Startups Promotion for Overcoming Middle-Income Trap in the Philippines: Effects, Challenges, and Strategies
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The middle-income trap (MIT) states that middle-income economies have found it challenging to upgrade to reach the high-income stage over an extended period. Overcoming MIT has long been discussed as an essential social issue related to fewer job opportunities and unstable income, notably in Southeast Asia. Particularly, the Philippines has the most extended history of operating under MIT. The Improvement in ease of doing business (EDB), primarily through startups promotion, is the most significant way to solve the economic development issue. However, much less previous research on the relationship between EDB through startups and MIT in the Philippines and on the development strategy relevant to the EDB for overcoming the MIT from the updated Philippine Development Plan were identified. Tran’s economic development stage model and Hara’s business development model were utilized to examine the predictive relationships between the economic development stage and EDB. Using secondary data compiled between 2002 and 2021, primarily from the World Development Indicators and multiple linear regression modeling, the strength of the EDB through startups predicting the percentage change in R2 variance in the MIT was evaluated in nine Southeast Asian economies. Using natural data, EDB was found to be a significant predictor (F [1, 100] = 9.332 p = .003) and is thus a substantial factor in escaping MIT. Then, using the grounded theory model and observing the initial conditions of establishing startups, a time-consuming procedure with high cost due to the strict regulations for foreigners can be a significant culprit in the Philippines. Also, a development plan for overcoming MIT through upgrading the EDB in the Philippines was demonstrated by conceptually integrating two platforms of economic development and business development through startups promotion into one concept. Positive social transformation emanates from the continued support of revising development policies of startups to escape MIT in the Philippines.
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