Apart from being an economist and writer, I am also an entrepreneur. I belong to the sector of small and medium sized enterprises (SMEs) as an owner of a restaurant group. We in the SME sector are fighting for our lives amid the COVID-19 pandemic and government is not making our plight easier.
The problem lies in government’s lack of preparation and poor messaging. While we in the SME sector have every intention to comply with the directives of the state, we are left confused with contradicting directives that come to us on a piecemeal basis. It’s obvious that government is writing the rules as it goes along.
We can forgive the authorities for frequently adjusting policies considering the fluidity of the situation. What is unforgivable is their propensity for making sweeping pronouncements without preparing clear implementing guidelines.
For instance, when the President first announced a community quarantine for the residents of Metro Manila last March 12, he left the entire SME sector (and everyone else, for that matter) hanging with a deluge of questions.
We ran around in circles asking which sectors were exempted from the forced quarantine and which could continue operating? How could we sustain our supply chains amidst the quarantine and curfew? What were the guidelines for employee compensation, particularly those unable to report for work?
No surprise, mass confusion followed and chaos reigned in Metro Manila in the next few days.
Four days later, government doubled-down on its policy by declaring the entire Luzon under lockdown. Again, government committed the mistake of not providing us with a complete set of rules.
With all non-essential commercial establishments ordered to close, merchants agonized over how they could meet payroll and rental obligations with no sales to back it up. We were unclear on who could continue operating on a skeletal basis and who could not. We asked what permits were necessary to deploy delivery trucks on the streets.
Eventually, some of our questions were answered, albeit in trickles. The point is, government should have been ready with its implementing guidelines before it announced the lockdown. Momentous announcements that affect the way we live and work should be backed with a clear set of rules.
Making matters worse was that there was no single spokesman with the authority (and credibility) to speak on behalf of government. We were bombarded with policy directives from the Department of Health, DOLE, the MMDA and the DTI, many of which were in conflict with the other. Local government units added to the confusion.
For instance, we were advised by the DTI that restaurants were not allowed to operate. Later on, we’re told that we could continue operating provided we limit our commercial activities to take out and delivery services. To our surprise, restaurants that opened their kitchens in Mandaluyong, Marikina, Manila and Rizal were charged a P20,000 fine.
For those of us who have commissaries and manufacturing plants, the office of the President ordered that before we could be allowed to operate, we needed to provide dormitories within our factory premises to serve as dwellings for our employees. The following day, we were advised by the Philippine Export Zone Authority that having dormitories was not a requirement.
Labor Secretary Silvestre Bello said on national television that employers are not allowed to deduct from their employee’s leave credits while under quarantine. Upon seeking further clarity from DOLE, we were advised to ignore Secretary Bello’s pronouncement since it was not the official position of the labor department.
DOLE announced that it would provide a P5,000 one-time, lump-sum, non-conditional financial assistance to all displaced employees, regardless of status. It made the announcement without saying how the employees could avail of it. Later on, we were told that the subsidy would have to be advanced by the employer and subsequently reimbursed by DOLE upon submission of certain documentary requirements. The policy was not well thought through as the majority of the SMEs have depleted their cash, many of whom face bankruptcy.
I appreciate the efforts of the inter-agency task force and especially the Department of Trade and Industry who worked tirelessly to better define the rules for business movement. However, let’s not lose site of the fact that the outbreak started last December and government had two months to prepare the protocols needed by civil society to function even while on quarantine. Any competent government would have planned forward.
The next few months will be critical for SMEs. With the lockdown, SMEs face zero to minimal sales but must still meet payroll, rentals for office and factories, utilities and bank amortization (even if deferred by 30 days). Those with sufficient retained earnings will survive but the majority will not.
This is cause for alarm since 99.6 percent of all businesses operating in the country are SMEs and collectively, we employ 66 percent of the workforce. If the SME sector collapses, the entire economy will go down with it.
Government is preparing a P200 billion stimulus package to save the economy, but the lion’s share will go toward conditional cash transfers for displaced workers and the unemployed. It is unclear if SMEs will have a part of this. Neither has there been an announcement of financial aid for SMEs in distress.
Keep in mind that the end of the lockdown does not mean that everything will revert back to normal. Experts agree that it will take at least six months before buying habits normalize. Meanwhile, demand for consumer goods and services is seen to drop by 40 percent, post lockdown. Most SMEs will not survive given high rental rates, expensive labor costs and high utility costs.
The most effective way government can assist SMEs is by mandating commercial space lessors to reduce their rent by 40 percent or charge a straight percentage-of-sales rental for a period of six months; by freezing minimum wage increases for one year; by not mandating SMEs to advance DOLE’s P5,000 subsidy; by mandating banks to grant a three-month loan amortization holidays to SMEs. These are forms of support that will matter to fledgling businesses.
The dire situation of SMEs is a ticking time bomb. At this point, government still has the time to formulate a viable rescue plan for the sector. Let’s hope it does. The last thing we want is for them to formulate a plan only after the SME bomb explodes.