Philippine economic backbone faces coronavirus axe

philippine economic backbone faces coronavirus axe - Philippine economic backbone faces coronavirus axe

By Arjay L. Balinbin
Reporter

THE swarm of diners looking for cheap food on a busy street in Cubao — one of the oldest and busiest districts in Quezon City near the Philippine capital — has disappeared since Manila and nearby cities were locked down to contain a coronavirus pandemic.

“I would be lucky to get a customer during lunchtime,” cured beef eatery owner Maria Teresita, 55, said. “I’m not worried about the rent because I own the place, but our sales may not be enough to pay for our utility bills,” she said in an interview.

Filipino entrepreneurs sell everything from food and clothing to beauty products and health supplements and are considered to be the backbone of the Philippine economy.

More than 99% of the roughly one million business establishments in the country in 2018 were micro, small and medium enterprises (MSMEs), according to the Trade department. The smallest of them accounted for 88% of the total, or a little more than 887,000 establishments.

These have raised the quality of life of their families and workers, having created 5.7 million jobs or 63.19% of the country’s new jobs in 2018, data showed.

A fifth of the country’s MSMEs are in Metro Manila, which generated more than a quarter of the total jobs.

Now, these small companies are at risk of getting bankrupt or completely shutting down amid a Luzon-wide lockdown that has since been limited to the metro and key cities and regions.

President Rodrigo R. Duterte locked down the entire Luzon island in mid-March to contain the pandemic that has sickened more than 12,000 and killed more than 800 people in the Philippines.

People should stay home except to buy food and other basic goods, he said. Mr. Duterte has extended the so-called enhanced community quarantine twice for the island and thrice for the capital region where novel coronavirus infections are concentrated.

CASH FLOW
While some businesses in Metro Manila have been allowed to reopen under the modified lockdown from May 16 to 31, people were still advised to stay home.

About 436,000 of the country’s 1.6 million small businesses were forced to halt operations amid the lockdown, with one million of them operating with a skeletal workforce, according to the Finance department.

The smallest of these firms lack traditional banking relationships, making it more difficult for them to get financial assistance during the health crisis.

The personal finances of many small business owners are at serious risk because they mix their personal and business expenses, some of them using a house as collateral.

While the government has declared a moratorium on the payment of rent and bills, some of these businesses simply don’t have enough cash to keep things going.

The Philippine Exporters Confederation (PhilExport) in a statement on March 13 urged the government to help MSMEs keep afloat by giving them access to collateral-free loans, a moratorium on loan and interest payments and tax breaks.

The government has allotted as much as P51 billion in wage subsidies to small business workers, which could help Louie, 19, and his eight co-workers at Aytona General Merchandise in Cubao.

His boss wanted him to go home to his hometown in Palawan province but he was forced to stay behind after work, classes and public transportation were suspended starting March 17.

“We don’t have any choice but to stay here although we don’t get paid anymore,” Louie, a salesman, said in an interview. “Our food and lodging are free. For now, that’s a better option.”

The shop, which continues to sell plants and handicrafts even if the products are considered nonessential, used to sell as much as P10,000 daily. Now, they would be lucky with just P700.

LENDING
“God forbid,” Louie said when asked what he would do if the lockdown was extended until June.

On May 5, the Philippine central bank adopted “prudential measures” to help MSMEs during the coronavirus disease 2019 crisis and hasten their recovery.

It deferred stricter capital rules for standalone thrift, rural and cooperative banks by another year so they can continue lending to small businesses in the countryside.

MSME loans guaranteed by the state-owned guarantee corporations were also assigned zero risk weight.

Ferdinand, the 42-year-old owner of Bong’s Blooms & Balloons inside the 35-hectare commercial mixed-use Araneta City, was busy filling out forms for his six employees availing themselves of the government’s cash aid program.

He’s worried about his P60,000 monthly rent even if the Trade department had issued a memo giving tenants a 30-day grace period for their rents.

Ferdinand sold P300 worth of flowers on a Saturday, a far cry from the P20,000 revenue he got on a very good day before the virus struck and the lockdown was imposed.

Ronnie, 50, said he wished the government did more to help small business owners like him.

“I haven’t received any help,” the owner of a money changing business in Quezon City said in an interview. “When did they really help us? They’re only good at collecting taxes,” he added with a sigh.

The money changer said his business had not been making money since the lockdown. “I live in this small stand because I have nowhere else to go,” he said.

TRANSITION
Parañaque Rep. Joy Myra S. Tambunting has filed a bill that will require landlords to give MSMEs a 50% discount on rent for the periods covered by the community quarantine and a month after. Also under the measure, premium payments or contributions to the Social Security System, Philippine Health Insurance Corp. and Home Development Mutual Fund of both the employers and employees of MSMEs will be waived and considered paid during the lockdown.

Senator Maria Imelda Josefa R. Marcos has also filed a bill that encourages small businesses to retain their workers by giving a direct wage subsidy of 75% of a company’s payroll cost.

“Small enterprises have a very low survival rate even under normal circumstances, so how much more under the new normal,” Benvenuto N. Icamina, vice-president and chief operating officer at the Wallace Business Forum, said by telephone.

“There’s only so much assistance the government can give them to survive,” he said, adding that the smallest ones were likely to fail.

Mr. Icamina said these companies could either transition to technology by adopting an online platform or diversify into a business preferred by consumers under the so-called new normal.

“If you are an innovative entrepreneur, my advice to you is you have to find a way to survive,” he added.

Maria Teresita, the eatery owner, had not let any of her eight crew members go. “I pity them. My plan was to give them a pay hike after the lockdown, but who knows what would happen?”

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