By Cai Ordinario, March 23, 2020; Business Mirror

http://businessmirror.com.ph/2020/03/23/msmes-import-export-bloc-need-%e2%82%a733-2b/

To cope with the coronavirus disease 2019 (Covid-19), micro-, small- and medium-sized enterprises (MSMEs) as well as large firms that export and/or import would require a bailout of P33.2 billion this year, according to estimates by economists from the University of the Philippines.

In a discussion paper titled “Vulnerable to the Virus: Globally Oriented Manufacturing Firms at Risk From the Spread of Covid-19,” UP School of Economics assistant professor Karl Jandoc; UP Center for Integrative and Development Studies Research Associate Adrian Mendoza; and Representative of the 2nd District of Marikina Stella Luz Quimbo said this estimate assumes that government will shoulder 12 percent of firm revenues (as profit) for a month.

The package covers P693 million for purely exporting MSMEs; P8.7 billion for purely importing MSMEs; and P23.8 billion for large firms that simultaneously export and import.

“While large firms are able to withstand, to some extent, the Covid-19 shock, SMEs do not have such capability,” the economists said. “These SMEs export food and food products which are highly perishable and more sensitive even to short-term vicissitudes in global demand.”

The economists said they examined firms that export or import from countries with the greatest number of detected cases. These countries are China, Italy, Iran, Republic of Korea, France, Spain, Germany, Japan, the US and Switzerland.

These countries comprise nearly 95 percent of the 181,493 detected Covid-19 cases globally. With this, economists said this increases the probability of lockdowns, travel bans and other policies that could slow down economic activity.

The economists found that export revenues from Covid-19 countries reached $39.3 billion in 2019, accounting for 55 percent of total exports. The value of imports from Covid-19 countries reached $56.4 billion or 53 percent of total import value in 2019.

With this, they estimated the economic fallout from Covid-19 may affect 494,679 workers from globally oriented manufacturing sector (GOMS) firms.

The 345 MSMEs that are pure exporters employ 19,216 workers, while the 1,473 purely importing MSMEs employ 103,855 workers.

The 1,451 large firms that export and import employ 371,608 workers, or 75 percent of the potentially affected total number of workers.

“For SMEs, it is possible that a lockdown on Covid-19 countries will affect these firms even in the short run. Compounding the problem is that these SMEs may not have the capability of large firms, e.g., access to credit, to withstand an economic shock such as that engendered by Covid-19,” the economists said.

In order to finance the bailout, the economists said policy measures implemented by other Covid-19 affected countries may be adopted by the Philippines.

These include loan and credit guarantee to ensure credit availability to firms done in Canada and Thailand; temporary wage/payroll subsidy to prevent layoffs implemented in New Zealand; and deferment of income-tax payments without penalties or interest, which is also being implemented in Canada.

The measures also include special credit window/facility for business through the banking system implemented in India; loan repayment holidays/loan restructuring from government financial institutions and private banks in the United Kingdom; and providing employment maintenance where the government partially covers the cost to pay workers allowances from leave of absences, implemented in South Korea.

The economists said another policy option is to reduce tariffs to cut the cost of imported inputs.

“We note that HB 6606 provides for a separate fund for displaced workers amounting to P15 billion. Based on rough estimates, providing displaced workers in GOMS an amount equivalent to minimum wages for a month can be financed through this proposed P15-billion fund,” the economists said.

In House Bill 6606 or Economic Rescue Plan for Covid-19, Quimbo said the stimulus package will be the main economic measure to address the current public health emergency.

She said the monies shall be appropriated out of any funds in the National Treasury, as additional funding and budgetary requirements for the fiscal year 2020.

The bill provides for the government to allocate P108 billion for a fiscal stimulus package, broken down into: P43 billion for assistance and promotion of the tourism sector; P15 billion for unemployment assistance; and P50 billion for assistance for business, particularly MSMEs, which includes loan packages and subsidies.

The bill also creates the Inter-Agency Task Force for the 2020 Fiscal Stimulus Package to manage the use of the fund. On the task force are the National Economic and Development Authority, Department of Tourism, Department of Labor and Employment, Department of Trade and Industry, Department of Finance, and Department of Budget and Management.

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