DESPITE imposing one of the world’s longest and strictest lockdowns, coronavirus cases in the Philippines have now surged past 230,000, with Indonesia eclipsed as the region’s biggest outbreak.
The virus resurgence is said to have been fuelled by testing gaffes and failures in quarantine protocol in the face of over 100,000 overseas Filipino workers arriving back home after losing their jobs.
The Philippines reopened its capital although new cases were still growing by up to 1,000 every day.
As people returned to offices and families gathered again, infections surged 500% in over two months of easing before the government re-imposed the lockdown in August.
The initial lockdown was from mid-March to the end of May.
Philippine Ambassador to Malaysia Charles C Jose speaks to StarBiz about the remedial measures taken by his government to kickstart the economy and the huge effort to save the lives and jobs of millions of Filipinos.
Q. The Philippines is being severely tested by the Covid-19 pandemic, with your economy shrinking by a record 16.5% in the second quarter. Can there be a rebound?
Prior to Covid-19, the Philippines was one of the fastest growing economies in Asia, with GDP growth of 5.9% in 2019. This allowed the country to face the challenges of 2020 from a firmer economic position.
The World Bank expects the Philippines’ economic growth to return to above 6% in 2021 and 7% in 2022.
This is possible due to the Philippines’ strong economic fundamentals and sufficient fiscal space, which places us in a favourable position to support the government’s economic recovery plans. Increased economic activity surrounding national elections is also expected to boost growth in 2022.
While the second quarter decline in GDP is substantial, we are already seeing signs of recovery. Manufacturing production and trade have taken a U-turn as the pace of decline slows. For instance, our volume of production index in June has already recovered to -19% since the April lows of -39%.
Similarly, exports improved by from -50% in April to -13% in June, while imports recovered gradually from a contraction of -165% in April to -25% in June.
Increasing urbanisation, a growing middle class and a large and young population helped create strong consumer demand in your country.
Q. How confident are you that these fundamentals will be able to lift the Philippines out of its quandary?
For several years, strong domestic consumption helped power Philippine GDP growth in a consistently upward momentum pre-pandemic. This is due to a strong and growing middle class comprising of young and educated people, with increasing productivity and wages.
Household incomes are likewise buttressed by consistently growing overseas remittances. However, our strengths extend beyond demographics.
The Philippines has strong fundamentals built over decades of structural reforms.
Over the past two years, we have been implementing progressive tax reforms that created fiscal flexibility for the government, and increased the net pay of wage earners to further support consumption. We have also improved the ease of doing business to help the private sector flourish.
Finally, we have ensured that the country has abundant external reserves and the lowest public external debt in the East Asia and the Pacific region, which provide monetary policy plenty of room to inject the necessary liquidity into the economy.
As is the case for most, if not all, countries in the region, the pandemic has caused a slowdown in trade, investment, tourism and remittances as well.
Q. What is the prognosis for the near future?
Like most countries worldwide, the Philippines’ tourism-related activities such as transportation, hotels and restaurants are among the worst hit sub-sectors in the second quarter. This is to be expected, considering the nature of the pandemic and the measures implemented to suppress its spread.
However, we are seeing signs of growth in multiple sectors despite the extremely difficult external and domestic environment. For instance, ICT, banking and finance, public administration and agriculture showed positive growth in the second quarter.
Remittances have likewise rebounded.
According to the Bangko Sentral ng Pilipinas, our central bank, Filipinos abroad sent home US$2.737bil in June, a 7.6% growth compared with the same month last year, ending a three-month drop at the height of the global Covid-19 crisis.
The increase was brought by a 14.2% rise in remittances from land-based workers, even though money sent by seafarers remain sluggish due to cancelled cruises and reduced world trade.
Q. How confident are you in your globally recognised competitive workforce, in their ability to help reinforce the growth momentum?
We have confidence in our young and educated talent pool as the proponents of economic growth. The Philippines is perfectly placed in what is called the “demographic sweet spot.” Filipinos are younger than most of the rest of the world, with a median age of 23.1.
This translates to very young, competent and robust human resources who are in the early stages of their working and productive years, and will only gain more productivity as they mature and gain more skills for decades to come. Our people are highly educated and proficient in English. Our universities and colleges produce over 700,000 graduates per year.
As workers, Filipinos are also known worldwide for highly desirable professional traits such as strong customer relationship skills, trainability and fast learning curves, adaptability to different cultures, and high levels of commitment and loyalty to their workplace.
Q. According to reports, over 100,000 Filipino overseas workers arrived back home after losing their jobs. What is being done to help them?
The Philippine government is exerting all efforts to help displaced Overseas Filipino Workers (OFWs) during these difficult circumstances. OFWs who have opted to return to the Philippines are provided, free of charge, with repatriation assistance which includes provision of chartered flights, Covid-19 tests upon arrival, and food and accommodation while waiting for the test results, and transportation back to their provinces.
The government also provided a one-time US$200 cash aid to OFWS both overseas and those stranded in-country, and has already disbursed more than US$46mil to 233,000 OFWs as of Aug 8.
We understand that many displaced Filipino overseas workers may take some time to return to their jobs, or find new places of employment.
As such, the government has prepared programmes to generate alternative sources of livelihood, such as financial grants and loans to start new businesses, as well as training programmes to retool and upgrade their skills.
Q. There are more than 90,000 micro, small and medium-size (MSMEs) companies which make up the backbone of the Philippine economy. What measures have been taken to assist them?
Our 947,000 MSMEs employ nearly 7.8 million workers in the country, and they serve as an integral provider of jobs and income for Filipinos.
This is why a substantial portion of the Philippine government’s US$12.27bil fiscal package is geared towards supporting small businesses. Support to MSMEs include credit guarantees for small businesses, and support to the agriculture sector. Financial assistance will also be provided through specialised micro-financing loans and loan restructuring.
In addition, the central bank has also announced a series of regulatory relief measures intended to encourage banks to provide financial relief to their borrowers, for example a temporary grace period for loan payments, and extend loans to MSMEs.
For instance, the central bank allows loans to MSMEs to be counted as part of banks’ compliance with reserve requirements, temporarily reduce their credit risk weights to 5%, and assign zero risk weight to loan exposures guaranteed by the Philippine Guarantee Corp.
The Philippine legislature is also in the process of passing a US$3.3bil pandemic relief bill that will buttress the existing fiscal resources deployed to fight the pandemic.
This includes a provision for capital infusion to government financial institutions (GFIs) to allow them to lend to more small businesses and help smaller banks.
The total support from both fiscal and financial resources will allow GFIs to leverage the initial capital infusion to provide more credit guarantees, more wholesale banking services to help smaller banks and microfinance lenders to help their clients, and more lending to small businesses.
The Philippines imposed the longest, strictest Covid-19 lockdown in South-East Asia, from mid-March to the end of May.
Q. How was the experience for your people?
The Philippines reported its first cases of local transmission on March 7,2020. The following day, the government issued a state of public health emergency and placed the country under Enhanced Community Quarantine (ECQ). This suspended classes in all levels, halted mass public transport facilities, prohibited mass gatherings and imposed stricter home quarantines.
Subsequently, we implemented community quarantines in other areas, mobilised healthcare facilities and resources, and enforced social distancing protocols within communities.
Similar to other countries, the most difficult aspect for Filipinos was the impact on businesses and livelihood. With 75% of the economy shut down, many establishments had to close, affecting incomes and wages.
To help Filipinos with economic difficulties during the lockdown, the government deployed a US$12.27bil fiscal package, 44% of which went to social amelioration programmes such as household subsidies, wage support and other measures for vulnerable Filipinos.
Despite the impact on the economy, we believe the decision was necessary to save lives.
The lockdown saved an estimated 59,000 to 171,000 lives and prevented an estimated 1.3 to 3.5 million cases.
Had the lockdown not been implemented, an estimated 68,000 severe and critical cases at the peak period would have overwhelmed the healthcare system.
Q. There is a second lockdown in the capital and nearby areas. What is the feedback you are getting?
Over the past few months, the government has been calibrating the community quarantine towards a targeted area approach. As areas improve, their quarantine guidelines are relaxed and gradually normalised.
Meanwhile, cities and provinces with higher incidences maintain tighter lockdown regulations. The government made the decision to tighten community guidelines once again in Metro Manila.
This was necessary to manage the infection rates in the most densely populated area of the country, as well as to prevent overburdening the healthcare system.
According to research experts from the University of the Philippines, Metro Manila is getting close to flattening the curve, noting that the region’s R-naught or basic reproduction number has dropped from 1.5 to 1.15, meaning each infected individual infects an average of 1.15 other people.
As the situation improves, the quarantine guidelines in Metro Manila will be recalibrated accordingly.
Q. How is the healthcare system being reinforced to ensure that hospitals are able to cope with the pandemic?
The government deploys the Test, Trace, and Treat (T3) strategy. First, testing capabilities were buttressed. From just one testing laboratory at the start of the pandemic in January 2020, we have ramped up to 107 accredited testing laboratories nationwide conducting an average of 27,800 tests per day, the highest in South-East Asia.
We are also striving to ensure that the healthcare system does not get overwhelmed.
Hospital bed occupancy rate is at 49.5%, with only 28.2% of ventilators utilised. We complement hospitals with community-managed recovery facilities to accommodate asymptomatic and mild cases, so that hospitals can focus on treating more severe cases.
The government has thus far allocated US$1.11bil to buttress the healthcare system, hire more medical workers and procure equipment and PPEs. This will be further supplemented when the new Bayanihan 2 legislation is passed, which includes provisions for even more fiscal resources to support the healthcare system, enhance testing, tracing, isolation and treatment, and support critically affected sectors and workers in ECQ areas.
Q. In June, your government announced the approval of 12 new economic zones to be managed by the Philippine Economic Zones Authority or PEZA. What are some of the key incentives to be provided to investors?
The government has approved a dozen new economic zones which are expected to bring in around US$130mil worth of investments into the country. Of the 12, nine are information technology (IT) centres, one IT park and two manufacturing ecozones.
In line with the government’s thrust to spread out development to more parts of the country, 33% of the new ecozones will be in the Visayas and Mindanao, while the rest are in Luzon. There are over 400 economic zones in the country with over 4,500 companies, which directly and indirectly employ 6.5 million Filipino workers.
We are confident that the new ecozones will provide even more jobs, as well as elevate the technical skills in the country through the innovation parks.
Investors operating in the ecozones are eligible to receive simplified import-export procedures, income tax holidays and other non-fiscal incentives. Above these, investors have more incentives to look forward to.
A new legislation called the CREAT Act is proposed to be the largest stimulus programme in the country’s history.
Through the Act, the government will immediately reduce the corporate income tax rate, as well as enable the government to be more flexible in granting fiscal and non-fiscal incentives to attract high-value foreign investments.
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