How to Help the MSMEs post-Covid19

It came out on April 11, 2020 at the GMA News Online website that House Ways and Means Chairman and Albay 2nd District Representative Joey Salceda proposed a P45-billion wage subsidy scheme for some six million workers in micro, small, and medium enterprises (MSMEs) hit by the Luzon-wide enhanced community quarantine.

The lawmaker, citing his note to the President, said that a payroll support program would likely be necessary to support MSMEs that faced liquidity issues in the wake of the enhanced community quarantine “as well as their workers, who are at risk of being terminated if these MSMEs are unable to pay their wages and maintain operations.”

Well, that and/or the BIR to refund to the MSMEs their prepaid taxes that have accumulated in the hands of BIR as excess withholding taxes (WHT). These monies are actually booked as assets in the MSMEs balance sheets, but they cannot use these financial assets because it is hard to refund them from BIR. The liquidity will help in the post-Covid19 recovery of MSMEs, so it should be seriously considered. Doing this veers away from dole-out, and cleans up the accounts payable of government to MSMEs. 

POST-COVID19 - THE URBAN PLANNER’S ANGLE TO THE TWIN PUBLIC HEALTH CRISIS-ECONOMIC CRISIS DILEMMA

As an intermittent economist and spasmodic physical/urban planner, I keep thinking about how our country can be cushioned from the massive economic slump that awaits us at the end of this fight against Covid19. As I discussed last time, our government is giving priority to public health solutions, and rightly so. But we know that we are likely in a situation now where the cure can just be as painful (or deadly) as the disease, figuratively speaking. A prolonged lockdown will slowly kill our economy, unless we find ways to keep it grinding.

What gives me hope is that we are an archipelago. Our islands are natural enclaves, and many have, through the years, developed some degree of self-sufficiency especially those that continue to be literally off-grid (power-wise), and still grographically separated even with the advent of transportation technologies.

I keep mentioning this word: enclaves, because this is a key, operative word in our recovery. Enclaves can be islands or areas that have enforcible boundaries like SBMA, or Clark, the peninsula of Bataan, the mountain city of Baguio, the Northern end point of Cagayan (Sta. Ana), etc. Enclaves are useful both in 1.) keeping Covid19 out, or 2.) trapping Covid19 in, depending on the situation of the enclave.

Let me cite a specific example, and let me use my home province Catanduanes, for this purpose. According to news it had one suspected case, a man who apparently boarded a bus from Pasay to Virac, and died of heart attack in the hospital from 3 weeks ago. But since then no one else has been deemed a suspected case, so it appears that the Island Province is clean of Covid19 (good for the sake of this example).

If the LGU of Catanduanes bites the bullet it can choose to implement a full lockdown with a policy to create an enclave to keep Covid19 out. They have to shut down their ports and airports from the rest of the country. They have to feed themselves out of what they have. They can fish, they can plant staple food, they can nurture their own animal farms, and so on. They will have no hotdogs, sardines, pack of noodles, chocolates, etc. So they will have to eat healthy food for a change (bit of levity there). But they also have to care for their own sick for the time being, so they will have to rely on homegrown, in-situ healthworkers.

These enclaves will be like small economic engines that will keep grinding while the big engine is unable to run efficiently. They must endeavor to produce surpluses so they can send them out. In the case of Catanduanes, out to the Bicol Region thru Albay or CamSur.

Meanwhile, upon success in flattening the local curve (19 cases today), the Bicol Region can also isolate itself from the rest of Luzon by agreeing with Quezon about creating a well-managed checkpoint at the border of Calauag, and closing its port in Sorsogon from entry of people/goods from Allen, N. Samar. Masbate as an Island can do the same as Catanduanes. On the other hand, the whole Island of Samar can also group together (Northern, Western and Eastern Samar) and create an enclave by closing off the port in Allen, the San Juanico Bridge, and other trading ports towards CARAGA. But I digress.

Later, the whole Bicol Region can regroup and create synergy so a larger regional economic engine can be made out of the smaller provincial engines.

The same can be done for Peninsular Bataan, which can regroup with SBMA later. Region II can isolate itself by closing off Claveria from Ilocos Norte and by making a checkpoint/barrier somewhere in Nagcarlan and in Kayapa (where the Ambuklao Road from Baguio/Benguet connects with Nueva Vizcaya). Baguio City will have to close off Kennon Road, Rosario-Pugo/Marcos Highway and Naguillan Road. Ifugao needs only to close off the road from Bagabag, I think.

Other places like Bohol, Guimaras, Panay Island, Mindoro, Sta. Ana, Cagayan, Aurora, the Bondoc Peninsula, etc. can also create their own enclaves and like the Catanduanes example, focus on food production and export surpluses to the Covid19 hotspots/provinces without any intention of importing.

By now you would have already figured out that the policy of creating enclaves is not just a public health policy, but is also about creating food production centers to keep feeding the country, to keep producing raw materials, to keep creating surpluses as economic fodder for the larger economic engine and keep it from running into the ground. These enclaves will also be able to keep their purchasing power, and lead the consumption-based path to full recovery once the Covid19 is eradicated.

In Metro Manila, the goverment should pass a strict policy to allow Covid19-free natural enclaves like gated subsivisions and condominium complexes to disallow any move-ins without risk of being hauled to court. People should stay where they are right now and not move residences. Hotels should be commissioned to house healthworkers, with full cost charged to government’s account. They should not be going home to residential areas everyday and put the lives of their families at risk. They should not waste time commuting while they can use the time better by resting in hotel rooms. They are “prized possessions” of the country and must be kept in tip-top shape. Meanwhile, hotel workers should be treated as frontliners and should also be housed in the same hotels until the outbreak is contained.

There are aspects to the problem at hand that can benefit from the physical/urban planning profession, and we have high-caliber planners here, say, from UP-SURP. We should get some of those guys into the TWGs that feed policy ideas to the IATF.

My 2 cents.

Covid19 - Raising Funds for the Social Amelioration Package

Since we have been told that government”s cash position is low, we need to pitch in ideas on how to source funds for the social amelioration package. I recall there apparently is an unpaid Php50B taxes from POGOs. Now may be a great time to issue collection notices for it, so government can borrow Php50B more from Bangko Sentral against that AR.

Covid19 Lockdown - Government can do Gamification

As the key is still to keep people in their houses, I am reposting this mindmap to mention that a small box in here says “GAMIFICATION”. It means that government can use elements of game-playing on national TV to keep people at home because they have to read codes flashed on the TV screen to confirm that they won. The prizes can be from government or from private companies, and TV personalities can be asked to volunteer and host these “games”

Covid19 Pandemic: The Twin Public Health-Economic Crises Dilemma

By now, many of us are already aware that there are 2 kinds of crisis we are facing: a public health crisis and an economic crisis. And there is an inverse relationship between the effects of available solutions to combat Covid19 as a public health crisis and the looming economic crisis. That means, obvious solutions such as social distancing, total lockdown/community quarantine, etc. are the right medicines towards the public health crisis, but will put a lot of pressure on the economy as these measures slow down the whole economic machine. The dilemma lies in the fact that government needs to keep collecting taxes as it needs to fund with cash the social amelioration package that it needs to effectively roll out to keep people out of the streets. But as there are no economic activities, what is to tax? It can of course borrow from the public l thru bonds or from Bangko Sentral as IOU, or borrow from IFIs. Whatever government does, it has to somehow try to keep the economic engine running lest it grounds to a full halt.

While on lockdown, people will still need to eat, so they need to buy food, medicines, and other basic needs like utilities. With the social amelioration package they will have some purchasing power. The problem however is that the lockdown’s physical aspect cuts off food producers from consumers. It also cuts off raw material suppliers to food manufacturers, and prevents medicine and other basic stocks from reaching the shelves. It can also prevent coals from reaching power plants, although the renewables will keep producing power albeit intermittently, i.e. hydros will keep running as long as rivers do not go dry come summertime. There is also an effect on mobility of workers in food production, manifacturing and in the various utlity subsectors. So the efficiencies will also suffer.

The key to break the impasse is for government to be more creative. That is, to try to impose the public health solutions but creatively keep the economic machine running even just on low gear. Now, it easier said than done, so I will try to give a few concrete examples:

1. Create “food highways” out of the armed forces. One of the scares often cited by exponents of full lockdown is that our citizens do not have the discipline. But the soldiers are our most disciplined lot. They will wear PPEs when told. So let them be our transportation backbone. Anyway, this is, by all definitions, a war. 

2. Healthworkers should work and many if not all will work, but they need mobility in order to work. Moreover, suppliers of PPEs need to also keep making their products continously. Government can create a PNP P2P transport system for both. Let our cops drive police cars and motorbikes to ferry healthworkers (wearing proper PPEs). And also transport PPE supplies and donations. 

3. Supervise private food/medicine/basic goods manufacturing companies in the creation of sterile workers enclaves. These enclaves are like free accommodations for workers that are shielded from possible viral contamination by ensuring no interaction with the “outside world”. This concept can be done also for construction camps so infra projects can continue especially in places that are far from Covid19 hotspots. 

4. Government should focus on cordoning off hotspots so the public health policy can slowly shift from full lockdown (keeping the virus out) to trapping the virus transmission within enforceable borders (keeping the virus in) so that the rest of the country can reclaim normalcy. 

5. Needless to say, supermarkets, groceries and banks need to be open. So workers/employees for these services should continue to work. But government needs to give guidance to supermarkets and grocery stores to hire people based on closest proximity to avoid long commutes. Hire people from next door. Banks should shuffle staffs so that they are reporting to the branch closest to them.

Any more creative ideas?

The New Normal in Post-Covid19 Era

Two buzzwords will be trending in a couple of months from now.:"New Normal," which is not that new, and "Post-Covid19," which is a novel word. :-) Let me try to use both.

Businesses will now be more attuned to working from home (WFH) for certain activities, especially now that they have an ample dry run during the ECQ, and now have the knowledge and experience as to what will work and what will not.  Bonuses will also shift from cash to faster internet/wifi connections at home,to ensure that employees are investing bonuses towards better resiliency. Home offices might even become fully-funded by employers.

Consumers have also tried and tested which online and delivery companies are reliable and resilient during crunch time. They also became aware of the heartaches that come with wrong deliveries, billed-to-credit-card-but-not-sold-out woes, and the list goes on. They would have become online-buying savvy already, and why go back to the old ways if one can have groceries delivered to his/her doorstep without having to interrupt online yoga.

As there will be a new normal for businesses and consumers, there should also be a new normal in government, especially in the aspect of national budget allocation. Obviously, in the post-Covid19 era, we should be ushering in a new normal of giving public health the lion's share rather than the current bias towards intel funds. Governance concepts will have to be revisited, and questions whether senators are expected to do repacking of goods during crisis will have to be answered by candidates. 

Ah. Ms. Universe Q&A will definitely go into a new normal as well, Gone are the days wherein any answer bordering on the essence of a woman will win the crown. The Ms. Universe will now be expected to have knowledge of the science of viruses, the dynamics of human-to-human transmissions, and  data analytics towards flattening the curve.

Post-Covid19 Recovery Planning

I will hazard a guess that a new PPP format of infrastructure investments will be our path to recovery post-Covid19. FDR's New Deal in the US worked before as a purely government-led undertaking, and it worked. But government this time will be hard-hit and will have empty coffers.

Big businesses will lead but the middle class which holds a significant amount of savings when pooled together will form new infra companies, and entering into a new PPP format construction deals will help us bottom out. This will fuel grassroots employment, restore buying power and kickstart a consumer-led, consumption-based upswing in GDP. This is my fearless forecast.

The key therefore is for the NEDA and the PPP Center to be creative in putting together a new, out-of-the-box PPP contractual deal that will attract the middle class to invest.  It is not impossible to put together, just a matter of forward-thinking, given the pressures of the current situation.

Here is one idea. New companies can enter into LGUs to do PPP projects, using the net present value of future taxes as the LGU's counterpart in the PPP venture, a case of securitizing future income from taxes. So, the future tax is the LGU asset to be securitized (backed by LGU Board Reso of pre-allocation of IRA, for example), and there is only one borrower (the LGU) and there is only one taker/investor (the business). The sticky part is agreeing on a discount factor.

The LGU becomes a part owner of the infra business, and gives stability to the deal because it will have to rest its future income from the success of the business rather than a fixed tax on both property and income of the business.

It will work. Government simply needs to provide the enabling policy.