How businesses can survive COVID-19

In the last column I wrote about the need for stimulus and food availability to help ease the concerns and boost the economy as it faces the threat of the COVID 19 pandemic.

As news reports and commentaries show just how the disruption has created a global recession, G20 nations are promising a $5-trillion dollar stimulus to help the global economy.

The deeper this recession goes, the more difficult it will be for us to crawl out, and achieve sustained growth.

What this means for many businesses especially in the Philippines has already been written: job losses in the millions, thousands of businesses possibly going under, especially the 5.4 million jobs in tourism, and 3.9 million in construction and realty. This week we focus on more imperatives for business survival and recovery.

Government support around the world is temporary

As I wrote previously, any government subsidies for job losses or other forms of support, even for rich countries will be temporary and not enough and not forever. Thus, local businesses must use them wisely to ensure survival in the long term, to recover over a six month period until the Christmas season when higher purchases are expected.

In the post-quarantine period, businesses will have to plot a recovery path – when revenue will need to surmount costs to create the financial space to gain stable working capital for operations.

Win-win arrangements with banks, landlords, and clients

To do this, win-win arrangements between banks and borrowers, landlords and tenants, suppliers and clients will need to be done to ensure everybody’s survival in the next several months.

Moreover, restructuring of loans and bridge financing will be needed to reduce interest rates. Since the BSP rates have reduced significantly to about 3.25%, the interest on these loans will need to drop as well. This will keep the financial system alive to help other businesses survive.

This is a win-win for the banks, that will have grapple with thousands of foreclosures and loan defaults, which they cannot afford to handle. In the past banks already had to spend more money just disposing of all the acquired assets.

Strategic initiatives: Boost opportunity outside Metro Manila

It is obvious that the enhanced quarantine in Luzon will cause a lot of dislocation. After all, 60% of our GDP is created by Regions 3,4 and NCR alone.

It is essential for the national economy that those regions less hit can continue.

To illustrate, Business Process outsourcing companies have shifted their job loads to Davao where employees can still travel to call centers, or are housed in nearby hotels. The Banana, industry of Mindanao continues to export to meet rising demand now that east Asian countries like China and South Korea are recovering. These must continue.

A distribution of opportunity outside Metro Manila will need to continue at a faster pace. To do this, ports, airports and other connectivity infrastructure needs to be built. This is where the governments Build Build Build infrastructure program will need to proceed.

With this, The CITIRA bills provisions to create Incentives Review Board will be necessary to provide the right kind of incentives to complement the better infrastructure to create attractive investment sites outside Metro Manila.

Lastly, support for business organizations and efforts to lure investments will be necessary to promote regions outside Metro Manila as investment destinations. Perhaps LGUs can work with local chambers of commerce to boost investment promotions.

All combined, these measures will protect as many jobs and sustain enterprises through this.

Stay safe everyone!

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