Second wave or extension of the first?
Business & Economic Prospects, Situation of PH Management of Covid19
Where are we in the stage of Covid times, where are we headed, what can we consider doing?
HOSPITALS. The looming potential problem will not be facilities, but lack of frontliners as more and more doctors, health workers and graduates get knocked out of service by infection and into quarantine. After a drop last month nationwide in Covid-19 ICU (intensive care unit) cases, making many hospital beds available, there was a new increase in the number of Covid-19 patients as a result of the lifting of quarantines and the return of overseas Filipino workers (OFWs). But death rates are now lower because more experience has been gained in handling the cases and ensuring adequate supplies. The initial disaster that unnecessarily cost many lives of doctors and health workers has not been repeated with the arrival and distribution of personal protective equipment and the establishment of laboratories that were mostly effected by the conglomerates, the Chinese-Filipino community, the Chinese government and the private sector. What is needed in the battle against the pandemic has now been substantially supplied by the government.
BUSINESS. It strongly cooperated with the government and extended help to employees through Covid-19 assistance programs,but with some critique of shortcomings in logistics and lack of detailed wholistic planning (e.g. how people will travel to work given social-distancing requirements), while recognizing helps and excellence in some areas. Over 4 million jobs have been lost so far. With business restarting under general community quarantine, or GCQ, retail appears to have returned at some 10 to 40 percent in the first week in provincial areas, especially in low-end malls there. The high-end and Manila malls generally have a lower number of returning clients. Digital vendors, bakeries and groceries have higher sales than pre-Covid-19. Major restaurant, retail and service chains are closing many of their branches. A resurgence of cases is to be expected and must be accepted. Meanwhile, treatments must be well managed and mortalities minimized until the expected drug or vaccine arrives in about a year. To go back to enhanced community quarantine, or ECQ, after the reopening of business would be disastrous for the economy and would be proof that we cannot manage a crisis that our neighbors have been successful in dealing with and from whom we can copy a range of models.
Pending government announcements of support policies, the initial return of markets will be used by many enterprises, including foreign investors, to decide if they will try to weather this storm, or just close shop and cut their losses. Lower interest rates have not yet been substantially enjoyed by borrowers or have translated to more access for players who are facing revenue difficulties. The local and United States stock markets have had significant recoveries, but are subject to intense debate as to whether they are indicators of a recovery, a premature speculative run-up that will suffer deep corrections or a decoupling of financial markets and real physical markets because of so much money being released into the world economic system. There are still the dropping OFW remittances, the question of business process outsourcing (BPO) resilience, Trump expanding the trade war and the stability of the US economy and politics to worry about for decision makers, among other considerations. This can also be a watershed for old enterprises bowing out to new ones that could grow faster.
FINANCE. The Philippine gross domestic product (GDP) has been variously predicted by different institutions to drop 2 to 8 percent in 2020, from an original expectation of growth of over 5 percent. The strict focus of the Department of Finance (DoF) led by Secretary Carlos Dominguez 3rd on controlling financial expenditure targets has led to the Philippines being recognized as in the Top 6 countries in financial stability, obtaining upgrades to investment grade BBB and above, even up to an A-rating from a Japanese agency. This conservative stance is criticized by some as not considering the human and economic toll (supposedly when we should spend more to assist the unemployed and failing businesses). This was taken into account, and the target Covid-19 budget has been adjusted from some less than 300 billion to 1.3 trillion pesos, on top of adjustments on some tax measures. President Rodrigo Duterte and Congress led by Speaker Alan Peter Cayetano also approved the largest social protection program in Philippine history in record time. There are various requests of the business community for types of relief that are awaiting government response. While releasing money on deficit will help, how much of it is reaching those who need it or can use it, and if it arrives when needed, will be key to its effectiveness.
INVESTMENTS. The Philippines is missing most of the manufacturing and operations transfers from China. The DoF will postpone some tax increases, and is accelerating the drop in income tax rates from 30 to 25 percent. Local and international business chambers, BPO groups, ConWEP wearables, real estate associations, etc. are discussing policy assistance with the government to remain viable in the Philippines. But we are being bypassed by most transfers, a clear sign that we need to change and develop fast. In Vietnam, Samsung pledged a monster investment of $17 billion, starting already with a $220 million R&D center in Hanoi for next-generation technologies, the largest in Southeast Asia, with 3,000 staff. This shows the importance of infrastructure, so we are in the right direction in “Build, Build, Build,” but we were too slow to capture this wave of investments going out of China that are primarily going to Vietnam, Thailand, Indonesia. Department of Trade and Industry Secretary Ramon Lopez and his team are trying a program of targeted courtship of investors that our Asean neighbors have been using. Our think tanks and politicians should focus less on politics, and more enterprise development, cooperations and innovation. More of our people should spend more time learning, acquiring new skills and attitudes and on productive activity, rather than on social media, entertainment, critiquing. Our current situation is beyond what government and employers or nations alone can handle. It is a “whole society” cooperation that’s needed.
George Siy is a Wharton-educated industrialist, international trade practitioner and negotiator, serving as director of the Integrated Development Studies Institute (IDSI). He has advised the Philippines and various organizations in trade negotiations with the Association of Southeast Asian Nations, Japan and the United States.
New Worlds by IDSI (Integrated Development Studies Institute) aims to present frameworks based on a balance of economic theory, historical realities, ground success in real business and communities and attempt for common good, culture and spirituality. We welcome logical feedback and possibly working together with compatible frameworks.
**Also published in: https://www.manilatimes.net/2020/06/21/opinion/columnists/second-wave-or-extension-of-the-first/733190/