Metro Manila (CNN Philippines, July 27) — The Asian Development Bank wants to sustain wage subsidies for micro, small and medium enterprises even if quarantine rules have been eased as they face a funding crunch which could leave workers unpaid.
ADB published on Monday the results of a survey conducted from April 28 to May 15 to gauge the impact of the COVID-19 pandemic on the business community. The poll covered 2,481 firms covering all sizes and industries.
Across the board, SMEs said cash was their biggest problem, with a third of respondents saying they already ran out of funds within the first month of the enhanced community quarantine rules which led to temporary business closures. Meanwhile, 36.5 percent of firms interviewed said they expect their liquidity to dwindle in the next one to three months and 17.4 percent said they will have no more money after six months.
Barely a tenth said they had enough savings and liquid assets to sustain operations. Even a fourth of large firms said they had cash constraints.
“The most significant financial problem for enterprises during the COVID-19 pandemic is paying staff wages and social security charges,” ADB said.
It noted that half of the businesses did not pay salaries after the lockdown took effect mid-March. Around 29 percent implemented pay cuts, while a fifth said wages were unchanged.
Microenterprises, which employ up to nine workers, were the hardest hit, although some managed to raise salary payments during the period based on product demand. The short-term solution was to implement leaves or cut work hours per week. On average, about two full-time workers and 1.4 part-time employees were laid off in April.
Work from home arrangements were likewise not ideal for most businesses, with 57 percent of firms saying it wasn’t ideal for any of their laborers.
The ADB suggested that government sustain its Small Business Wage Subsidy Program, a measure requested by many SMEs. “It would be useful to extend the program, particularly for sectors hardest hit by the downturn, notably in retail, transport, and tourism,” the report pointed out.
Tax deferrals and more accessible loans would also help businesses recoup losses, while another suggestion was to help these businesses transition to online sales.
Surveyed firms also reported heavy reliance on own funds or retained profit to keep business going, followed by borrowing from family, relatives, and friends. Only a tenth took loans from banks for working capital, while about 9 percent received government funding support.
ADB said 53 percent of firms would not be able to borrow ₱50,000 within a week if they needed to. “These figures suggest that overall credit constraints are becoming more binding even for a relatively small amount of liquidity,” the report added.
The Bangko Sentral ng Pilipinas reported separately on Monday that banks tightened the standards they used in granting loans to companies during the second quarter, the first time in more than three years.
The ADB survey also revealed that about 80 percent of businesses saw sales plunge at the height of the lockdown. Wholesale and retail trade saw the biggest drop at 22.4 percent, followed by accommodation and food services at 15.8 percent and other services at 14.1 percent. However, some 38 percent of retail establishments enjoyed a boost “due to the need for essential goods” after the ECQ was implemented.
Groceries, which were among the few stores that stayed open during the lockdown, saw long lines and loaded carts as people stocked up on supplies.
Half of the firms which saw lower sales values were from Metro Manila, followed by Calabarzon at 12.7 percent. These two account for two-thirds of the national economy, which Finance Secretary Carlos Dominguez III wants to shift to more relaxed quarantine rules as soon as possible.
Firms are also unsure about their path to recovery, with 51.5 percent saying they can’t tell when they can bounce back. About 30 percent said it will take more than three months to regain business activity, 14.6 percent said it will take between one to three months, while the remainder think they can manage a rebound in a matter of weeks.
The government has relaxed quarantine restrictions all over the country except for Cebu City, which saw a spike in infections in June. There’s a threat to also revert Metro Manila to the tightest quarantine status due to a spike in new COVID-19 cases, although economic officials earlier said the country can no longer afford a second lockdown.
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