By this time, most businesses will have made a strategic decision on their future course of action as more information continues to surface on how the coronavirus pandemic is shaping the new normal of today and tomorrow.
For many, especially those in the micro, small and medium enterprise (MSME) categories, the most toxic decision taken would have been about closing down – sending termination letters to employees, liquidating any salvageable assets, paying off creditors, and generally, trying to stop further losses.
Indeed, many MSMEs have now reached the end of the line. With only P460 million so far appropriated by the government to help distressed companies affected by the harsh lockdowns, the money in the first rescue package was too little, and as it turned out, too late to be of help.
When the President signs (if he has not yet) the P165-billion rescue package that partially allocates some help for MSMEs affected by the COVID-19 lockdowns, it will also not be able to save the many that could no longer pay rent, loans, and salaries of staff. The second rescue package, likewise, will be too little, too late.
Not walking the talk
Despite the government’s pronouncements about saving MSMEs, it is obviously not walking the talk. The extension of the Bayanihan to Heal as One Act (Bayanihan 2) to Dec. 30 this year allows the President to reallocate P55 billion to government financial institutions, which will be channeled to badly affected businesses.
Realistically, this help will be available only for bigger companies that have had the funds to weather out all the months in lockdown, now nearing six months that have proven lethal to those affected by the new social distancing norms.
Other provisions of Bayanihan 2, like an extended moratorium on the payment of bills and loans, will also only matter – for whatever small help – to the surviving small and medium enterprises.
For hundreds of thousands of small dine-in restaurants, salons, fitness gyms, saunas, travel agencies, hostels, and many others that were not able to avail of the meager financial assistance allocated in the first installment of the Bayanihan law, the fresh funding under Bayanihan 2 is now meaningless.
Any chance of getting back in business will be difficult with the substantial amount of lost investments, aggravated by lethargic consumer spending, and with too many people losing their jobs, and therefore income.
Longer recovery
For a developing country that has 88.5 percent of its businesses categorized as micro, meaning with assets at P3 million and below, the engines of future economic growth rely on the health of these companies as they transition in the future to becoming bigger operations.
But with most of them forever lost with the quarantines, the economic recovery that had been gaining momentum during the last three decades will likely be set back by two or more years. For many of the micro businesses, those few million pesos lost by closures will be difficult to recoup.
As a rule, the larger the micro enterprise, the bigger the fall. A failed neighborhood beauty parlor, for example, may likely need to sell its equipment at a fire sale and not have enough money left to restart a similar business during better days. On the other hand, a sari-sari store owner or street carinderia would need just a few thousand pesos to reboot.
A longer economic recovery for the country can be expected in direct proportion to length of the lockdowns. As the quarantines have dragged on from the original 45 days to now more than six months, the earlier prognosis of a recovery in the second half of 2020 has been replaced to one towards the end of 2021. Don’t be surprised if this recovery will happen only in 2022.
Bright spots
Still, there are bright spots to look forward to.
First, the pre-COVID Philippines had built a fortress of economic good will that has buttressed its sustainability for future growth. The global pandemic is an extraordinary event, like a world war, that was sure to affect most countries.
We still are emerging comparatively ahead of other economies on recession data, and have better forecasts about recovery even if on extended terms. Other economic indicators also give us a head start compared to countries that were just recovering from the last global financial crisis.
On the ground, a thousand other new micro businesses are starting to sprout. Personal wealth accumulated during the previous decade is being invested, mostly by young Filipinos, in new ventures that could slowly replace what had been lost during the lockdowns.
Hopefully, when the time comes, we should have in place a more robust system that will help these post-COVID MSMEs grow through expansion loans as well as research and development initiatives either through digital tools or technology interventions.
It’s time to walk the talk, to build the necessary support systems that will bring economic recovery faster, and mitigate the suffering that the nation had to go through this year and maybe even after till 2022.
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