Bumpy road to recovery

The increases in 2023 of statutory contributions to SSS, PhilHealth, and Pag-IBIG will be beyond the capacity of MSMEs which are still in life support

Almost in unison, world leaders predict an upward trajectory after the near-fatal plunge of the economy from the Covid-19 and the senseless policy of excessive large-scale lockdowns.

Business shares the same expectation hoping policymakers and union leaders will put on hold cost hikes until the brewing headwinds subside.

The tripartite partners are aware of the ruinous impact, especially on micro, small and medium enterprises or MSMEs of the triple threat looming in 2023.

First, the pending wage increase order. Second, the hike in contribution to state welfare service agencies namely, Social Security System, Philippine Health Insurance Corporation and Pag-IBIG Fund. And third, the unrelenting inflation.

The expected wage increase order will be a dampener for many enterprises, especially the micro-businesses, many of whom were permanently shuttered while the survivors are still in intensive care after the two-year economic disaster.

Global inflation fueled by the Russia-Ukraine war puts at risk enterprise viability.

The increases in 2023 of statutory contributions to SSS, PhilHealth, and Pag-IBIG will be beyond the capacity of MSMEs which are still in life support trying to restart, recover and rebuild their businesses.

Major business organizations like the Philippine Chamber of Commerce and Industry, Philippine Exporters Confederation Inc., and Employers Confederation of the Philippines have appealed to President Ferdinand Marcos Jr. to use his authority under Republic Act 11548 of 2020 to defer increases in SSS contributions for the duration of the State of Calamity until the economy is in stable condition.

Let us look at the urgency of these increases one agency at a time.

Take SSS, it claims the one percent hike which will be absorbed fully by employers will lengthen the life of the fund by 22 years until 2054. This could be a self-inflicted loss as it might wipe out the big source of its revenues, the MSMEs. It ignores the difficult reality at the enterprise level at this time.

Besides, the one percent increase in SSS premium together with the upward adjustment of the salary base will effectively increase the present contribution by 62 percent.

In contrast, the Pag-IBIG board deferred the approved staggered increase of its P100 monthly contribution (P50 in 2020 and another P50 in 2021).

Pag-IBIG was able to delay such an increase as it posted a decent profit and healthy cash flow during the pandemic.

It can be recalled that way back in 2010, Pag-IBIG proposed to double the P100 monthly contribution but was prevailed upon to instead double its 8 million membership base and improve its collection rate of 65 percent on loan receivables.

Pag-IBIG has since then added another 6 million new members and improved the collection rate to 95 percent. It was able to expand benefits like emergency assistance during calamities-natural and manmade, reduce the interest rate on its socialized housing, and introduced new multi-purpose loan facilities.

It was able to redeem a long-outstanding Government Service Insurance System bond of P5 billion which was an investment in the Pag-IBIG housing portfolio.

The interest rate for socialized housing loans to its members was reduced.

Since 2010, Pag-IBIG posted increasing annual net income, 70 percent of which consists of members’ dividends.

It has earned several excellence awards from several prestigious institutions.

It received for several years unqualified audit reports from Commission on Audit, the state auditor.

All these were achieved by Pag-IBIG without raising the monthly contribution that was pegged at P100 since its creation on 11 June 1978 or 44 years ago.

The business hopes that Pag-IBIG can sustain its remarkable performance and again defer the scheduled increase in membership contribution.

In the case of PhilHealth, it will need massive housekeeping and image building to justify any mandated increase in monthly contributions. All its past accomplishments are flushed down the drain by the reported scandals like the P10 billion unpaid obligation to private hospitals and the unresolved P8 billion contract with Pharmally at the height of the pandemic.

As this column was being written, the morning papers reported that PBBM, thru his Executive Secretary, deferred indefinitely PhilHealth’s plan to raise contribution due to the prevailing sluggish economy.

Undeniably, raising contributions is the quickest and easiest way to extend the life of the fund and perhaps expand benefits but it inflicts untold damage to the captured enterprise members, especially the MSMEs.

An increase in contributions may be inevitable at some point but it should be properly calibrated for the right amount, at the right time, for the right reason.

At the same time, it can conveniently mask inefficiencies or irregularities in the management of funds.

An increase in contributions may be inevitable at some point but it should be properly calibrated for the right amount, at the right time, for the right reason.

The labor groups could also temper their demand for an unaffordable wage increase at this time.

One road obstacle is removed with the indefinite deferral of PhilHealth’s planned increase.

Business is confident that Pag-IBIG, on its own, will again defer its planned increase in contribution.

The wage board is requested to be cautious before issuing a wage order.

The economy is still in a fragile state and it needs the collective support of all stakeholders to make the road toward full recovery less bumpy.