory.
Exporter E has received impetus to her business during the time in 1976 where
demand for abaca bags and souvenirs was at peak due to U.S. Bicentennial
celebration. General demands for Philippine handicrafts were at peak at that time
and its market was predominantly serving the United States due to strong
Philippine – United States relations. At the beginning of the 80s her company was
able to expand to European market. Her unique selling proposition was that she
was able to get the taste of the European market especially on colors. She was
able to conquer the European market still at the time where most of Philippine
exporters are focused on American market. In the year 1983 the Japanese market
opened up and later on South Korea followed. There was a great demand for the
two countries for Abaca-Sinamay that was used for wrapping flowers.
There is at present a general understanding at the industry that orders are
dwindling and the industry is coping up to stay alive but on the part of Exporter E,
she has dismissed the marketability difficulty of abaca handicrafts citing that in
fact lately she has to cancel or refuse orders which amounted to hundreds of
thousands of dollars (as quoted) due to lack of raw materials.
The shortage of abaca raw material was primarily due to the damage of super
typhoon-Reming that ravage the Bicol region. There was also difficulty in
32
organization of the displaced home workers also brought about by the typhoon.
Nevertheless she still acknowledged the cutthroat competition in the global
market. As she compares her company’s performance to that of about 40 plus
other exporters in the region, some inevitably must take on and off or must totally
give up the business but she managed to consistently stand and exist.
She cited some common litany of problems in the industry like: there is this agony
of sinking dollar; or that the market is not there; there is no incentive at all; their
price could not compete, there is a problem in abaca supply and so on. Exporter E
took pride that she was in the business all the time. Her secret of staying on is
attributed to determination and resilience to shocks and also a clear vision of her
business for the future. She said that she might not be earning due to lower
exchange rate or rising production inputs but her business is going to last. Her
strategy is to keep the buyer and wait for the next cycle (her orders are price fixed
for about 2 years) and then make adjustments. She makes sure that her price is
still competitive but to augment her profit, she strives to get volume orders.
With regard to production efficiency and quality control Exporter E has to cope
with the realities in cottage industry. She admits that discipline is hard to impose
to home workers.
She said that Filipinos in general (with reference to her experience in dealing with
the peasant home workers) have a very weak business sense. She has referred
to the attitude of workers in adhering to get easy money and quick job. Such
attitude jeopardizes the business in the long run if quality has to suffer.
It is inevitable on her part to impose strict quality control although this would mean
extended production process as her company must inspect every detail and every
piece of home workers’ output. On the other hand such home workers’ attitude
has practical explanation. Considering the economic situation of these peasant
workers where they have to struggle for their daily subsistence, their reaction
compares to that of a survivalist instinct.
33
Exporter E explains the transactions of the average piece workers that the
peasant workers start with a negative (having debt or future earnings already
being compromised) other than that, they must struggle to support their daily
subsistence on very basic need which is food. So how can discipline and future
projections be self-imposed when peasants workers are confronted with very
pressing need to stuff their stomach? Their reaction is to get the work quickly
done and if possible cheat so that finances could be stretched to serve both debt
and basic needs.
Exporter E perceived such vicious cycle in the abaca business as fundamental
problem that has to be addressed first. The first goal in the abaca business is to
provide first to home workers. This strategy is almost a necessity in order not to
be short changed by the home workers as she said.
Exporter E buys her own materials for quality control and provides them to home
workers. She would extend initial cash outlay and on Fridays, (a regular turn over
of produce) the home workers are paid for whatever they finished so that they
would not need to acquire more debts. Exporter E also complements the cottage
outsourcing with in-house quality control facilities and with employed factory
workers for final processing and packaging.
Exporter E characterizes her business activity as a focal point in the cottage
industry where investments, innovations and motor for development takes place.
She explains that everything is already bundled up ready for piece workers to be
initiated. Any new innovation, changes and technology acquisitions are initiated by
her.
She differentiated two types of work approach, one is giving piece workers a job
order under a referral of a sample to do with his or her materials, or the other way
which is to readily procure the materials to be worked with, explain the processes
and how it is done, set standards, give needed tools like molders, release initial
cash outlay and clarify the quality to be expected.
34
Considering and knowing the reality in the cottage industry as earlier discussed
the latter work approach is what makes her different (a plus factor on her part) and
effective as compared to other exporters. Any work order from her is well
calculated as she creates her own design, she knows what to expect as she has
made her own sampling and tests, and she even knows how much a piece
worker could finish in a day. Such scheme provides her a very strong, reliable
projections and control on what to expect when job orders are consolidated from
all piece workers that run to thousands.
Exporter E as compared to other exporters considers herself as manufacturer and
not just a mere trader. A trader runs the business in a manner similar to that of a
low end manufacturing where quality and standards are being compromised. An
exporter-trader would get order from buyers, receive pre-payment, pass on the
purchase order to mostly sub-contractors (they are also informal in nature) in the
cottage industry, receive the finished products, pack it and send it to foreign
buyers.
A typical mode of business among exporters with its international buyers is that
50% down payment is being demanded together with the purchase order. The
handling of goods is on FOB (free on board) – Manila basis. The rest of 50%
payment will be paid upon receipt of the goods. This could take about two months
considering lead time of 5 weeks by sea freight.
The role of piece workers or artisans in her mode of business is to carry out the
instructions and conditions she has set. Exporter E regarded herself as the actual
manufacturer and the artisans provide skills as labor input to her production
function. In her way, artisans or piece workers have lost their freedom to impose
or apply their own creativity and innovativeness in their crafts as everything are
pre-planned and pre-initiated. It is just a matter of skills enhancement that the
artisans must adapt. On the other hand Exporter E has effectively addressed the
very weakness of the abaca cottage industry and in effect she has managed to
stay on.
35
3.2 Industry Benchmark:
The Experience of China’s TVEs
One way to assess the general performance of the Bicol Abaca Cottage Industry
is to get some comparative insight on how the other market players succeed to
build their industry and eventually managed to place their products successfully in
the market. This comparative approach can also be viewed as a mode of
benchmarking when it comes to the performance of the abaca industry.
In this regard I chose to explore the path of China’s TVEs (Township and Village
Enterprise). China’s TVEs possess an exemplary performance in industry
development. Its socio-economic background is parallel to that of the Bicol Abaca
Handicraft Industry.
Here are the relevant points of view about China’s TVEs:
1. The TVEs take place on rural setting.
2. Their origin of industry is based on handicrafts.
3. Their industrial activity is supplementary to agricultural activity.
4. Their educational background and economic level (as peasants) is
relatively similar to abaca cottage industry.
5. Their establishment of an enterprise indeed varies strongly on
basis that TVEs-formation has undergone an exceptional struggle for
political right to create and build an industry, but their economic
performance and industrial disposition could be well compared to
that of the Bicol Abaca Cottage Industry.
As China’s TVEs and the Philippines’ Bicol Cottage Industry have the same
comparative advantage, both of them struggle for their respective share in the
global market. That means that the Bicol Abaca Handicrafts stand in direct
competition with TVEs handicrafts. Even in the local market, TVEs’ Handicrafts
pose a threat to cottage industry products. For example, a local (Bicol-based)
handicraft producer has expressed worries about the increasing presence of
China-made handmade bags in the local market. Those bags pose a direct threat
36
to local products and as they could well be substituted to abaca-made bags.
Those bags are also much cheaper compared to local counterparts.
Here is the path to industrialization of the TVEs:11
A comparative approach to abaca industry’s performance:
Looking up at China’s experience
In 1966 there was turbulence in China’s centralized and planned economy
(a political transition from socialism to communism). A form of “Cultural
Revolution” 12 took place. All economic activities were paralyzed except for
agriculture. The students stopped their classes, the workers have ceased to
work, the government employees refused to do their office works, but the
Chinese peasants must carry on with their agricultural activities for obvious
reason in order not to starve. The students, workers and government
employees on the other hand could still rely on food allowance they are
entitled to.
The Chinese peasants did not loose time to supplement their meager
agricultural output by producing goods for the local market. The political
situation became a golden opportunity for peasants to build industries as
there was necessity to fill the gap brought about by the underproduction of
government industries.
The occasion gave rise to the commune- or brigade run enterprises as
peasants made use of their idle labor power, indigenous skills and available
material supplies to create light industry. However such commune- and
brigade run enterprises were confronted with a lot of hurdles such as that:
11 For general reference: Kang, He. China`s Townships and Village Enterprises. (Beijing, China:
Foreign Languages Press, 2006)
12 The Cultural Revolution was the result of the transition from collective ownership to “ownership
by the whole people”. The occasion was also aggravated by natural disasters and crop failures
(Kang, He. China`s Townships and Village Enterprises) p.18
37
1. The industrial endeavor was not covered by the planned
economy.
2. The access to centralized material supplies was zero.
3. The marketing assistance from the government was not available.
4. Credit from state banks was not possible.
5. Electricity supply was not granted.
6. Even registration and business license were being refused.
The peasants have to rely entirely on the market from purchase of
materials to selling of their products.
By the end of 1978, economic reforms for rural areas were pushed through.
The move got momentum from villagers as they defied all risks to contract
their collective land to individual household. The reform has created great
enthusiasm among the peasants as they could get returns from their work
efforts.
An analysis conducted by the local government in 1982 on the general
performance of commune and production brigades had the following
characteristics; 35% of them were good, 50% were average and 15% were
not so good.
The problems cited according to its severity were:
1. Weak leadership
2. Poor management, confused accounts, skewed picture of the
actual state of operation, great waste resulting from handling out
gifts and throwing banquets
3. Faulty market targeting, smuggling, bribery, corruption,
speculation and deception, and
4. Overlooking economic accounting, high costs and low quality of
products.
38
Addressing to such inefficiencies and distortions, the proposal, geared
towards consolidation and readjustments have put emphasis on technical
transformation, work ethics and professionalism.
Soon the communes were abolished and in 1984, a new form of rural
organization named Township and Village Enterprise (TVE) was created. In
1990, the Ministry of Agriculture urged to focus on readjustment of the
industrial structure, cultivate the internal capability and improve
management in an all-round way, optimize the composition of the factors of
production and make great efforts to energize operations, strive to develop
export oriented enterprises, intensify the building of service sector and
create a good environment for the consolidation of TVEs and the
deepening of the reforms.
The campaign has served as an impetus towards development and
improvement. The TVEs laid foundation on basic enterprise management,
training centers were built, contract responsibility system of the enterprise
was improved, the ministry has invested in quality inspection offices in
wholesale centers and a comprehensive quality control mechanism was put
in place.
Since TVEs rely on the market, the purchase and marketing personnel
must render an extraordinary effort in sourcing raw materials, energy,
market information and product placement. The Book on TVEs has
described such personal effort as “…traveling across the width and length
of the country, racking their brains to find good ideas, tiring out their
tongues to convince their clients and overcoming all sorts of hardships”13.
Given a situation of fierce competition in the market, some TVEs have
formed enterprise groups to achieve scale advantages.14
13 See: Kang, He. China`s Townships and Village Enterprises. (Beijing, China: Foreign Languages
Press, 2006) p.96
14 See: Kang, He (2006) p.203
39
The table below shows the consistent growth of joint ventures and
cooperative ventures launched by the TVEs from 1986 to 199115:
Year Number1986 2,4051987 2,9961988 4,7621989 5,9151990 6,9871991 8,456
The TVEs have evolved into a market oriented activity. Their operational
method is geared towards production based on market demands and
orders. They also expanded production through market promotion. The
production and operation of the TVEs are well adjusted to the cyclical
changes in the development of commodities. As soon as new products are
put into production, they also started at the same time developing for the
next product generation. When a product has reached its peak, they start to
introduce a new one.
Such kind of strategy is not only protecting and holding the TVEs’ market
share but it also keeps the pace at reinforcing and extending the life cycle
of a product.
He Kang (2006) descriptively compared the strategy to that of a boy eating
sweets: “One in the mouth, one in the hand, eye another one, and think of
one more”.16
The transformation of the TVEs has generated tremendous impact on the rural
areas, its share to the national economy became relevant and it also ushered
social development in the community.
15 Source: Kang, He (2006) p.27616 Kang, He. China`s Townships and Village Enterprises. (Beijing, China: Foreign Languages
Press, 2006) p.209
40
It is very relevant to acknowledge the turning point of the TVEs. It was clearly the
people’s initiative and determination to fight against all odds in transforming their
rural activity into viable business endeavor.
Alonzo postulates that: “Policy reform tends to be more lasting when pressure for
it comes from the people themselves, for only then does government see the
popular will clearly. Institutions imposed from above are likely to die a natural
death; the ones that last are those born of the people’s own initiative”17.
17 Chickering, Lawrence & Salahdine (Editors), Mohamed The Silent Revolution: The informal
Sector in Five Asian and Near Eastern Countries (San Francisco, California: International Center
for Economic Growth Publication,1991)- See contribution of Ruperto Alonzo on Philippines p.41
41
4 THEORETICAL CONSIDERATIONS
4.1 Strategy of Small Firm
In order to reap success in the international market a firm must be large. Chandler
quotes: “to compete globally you have to be big”. There is a practical value in
being a big company. Big company means larger capacity to withstand
competition and larger scope in imposing its business strategies. Big Company
has greater bargaining strength.18 Big company is in the capacity to support
innovation, research and development. Big company would understandably be in
better position in exercising efficiency and optimization given the advantages
present under economies of scale and scope.
“Large size firm remains an advantage in access to lower cost inputs, by virtue of
bargaining power and the ability to purchase in bulk.”19
Although big company suggests a strong financial power and embodies a modern
form of organization such as corporation, group of companies or conglomerates,
they are not the only means to become big. When common interest could be
collectively organized, it could also create a bigger effect against competitor and
towards the market.
“Globalization is altering modes of production because of growing competition.
Enterprises are compelled to develop competitiveness. The new global
environment demands flexibility and collaboration.”20
18 Taylor, Eduardo Small Scale Industries in the Philippines: An overview (Diliman, Quezon City:
Institute for Small Scale Industries, University of the Philippines,1983) p.719 See: Lubell, Harold The Informal Sector in the 1980s and 1990s (Paris Cedex 16, France:
Development Centre of the Organizationfor Economic Co-operation and Development
(OECD),1991) p.7520 Llanto, Gilberto Handbook on the Informal Sector (Manila, Philippines:.Bishops-Businessmen’s
Conference for Human Development and Department of Labor and Employment,1998) pp 59-60
42
The flexibility and collaboration could be realized through the Strategy of Small
Firms21 such as:
1. Exploiting niches –firm relies on its own capabilities. The Focus is on
areas where there are no scale economies or even some diseconomies of
scale.
2. Using alliances to succeed in a larger market.
Exploiting niches as a possible strategy for Abaca Handicraft Industry would be
less appropriate considering the level of activity – that products specialization and
differentiation is low. However if an entrepreneur could manage to bring out a high
end manufacturing and banking on possible exclusivity of abaca fiber made
products, it could well establish a market niche.
On the other hand utilizing alliances would be a much fitter strategy for the
industry. Competitive advantage could well be established through collaboration in
two sources22:
The first is group based advantage; it is derived from who is the group and how
the group is managed. The second advantage available to firms engaged in
group-based competition is firm-based.
The economic success of the group would depend on the presence of a positive
network effect. The group must build up capabilities, synergies and control system
for better appropriability.
The share of each member to the group will be based on its respective
contribution and the contribution will serve as the bargaining power in the group.
21 Audretsch, David (2003). SMEs in the Age of Globalization (Cheltenham UK: Edward Elgar
Publishing Limited,2003) p.62
22 Audretsch, David (2003). SMEs in the Age of Globalization (Cheltenham UK: Edward Elgar
Publishing Limited,2003) p.67
43
4.2 Mainstream Theories of Globalization
The aspects of globalization are likely to favor large businesses23. The challenges
the Philippine micro and small enterprises (inclusive of the informal sector) come
primarily in understanding and awareness on what globalization is all about. It
could either be a threat or a chance depending on the coping mechanism to
compete as trade barriers are eliminated. The process of globalization has
brought a different level of competition known as “hypercompetition”.24
D’Aveni distinguished under this concept four types of competitions:
1. Price and quality - a strategy of product differentiation and market niche;
2. Time and know-how – a strategy on right timing, reinforcing the product
lifespan and constantly initiating innovation;
3. Defensive strategy – a strategy geared towards building up a strong hold
and initiating market barriers against competitors through cooperation and
merger; and
4. Deep pockets – a strategy of building up financial power.
The cottage industry must act and consider its position on how to effectively face
the challenges. Under the slogan of “think local, act global”, the industry must
utilize its comparative advantage, must initiate cooperation, must invest in
innovation, must be market oriented and fundamentally must improve its internal
capability.
23Alfonso, Oscar Bridging the Gap: Philippine SMEs and Globalization. (Diliman, Quezon City
Philippiness.: Small Enterprises Research and Development Foundation, University of the
Philippines, 2001) p.2
24 Schneider, Ursula Der Prozess der Globalisierung (Working Paper No.3, 3. Auflage, Graz,
2003) with reference to Richard D’Aveni’s (1995) Book on Hypercompetition: pp 25-27
44
4.3 Development Theories
Western scholars attempted earlier way back in the 1950s to explain the
economic challenges in the third world. The idea is leaned towards western
achievements on industrialization as yardstick for development. The
modernization theory promoted progress through adaptation of western
technologies and aid from developed countries usually referred to as latecomer’s
benefit.
Modernization is defined as “the transformation process of a society from a rural,
traditional, irrational, and static stage into an urban, modern, rational and dynamic
one.”25
Although for decades now such modernization theory did not make any impact
among the third world countries but instead it became an agenda for the
developed countries which has lead to growing dependency of developing
nations.
The theory has moved forward propagating the neo-classical development where
government intervention to the economy is expressly not encouraged and instead
it adhered towards liberalization of trade.
“Contemporary scholars from the neoclassical development school insist that
governments of developing nations should refrain from interfering with the natural
forces of economy and should promote the activities of private businesses as well
as liberalize trade… On the other hand … technology transfer and aid from the
north are prerequisites for the development of a country.”26
The developed nations and interest groups have found alliance with the third
world political regimes where they gained control and influence in realizing such
25 Satake, Masaaki People’s Economy: Philippine community-based industries and alternative
development (Manila, Phils.: Solidaridad Publishing House and Kagawa, Japan: Literary Society,
Shikoku Gakuin University,2003) p.13
26 See also: Satake (2003) p13
45
ideals. They have worked hand in hand in exploiting the struggling masses under
the cloak of development.
The experience of the Philippines after the Second World War has set an example
of failed collaboration with international institutions like the International Monetary
organization (IMF) and Worldbank and partner-governments like the United States
of America. The local industries lagged by the onslaught of U.S corporations
during the post war period and the anticipated technological spill-over or trickle-
down effect was nowhere to be found.
A few numbers of large businesses have prospered due mainly to political
connection and support under cronyism, nepotism and corruption enjoying special
treatments and government funding. The Philippine case was even aggravated by
the two decades of dictatorial regimes which was at that time a legitimate partner
for development. The rural setting up to now has failed to urbanize and the
informal sector has thrived as the peasants have remained stuck to agriculture.
“The roots of the informal sector problem can be found in the bureaucratic model
of development, which focuses on government promotion of large-scale enterprise
and advanced technology as the essential tools in a successful development
strategy. … The development strategy is highly Western, rationalistic and
organizational. It had weak concept of individuals and of citizenship.”27
4.4 Theories of Alternative Development
Mao Zedong popularized the term “self-reliance” in China way back in the
1960s at a time where connections to allied Russian Federation was
deferred and transformed into a slogan for rural development. At first
impression, it manifests the ego of the communist regime as it rejects the
27 Chickering, Lawrence & Salahdine, Mohamed The Silent Revolution: The informal Sector in Five
Asian and Near Eastern Countries San Francisco, California: International Center for Economic
Growth Publication,1991) p.3
46
exogenous technology.28 On the other hand it promotes the mobilization of
indigenous technologies and resources. Moreover it emphasizes
community-driven initiatives for development. The rural society must rely on
its own strength and promote its healthy natural and cultural attributes.
The theory coincides with the concept of endogenous development where
the starting point lies at understanding the community’s values and their
vision of their future. The community’s desire is not far from satisfying their
basic needs and considering the fact that the rural community and the
informal sector still struggle to fight against poverty, the rural community
needs to breakthrough this barrier in order to get into a higher level of
development.
Some scholars modified or supplemented the alternative development approach
with theories such as: sustainable development theory, which harmonizes
economic growth with environmental preservation and sustainability for future
generations; and the appropriate technology theory, where it diffuses indigenous
and modern technology into intermediate technology.
The theory on alternative development is a move farther gradually from the
promotion of indigenous technology into adopting modern technologies based on
the people’s capacity and tempo.
28 Satake, Masaaki People’s Economy: Philippine community-based industries and alternative
development (Manila, Phils.: Solidaridad Publishing House and Kagawa, Japan: Literary Society,
Shikoku Gakuin University,2003) p.19
47
5 DISCUSSIONS
5.1 The Informal Sector
The Bicol abaca cottage industry shares a wide array of commonalities under the
concept of informal sector. There has been an extensive effort since early 1970s
in understanding the dynamics of this sector.
Viewing the Bicol abaca cottage industry based on that concept could help in
dealing up with its perceptions, fallacies and facts. The informal sector is also
generally known as non-structured sector, transitional sector and petty production
sector29.
The activity of the informal sector is also partly referred to as Community Based
Industry (CBI). “CBI is a group of enterprises which have developed from
traditional industries, and depend on the local labor forces and raw
materials in the local Market”.30
The informal sector is also identified by some scholars as the “Bazaar” economy.
“The traditional household industries are highly labor-intensive, subject to
seasonal fluctuations in activity, essentially loose and undynamic in their
organization, and because of the dwarf scale on which they operate, very difficult
to capitalize effectively.”31 The bazaar economy provides everyone in the sector
29 Source: Office of the Special Coordinator and Least Developed Countries (Published Year
unknown) Informal Sector Development in Africa. (Leaflet) (United Nations, New York Department
for Policy Coordination and Sustainable Development) p.6
30 Satake, Masaaki People’s Economy: Philippine community-based industries and alternative
development (Manila, Phils.: Solidaridad Publishing House and Kagawa, Japan: Literary Society,
Shikoku Gakuin University,2003) p.6331 Geertz, C. Peddlers and Princes: Social development and economic change in two Indonesian
towns. (Chicago: University of Chicago Press, 1963) p.70
48
some niche in the overall system through a set of inward elaboration of details
such as labor sharing and sub-contracting arrangements.32
“Subcontracting down the chain takes place as a method of cutting costs, in the
first instance by the formal sector enterprise that avoids the fixed costs and social
charges attached to direct employment of a large labor force and then by
successive layers of subcontractors, each of whom tries to reduce the costs to his
own enterprise by squeezing the margin of the next producer in the chain.
Exploitation of the weaker links in the chain in the relatively free market of the
informal sector is one of the implicit characteristics of the system.”33
At first glance, the informal sector stands in extreme contrast to mainstream
modern industries which are referred to as the formal sector. Under the
International Labor Organization (ILO) – Kenya report in 1972, economic
informality is defined as: “a way of doing things characterized by ease of entry;
reliance on indigenous resources; family ownership of enterprises; small-scale of
operation; labor intensive and adapted technology; skills acquired outside the
formal school system and unregulated and competitive markets.34
The definition above renders a normative view of the informal sector or of the
cottage industry. It captures the natural ability of interest groups in the informal
sector to grab opportunities within their means and capacity.
The real and pressing challenge lies at the capacity to transform into a dynamic
and economically sound enterprise that is capable in conquering higher business
ideals.
32 Satake, Masaaki People’s Economy: Philippine community-based industries and alternative
development (Manila, Phils.: Solidaridad Publishing House and Kagawa, Japan: Literary Society,
Shikoku Gakuin University,2003) p.833 Lubell, Harold The Informal Sector in the 1980s and 1990s (Paris Cedex 16, France:
Development Centre of the Organizationfor Economic Co-operation and Development
(OECD),1991) p.115
34 See also: Lubell, Harold (1991) p.17
49
There was an earlier assumption that the informal sector was a transient
phenomenon that would dwindle away in the near future as jobs were created in
the modern formal sector.35 But since the formal sector cannot absorb the surplus
of labor force that is stored in the informal sector, development strategies has
shifted toward recognition of the existence of the informal sector.
For decades now the informal sector agenda has captured attention as the
groundwork for development in third world countries. Some scholars have infused
optimism to the cause, bringing out the potential of the informal sector such as
that: “the small enterprises in the informal sector provide a solid foundation for
economic growth”36 and that “the Informal Sector is a stepping stone for
entrepreneurial development.”37 There has been bolder proclamation such as that:
“The informal sector is a reserve of productivity, creativity, initiative and earning
power and it provides opportunities for self-employment, and thereby
empowerment for the poor”38 and that “the informal sector holds the key to the
search for economic and political transformation … because it represents the
sociological “bridge” between traditional values and culture and modern
individualism and entrepreneurship”39.
There seems to be a missing link between progress and prevailing economic
status of the informal sector as persistent stagnation of development or even
deterioration has marred the decades’ struggle to transform.
35 See: Herman, Bohuslav & Stoffers, Wim Unveiling the Informal Sector: More than counting
heads (Aldershot, England: Avebury Ashgate Publishing Limited, 1996) p.16
36 Office of the Special Coordinator and Least Developed Countries (Published Year unknown)
Informal Sector Development in Africa (Leaflet) (United Nations, New York Department for Policy
Coordination and Sustainable Development) p.1
37 See also: Office of the Special Coordinator and Least Developed Countries Informal Sector
Development in Africa p.438 Chickering, Lawrence & Salahdine (Editors), Mohamed The Silent Revolution: The informal
Sector in Five Asian and Near Eastern Countries (San Francisco, California: International Center
for Economic Growth Publication,1991) p.150
39 See also: Chickering, Lawrence & Salahdine (1991) p.193
50
The informal sector can be viewed into two different perspectives. One is to
consider how its own constituents projects itself and on the other hand how the
scholars, development institutions, and government authorities understands the
sector.
The two perspectives need to be consistent with each other in order to effectively
address the challenges that lie in the informal sector. The informal sector
struggles with a lot of its stereotypes. Most of these stereotypes suggest strong
conventionality, inferiority and negative attribution. The informal sector must
address a lot of issues such as that: The informal sector operates outside the
formal economy, utilizes lower level of investment, demands less demanding skills
and handles relatively simple products,40 that there is no adequate physical
structure such as the absence of physical premises, and that it is often the case
that the output of informal sector is of poor quality.41
The samples of issues above were presumptions made by scholars and it tackles
the realities present in the informal sector. It has been around for decades and up
to now it is still legitimate and yet the constituents have not dared to address such
weaknesses. It seems that the constituents of the informal sector react passively
in defining the future of their operation.
There have been a lot of divergences in perspectives on how to transform the
informal sector as for example; the cottage workers deal or react only in such a
myopic perspective whereas sciences about the informal sector orient its views on
long term strategies. It is either that the informal sector lack judgment about its
activity or that the informal sector failed to understand the issues brought about by
the scholars.
40 See: Office of the Special Coordinator and Least Developed Countries (Published Year
unknown) Informal Sector Development in Africa (Leaflet) (United Nations, New York Department
for Policy Coordination and Sustainable Development) p.141 Lubell, Harold The Informal Sector in the 1980s and 1990s (Paris Cedex 16, France:
Development Centre of the Organization for Economic Co-operation and Development (OECD),
1991) p. 104
51
Lanzona (Llanto, 1998) argued that “informal activities should necessarily be
transformed into market-based, formal ventures before they can be improved.” 42
Although such argument presupposes better access to capital, technological and
human resources, it neglects to address the real cause of the informal sector
constituents’ inability to transform.
The primary cause of failure among small firms can be collectively attributed to
management weaknesses. Lack of management skills reduces the operating
efficiency.43 It includes the lack of accounting records and poor financial
management practices.44
The virtually non existence of business records disables the firm to assess the
situation and to direct its future business activities. Expenditures for production
are often indistinguishable from household expenditures.45 Another reason for
bankruptcy was the attitude of the small entrepreneur himself towards business
and towards life in general.46
5.1.1 How the Informal Sector Does Business
It seems that the informal sector even lacks judgment on how they would carry
and improve their activity. The deficiency in basic and fundamental tool for
assessment which is information in written form cripples them to make a step
further. The outright informality is actually the way the informal sector does its
business in a manner of not keeping records or basically in a manner where paper
42 Llanto, Gilberto (Editor) Handbook on the Informal Sector. Manila, Philippines:.Bishops-
Businessmen’s Conference for Human Development and Department of Labor and Employment,
1998) p.3
43 Lubell, Harold The Informal Sector in the 1980s and 1990s (Paris Cedex 16, France:
Development Centre of the Organization for Economic Co-operation and Development (OECD),
1991) p.10444 Taylor, Eduardo Small Scale Industries in the Philippines: An overview (Diliman, Quezon City:
Institute for Small Scale Industries, University of the Philippines,1983) p.9
45 Herman, Bohuslav & Stoffers, Wim Unveiling the Informal Sector: More than counting heads
(Aldershot, England: Avebury Ashgate Publishing Limited, 1996) p.20
46 See also: Taylor, Eduardo (1983) p.9
52
and pen seems not to exist or irrelevant. There is a huge disability with this kind of
set-up.
Transformation is a prerogative. The people in the informal sector must learn and
grasp the importance of accumulating and preserving information that would help
them better understand and connect their past with the future. It does not need to
have a sophisticated way of documentation (The constituents possess functional
literacy). For as long as they could write and read and carry simple mathematics
and articulate at least in their own dialect –in which case it should be under their
capacity, it would serve as a revolutionary effort in the industry that is capable in
creating a firm ground and a strong reinforcement for the future.
Chickering and Salahdine (1991) expressed that the informal sector lacks
resources to research and understand its own interest. There is an absence of
institutions of feedback and accountability. 47
5.1.2 Low Productivity
The most common argument about the informal sector and to the extent of the
cottage industry is low productivity48. Low productivity can be understood as the
under capacity in transforming the production inputs into optimum yields. As the
informal sector is generally regarded as labor intensive, it suggests a very low
remuneration at the works done. That further translates to low value added as the
goods command very low commercial value.
Effectively addressing the low productivity in the informal sector needs
comprehensive understanding of its nature of alternatives. Putting the case on
peoples’ (informal sector workers are peasants) job or work prospect, they could
47 Chickering, Lawrence & Salahdine, Mohamed The Silent Revolution: The informal Sector in Five
Asian and Near Eastern Countries (San Francisco, California: International Center for Economic
Growth Publication, 1991) p.194
48 See: Llanto, Gilberto (Editor) Handbook on the Informal Sector ( Manila, Philippines: Bishops-
Businessmen’s Conference for Human Development and Department of Labor and Employment,
1998) p.1
53
not get any better option other than their informal activity. Individuals are pushed
into informal sector activities for lack of alternative ways of earning a living.49
There is virtually zero opportunity cost as there is no job alternative or other
opportunities left. Considering the status of the worker with low educational
background, limited entrepreneurial capacity and financial constraint, the term low
productivity is a scholar’s definition. It would be difficult to address a problem that
the people concerned may not even be aware of. The term low productivity is a
result of an implied comparison of the informal sector to that of a highly efficient
industrialized modern sector but the activity in the informal sector is the best stake
its participants could get.
In the course of my interview and observation, I can trace low productivity
practically to inefficiencies and non-optimization of resources. If they could have
known the better ways or options, they could have made improvement and
change. It is also important for them to understand that any possible enhancement
does not come in a lump sum but on installment basis and sometimes even
undetectable that it needs extensive calculations to prove viability. Realizing a pair
of percentage points for growth does matter and it must be consistent for a longer
period. It would demand a great deal of discipline and dedication.
The term low productivity is a scholar’s perception but comprehending to the
informal sector, emphasis must be given on the term growth instead.
It has been the case that patch work solutions initiated from the outside had been
introduced or promoted to tackle low productivity such as providing technologies
and technical assistance. As for example, the case of stripping machine for abaca
farmers, the machine could produce abaca fiber five times the capacity of manual
stripping and yet the farmer I spoke with is hesitant in acquiring the technology on
a valid reason that he could not apply the full capacity of the machine because he
49 Lubell, Harold The Informal Sector in the 1980s and 1990s (Paris Cedex 16, France:
Development Centre of the Organization for Economic Co-operation and Development (OECD),
1991) p.113
54
is experiencing minimal harvest and plus the incremental cost like gasoline and
rent to be incurred is a discouragement.
Taking the option on a broader context, the machine could revolutionize the abaca
production and a good solution to low productivity but it would need careful
planning and calculations. The farmer could create alliance with other farmers in
order to gain from the full capacity of the machine. The machine demands broader
scope of activity and responsibility and it also means greater risk for investment.
The machine serves as the enabling factor for growth but without the
preparedness of the benefactor, no amount of progress could ever be realized.
The outside institutions may have offered solutions but if the farmers cannot
understand its potential it is again back to square one. Progress has become an
elusive dream that is actually attributed to lack of judgment and outlook.
The local and national government must have greater stake in the informal sector
in its struggle to bring prosperity to its people but its bureaucratic organization and
the disease of corruption hinders them to act effectively. “Corruption enormously
retards the effectiveness of institutional protection of citizens.”50
The informal sector is virtually non-existent having distorted or no visible
representation in national statistics and therefore no agenda for economic
prosperity.
“The informal sector is mainly composed of low-profit industrial and service
sectors, often submerged in the underground economy and which are not
generally covered by government regulations and statistics.”51
50 Chickering, Lawrence & Salahdine, Mohamed The Silent Revolution: The informal Sector in Five
Asian and Near Eastern Countries (San Francisco, California: International Center for Economic
Growth Publication, 1991) p.19551 Satake, Masaaki People’s Economy: Philippine community-based industries and alternative
development (Manila, Phils.: Solidaridad Publishing House and Kagawa, Japan: Literary Society,
Shikoku Gakuin University,2003) p.8
55
The scholars and other institutions understand the role of the government in
shaping up the informal sector and the government must also exercise
responsibility. They clamor for intervention and it is often the case that they
accuse the government for the underdevelopment of the sector.
“The low productivity of the informal sector is due primarily to the failure of the
government to establish conditions and reforms that can make the informal sector
more productive by improving its scale, such as more funds or investments for
infrastructure, higher labor productivity, and imports of capital goods”52
“On formation of human capital, values and access to better technology: the
government must establish institutions that can help the households adopt the
results of agricultural and industrial research. The informal sector must be in a
position to recognize the new technologies that they need and adopt them for the
specific conditions of their activities. Poor dissemination of technology is partly
due to failure by individual families to evaluate the usefulness of the new
technologies.”53
The government definitely has a level of responsibility towards the sector and the
remark above is pushing for policy reforms and a clamor for attention but again
the interaction only takes place outside. The passivity of the informal sector
people is a major disability.
The informal sector constituents must engage first in addressing the fundamental
challenges of low productivity and they must exert great effort in achieving growth.
“Increased productivity is a result of new and better production possibilities,
realized from advances in technology, increases in physical capital, accumulation
of skills, and improvement in economic organizations.”54
52 Llanto, Gilberto (Editor) Handbook on the Informal Sector (Manila, Philippines:.Bishops-
Businessmen’s Conference for Human Development and Department of Labor and Employment,
1998) p.2153 See also: Llanto, Gilberto (1998) pp. 26-2754 See also: Llanto, Gilberto (1998) p.22
56
5.1.3 Poverty
The most unsettling condition in the informal sector is the widespread poverty. A
person in a state of poverty prioritizes needs only for survival and a person’s
strategy only caters on day-to-day basis. It is inevitable not to take the issue of
poverty under the context of the development of the informal sector as it
handicaps any constructive attempt to build up the capacity of the informal sector.
“Informal activity is a coping mechanism or a means of survival”.55
The issue of poverty in the informal sector needs government intervention and
institutional support as the people concerned are stranded in this sort of vicious
cycle. Great dedication and determination for all concerned to surpass the hurdles
is necessary as the first step towards entrepreneurial transformation.
“Informal sector activities are undertaken with the primary objective of self-
generation of employment and incomes, rather than maximization of profit or
return on investments.”56
“Survival enterprises are often prevented from becoming growth oriented
enterprises by artificial barriers often psychological and self-imposed.”57
It is a common tool for the government to initiate livelihood projects in addressing
poverty. In the case of abaca handicraft industry, those home workers and abaca
farmers are the ones mostly suffering from poverty. The other input segment of
the industry like the sub-contractors and specialized production segments like the
twine making, metal framing and others can be promoted as micro-enterprises
which have the potential to become formal business entities.
55 Llanto, Gilberto (Editor) Handbook on the Informal Sector (Manila, Philippines:.Bishops-
Businessmen’s Conference for Human Development and Department of Labor and Employment,
1998) p.3456 Herman, Bohuslav & Stoffers, Wim Unveiling the Informal Sector: More than counting heads
(Aldershot, England: Avebury Ashgate Publishing Limited, 1996) p.1657 See also: Llanto, Gilberto (1998) p.87
57
Livelihood enterprises are primarily geared toward alleviating poverty while
growth-oriented micro-enterprises have business development as their goal.58
The earnings of the former are primarily used for consumption or for other social
needs rather than for enterprise growth or expansion while micro-enterprise
operator is motivated not by economic survival but by the prospect of making
profits. The profits would then serve as surplus and are available for business
expansion.
The informal sector is usually overcrowded with livelihood activities due to ease of
entry. An ILO study by Joshi (1996) proposes that livelihood should be
distinguished from those without prospects.59
“Micro-enterprises are most successful in raising incomes and creating jobs when
supported by comprehensive programmes that provide advisory services, training,
credit, marketing and technical assistance.”60
The informal sector is also confronted with the realities of exploitations of the
weakest link. In case of the abaca handicraft industry, the weakest link in the
chain is the piece workers. To counter the exploitation, it is necessary for the
piece workers to organize and to know their bargaining power but it is difficult to
promote such strategy when the piece workers are constrained by poverty.
58 See also: Llanto, Gilberto (1998) p.6359 Llanto, Gilberto (Editor) Handbook on the Informal Sector (Manila, Philippines: Bishops-
Businessmen’s Conference for Human Development and Department of Labor and Employment,
1998) p.6460 Office of the Special Coordinator and Least Developed Countries (Published Year unknown)
Informal Sector Development in Africa (Leaflet) (United Nations, New York Department for Policy
Coordination and Sustainable Development) p. 35
58
6 CONCLUSION
The onset of globalization has changed the face of competition into a sort of
hypercompetition. Mergers and acquisitions, alliances and collaborations were
formed among corporations and business entities in order to survive. In the case
of Bicol Abaca Cottage Industry, a form of collaboration especially among
exporters must be promoted in order to create a bigger impact against global
competitors. Collaboration would serve as a counterbalance to the smallness of
the industry. Collaboration will bring not only economies of scale and scope but it
could also enhance the business atmosphere in the industry as synergies could
be realized. Collaboration will carry positive network effects as a mode of pay-off
to the whole handicraft industry. Programmes such as shared information,
innovation, centralized marketing arm, centralized primary and secondary raw
materials procurement and purchase, and technology investments like centralized
packaging system are just examples that could be carried over under an umbrella
of cooperation and utilization of every member’s strength and capability.
Prerequisite for any possible collaboration is a strong information base as basis
for regulations and by-laws. The lack of documentation and records – which is a
major disability in the industry and a fundamental necessity, must be addressed
first. The earlier formation of cooperatives was indeed beneficial to its members
but the experience with cooperatives was not favorable. The lack of accountability
and transparency has lead to abuse of power especially by those who have
greater interest and stake to the cooperative. A strong sense of involvement
among potential members must be promoted. There was a general tendency of
passivity especially among small time constituents when it comes to defending
their interest. This could be the case as the smaller constituents have limited
access to information in the cooperatives which should have been generally
available and accessible. Regulations and a method of controlling must be
installed in order to safeguard every constituent’s interest. This could be pursued
through inclusion of government regulatory bodies and private development
institutions to the board. The design of a possible collaboration is also an
important factor for the success but there has been many form of cooperation that
59
was established and practiced in the business world and it is a matter of modeling
and adaptation to suit the demands of the handicraft industry.
It would be a formidable task and a great challenge to the industry to unite
considering its traditionally loose organization. It is a fundamental necessity and
understandably vital to any business endeavor to create a functioning and efficient
organization. There is no other better option that the Bicol Abaca Handicraft
Industry could otherwise easily adapt. It would be a revolutionary step to the
industry if it is able to create and form a dynamic organization that would look after
the common interest of every constituent that is capable in conquering a broader
market and expanding the business horizons of individuals.
Although the Bicol Abaca handicraft Industry has been around for decades and its
economic, social and cultural relevance in the rural development cannot be
ignored, the industry has failed to institutionalize. The industry lacks a platform for
dialogue among its constituents and interest groups. The general interest of the
industry must be protected and promoted but the industry lacks a governing body
who would regulate and defend. Concerns of unhealthy competition practices
were brought up at the interview and such myopic attitude is a major hindrance in
uniting the industry. The industry cannot unfold its optimal potential when it cannot
foster cooperation for the upliftment of the general well being of the industry. For
example, an effort of introducing a mode of standardization of products, general
guidelines for quality control, protection against product design piracy and the
general protection of intellectual property rights are some issues that must be and
can only be addressed through dialogue and cooperation. The industry also needs
a mechanism of assessment, control and information management. They are
important in drawing up the industry’s milestones and as a measurement for
progress and achievement. The industry must establish a long term strategy and a
vision for the future that would serve as guide towards success.
Identifying the weaknesses, faults and ill-practices in the informal sector is indeed
a step forward in recognizing the underdevelopment of the sector but effectively
addressing the challenges in a fashionable way like those under the development
theories or alternative development could be misleading as it cannot pinpoint the
60
fault. It is difficult or even impossible to get generic solution from the challenges
and hurdles faced by the informal sector. One can only refer to comparable
patterns or similar scenarios in the assessment of the business performance of
the sector. Looking at the general performance of the Bicol Abaca Handicraft
Industry, I could say that the industry is afflicted by its underperformance as it
failed to compete and protect its market share. The underperformance was
manifested by the inability to explore its potential. The industry could have
benefited from its first mover advantage considering the late rise of major
competitor – China in the market and also considering the earlier export-
orientation of the handicraft industry but it failed to unfold. The market has moved
faster than the industry’s pace.
Identifying low productivity as one of the traditional attributes of the handicraft
industry has only brought marginalization against the informal sector in general. It
is inevitable not to adhere towards modernization as a mode of solution to low
productivity. But taking the challenge of low productivity under the concept of
modernization is not realistic as the real challenge lies at how the transition would
take place. As technologies and the needed capital investments may have been
available in the case of a harvesting machine for abaca, the farmer has failed to
identify the economic viability of the technology. Emphasis must be given to the
term growth instead of low productivity. The term growth fosters dynamism and
direction. It could be applied to both macro- and micro-level of the industry.
Growth can be fostered on industry-level for example through general
performance targets. Relevant parameters like sales volumes, industry output or
market shares could serve as yardsticks for growth. Even such parameters could
not be easily applied by the industry when such information does not exist or is
not documented. Prerequisites for such parameters are data that must be
collected for assessment and control purposes. With regards to piece workers,
growth could be promoted by means of milestones. Pieceworkers need to become
aware of their inefficiencies and limitations. The milestones would serve as a
medium in tackling the weaknesses of constituents one-by-one and step-by-step
and also through the promotion and acknowledgment of one’s own strength. An
important medium to this is the generation of a checklist on negative attributes,
deficiencies, and hurdles that must be conquered and turned into achievements.
61
Prerequisite for this is also the active involvement of the piece workers. It has
been found out in this study the high degree of passivity of constituents in
handling the industry’s challenges but then responsibility for one’s fate as in the
case of the piece workers must be clarified and instilled.
The pieceworkers or synonymously referred to as the home workers serve as the
backbone of the industry. It is them who carry the real challenge in the industry. It
is not just because they provide indispensable workforce but also they are crucial
to the dynamics of the industry on how the industry will mold its future. The
characterization of the Bicol Abaca Handicraft Industry to belong to the informal
sector was considered primarily based on the prominent role of the pieceworkers
to the industry. The pieceworkers represent the massive workforce of the industry.
There were attempts to create an entrepreneurial base in grassroots but in case of
the pieceworkers, they face a dilemma. Most of the pieceworkers are inflicted with
poverty. As being discussed in this study, those constituents suffering from
poverty have different priorities and different outlook on their lives. It is difficult for
them to rationalize their activity businesswise as day-to-day survival is urgent
even to the extent of committing fraud and deceit just to satisfy their immediate
needs. Although in the case of the Chinese peasants, they managed to fight
against all odds and they were able establish a viable entrepreneurial activity, the
pieceworker in the handicraft industry is a case that needs intervention. A more
suitable approach is the adaptation of livelihood programs as suggested by
experts. Such programs can be carried by government entities and development
institutions which also have stakes at the development of the pieceworkers. The
handicraft activity under the umbrella of a livelihood project must cater towards
enhancement of skills, promotion of healthy work ethics and healthy
conceptualization of future outlook. But any intervention must be synchronized
and attuned to the overall mobilization of the industry. Interaction among the
industry participants is needed so as information could be shared and the activity
could be harmonized.
The whole set-up of the industry is faced with a lot of complexities and it is
inevitable not to address first the fundamentals that the industry lacks.
Understanding the industry on a global context would place it in a very different
62
league considering that other global industries have engaged in a much
advanced, elaborate and sophisticated strategies. It is understandably a very long
way to be at par with modern industries. Historically, cottage industries similar to
that of Bicol Abaca Handicraft Industry were the precursor to industrial revolution.
The whole system of putting-out is identical to that of earlier pre-industrial
revolution that took place in Western Europe. The system was an advantage as it
provides flexibility to work at home and as a supplement to peasants’ farming
activity – which is also the case for the pieceworkers. The role of Exporters in the
Abaca Handicraft Industry was also similar to that of the original bourgeoisies
(traders) who provide raw materials and collect the finished products. The putting-
out system was later transformed into a factory system by the arrival of
technologies for mass production and also by the idea of optimizing production.
Factory system was just an enhanced cottage system on larger scope. It is at this
stage where the Handicraft Industry had ceased to develop although technologies
are practically long in existent and it can be financed through capital investments
that could also be outsourced. Based on the interview of a successful Exporter,
the Exporter was able to successfully integrate putting-out with factory system.
The Exporter still acknowledged the relevance of the pieceworkers to her
business. In its sense, the putting-out system in the handicraft industry cannot be
regarded as obsolete but it had missed the time to transform. Although it is a
major belief among scholars that the stagnation in the informal sector was greatly
influenced by the external factors especially by the biases of government policies,
the fundamental deficiencies cited in this study can only be addressed within the
industry.
63
7 RECOMMENDATION
This study about the fate of Bicol Abaca Handicraft Industry is faced with
constraint on one hand because of lack of available records and on the other hand
because of limited means for extensive surveys. It is strongly recommended for
further research and development that more quantitative analysis on the basis of
measuring the economic activity of the industry be initiated. It would be interesting
to identify the extent of existent and potential global market for Abaca-based
Handicrafts. Getting to know the real economic worth of the industry in the region
and also its economic impact to its constituents would justify the kind of needed
support in the field of investment, government economic support and subventions,
and also the clamor for private and institutional economic backing.
The Bicol Abaca Handicraft Industry has evolved not just because of its economic
prospect, there was also a strong social and cultural relevance attached to it. The
term “traditional” has rendered negative and more often an awkward statement.
Being traditional has its roots linked more to the constituents’ attitude than to the
crude business process itself as it projects the kind of social and cultural set-up of
the constituents in doing business. This kind of complex and prominently irrational
social and cultural habits was expressed at the interviews. Understanding or
harmonizing such aspects may need an interdisciplinary treatment. On
sociological and cultural point of view, it is interesting to know how those deeply
rooted unconventional attitudes and practices can be transformed. There is a
great challenge that lies in the intricate thinking and understanding mechanism
especially among the piece workers. Considering the Chinese TVEs as industry
benchmark, their success was attributed mainly due to the extraordinary struggle
and discipline of the Chinese peasants. Their hard work was generally
recognized as the Chinese work ethics. In contrast to the Handicraft Industry’s
piece workers, it still remains a challenge to successfully mobilize them for
initiatives to uplift the industry’s standards. There is so much to done for the
upliftment of the constituents’ spirit to create an extraordinary outcome that could
be at par excellence among global market participants.
64
Abaca is central to the production being the primary input. The abaca-fiber has
premium quality compared to other fibers like sisal and abaca can understandably
command for higher price for quality. Fact is that global production of abaca is
comparably much lower than sisal and sisal is much cheaper. For handicraft
production both fiber can be substituted. Abaca can have the potential to cross-
over to the sisal-made handicrafts market. In order to realize this, abaca must be
competitively cheaper and production must be increased. Comparison of the cost
of production of abaca against sisal would provide hints on the extent of
productivity of abaca. Abaca is supposedly not difficult to propagate and its
farming method and fiber extraction may not be far different from that of sisal.
Comparison of economic viability of both could boost the competitiveness of
abaca through realization and build up of a strategy in conquering other market
segments.
65
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Gold Publishing
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9 APPENDIX
Interview Questionaires
Abaca Farmers Questionaires No. Name:Address:Household Members:
No. of Heads Helping in Farming:Educational Attainment:
ElementaryHigh SchoolCollegeVocational
Are you a member of any cooperative? Do you have plans to member?
Questions About the Activity:1. When did you start to farm Abaca?
Why? Was there any other alternative? (How long are you farming Abaca now?)Do you also farm other crops other than Abaca?Do you also engage in other source of livelihood?(Or what are the other activities in you family when not farming?)How much time do you spend everyday or in a week for abaca farming?Where do you get your seedlings?How big is your farm? Who owns it?What are the problems do you encounter in abaca farming?How many times do you harvest in a year?How much do you sell abaca?Do you think it is a fair price?If not, what do you think could be done in order to get better pricing?Who is buying your produce? (Do you owe him? How much interest do you pay?)Can you narrate the whole process in harvesting abaca (cutting, stripping, ect.)?How much time do you spend for the whole process?How much do you earn from your farming in a month or in a year?
2. Do you have any access for credit (As source of Capital)?How much interest do you pay?If not, dou you need one? For what purpose?
3. Did you get any assistance or support from any gov't programms or any private institutions?Or did you heard of any programs offered?Did you heard of Fida (Fiber DevelopmentAuthority) and its activity?
4. What are the problems or challenges do you encounter in planting or during the whole production?Do you have any innovation that you could consider helpful in your farming?Did you know of any technology or machine that you could use in order to increase your production?What do you think are other possible means so that you could increase your production?
5. What is the most special event in your life in a year? How do you celebrate it? Did you more often get credit in order to finance it?
6. What is your dream that you wish to happen?What do you think you should do to achieve them?
7. Are there any comment or information you would like to share about your abaca farming?
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Sub-Contractors Questionaires No. Name:Address:Household Members:
Household Member Helping in the Business:Educational Attainment:
ElementaryHigh SchoolCollegeVocational
Questions about Subcontracting:1. How did you get into the business of subcontracting in the cottage industry?2. When did you start? Did you have any other business alternative at that time other than subcontracting?3. How much capitalization did you need in starting the business?4. How do you finance your present business activity?5. Are you in need of capitalization? If yes for what purpose? How can you get it?6. Did your business grow if you would compare your present situation from the start? To what extent?7. Can you describe your mode of operation?8. How many small producers do you handle?9. How do you appraise your service offering? 10. What do you think is your competitive edge in order to stay in the business?11. Did have any form of development/inventions that you would consider innovative in your business?12. Is your business activity registered? Do you have plans to register? Why or why not?13. Do you have any other source of income other than subcontracting?14. What are the problems/challenges do you encounter in your course of business?15. Did you receive any gov't. or institutional support in the duration of your business?16. What do you envision for your business in the next five years?17. What is the most special event in your life in a year? How do you celebrate it?
Did you more often get credit in order to finance it?18. What is your dream that you wish to happen?19. Are there any comment or information you would like to give in general pertaining to handicraft industry?
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Twine Maker Questionaires No. Name:Address:Household Members:
No. of Heads Helping in the Business: Status:Educational Attainment:
ElementaryHigh SchoolCollegeVocational
Questions:1.How did you get into this kind of business?2. When did you start? Did you have any other business alternative at that time other than this?3. How much capitalization did you need in starting the business?4. How do you finance your present business activity?5. Are you at present in need of capitalization? If yes for what purpose? How can you get it?6. Did your business grow if you would compare your present situation from the start? To what extent?7. Can you describe your mode of operation?8. Where do you get your abaca raw materials ?9. How do you compute cost in relation to price?10. How much percentage share do you charge your labor from the price?11. How much time do you spend in your business in a week or daily?12. Did have any form of development/inventions that you would consider innovative in your business?13. How do you initiate the twine making contracts with your exporter buyers?14. What do you think is your competitive edge so that you could stay in business?15. Is your business registered? Do you have plans to register? Why or why not?16.Do you have any other source of income other than twine making?17.What are the problems/challenges do you encounter in your course of business?18. Did you receive any gov't. or institutional support in the duration of your business?19. What do you envision for your business in the next five years?20. What is the most special event in your life in a year? How do you celebrate it?
Did you get more often get credit in order to finance it?21. What is your dream that you wish to happen?22. Are there any comment or additional information that you would like
to give about your business connection to handicraft industry?