The lockdown of the capital Metro Manila and other provinces due to the COVID-19 pandemic has put a damper on the fast rising economy of the Philippines. For the first time in a long-time, the Philippines is looking at a contraction of its economy possibly resulting in many micro, small, and medium enterprises (MSMEs) and also big business like airline companies filing for bankruptcies.
The Philippine government has already introduced programs to cushion the economic impact of the pandemic like the Php50.8 billion peso small business wage subsidy program for displaced workers of MSMEs. There is also the Social Amelioration Program for wage subsidies in the amount of Php5,000 to Php8,000 for people in the informal sector who have lost their livelihood due to the lockdowns. In addition, payment of loans and rentals which is a big concern for businesses has been extended through the Bayanihan to Heal as one Act (RA11469) giving them time to recover. The Bangko Sentral ng Pilipinas (Central Bank of the Philippines) have also slashed interest rates by .5% to give businesses, especially, the MSMEs more accessibility to loans to fuel their recovery and reduced the required reserves of banks to increase the amount that they can loan out.
However, many more steps are needed considering the huge economic impact the pandemic-induced lockdown has caused. Thus, the Department of Finance is readying a “bounce back plan” to guide the government recovery responses once the economy reopens.
ECONOMIC RECOVERY PROGRAM
According to the Department of Finance (DOF) its Strategy, Economics and Results Group (SERG) is building a team to help state managers come up with a recovery and stimulus plan for the economy. The “bounce back plan” shall, according to the DOF, be fueled by “better expenditure management, improved tax policy, better tax administration, effective debt management, and other innovative and equitable means to share the costs of recovery”. Although, still in its planning stage, snippets of the steps for the bounce back program are as follows:
- The Department of Finance through Secretary Carlos Dominguez III has said in interviews that the government is still keeping its “BUILD, BUILD, BUILD” program a top priority as this will fuel the recovery program.
Infrastructures are an important part of the recovery program as this will ensure swift transit of goods and services among others. Construction companies and subcontractors with contracts with the government will most likely enjoy uninterrupted operations after the lockdowns. There is also a probability, provided that funds are available, that new construction projects will be opened for bidding to the private sector to fast-track important government projects.
- The government through the Department of Trade and Industry (DTI) launched its “Livelihood Seeding Program – Negosyo Serbisyo sa Barangay” to provide financial, technical, and business management assistance to the MSMEs in the barangay level. This assistance will help small enterprises navigate the situation after the lockdowns are lifted.
- The government has also opened loan facilities to MSMEs including the Php1 Billion Economic Recovery Financing facility (COVID-19 ERF) of the Small Business Corporation which would help a lot of businesses through their recovery phase. As of today, stakeholders has been clamouring that the said loan facility be increased to Php1.5 Billion to accommodate more MSMEs.
- The government is also mulling as part of the bounce back plan and restructuring of current loans of MSMEs to give them more flexibility for their own recovery strategies.
SUGGESTIONS BY THE PRIVATE SECTOR FOR RECOVERY OF INDUSTRIES
Some business groups and sectors are calling for the government to include in its recovery plan financial aid on business most especially MSMEs in the form of tax breaks. These recommendation includes fast-tracking the reduction of corporate income tax, tax amnesties, and tax holidays for MSMEs. Further, the government can also study the steps made by other countries to help their constituents, like China which reduced their value-added tax. The reduction of taxes would be big deal for MSMEs as they would need to be liquid in the near future in order retain their employees and keep their businesses opened
The pandemic and its consequences have really caused damage to the Philippines’ economy. Now, it is up to the government with the help of the private sector to repair these damages and put the country back on its course to economic progress.
Written by: Atty. Jon Dominic Penaranda