The morning after 2020
The toughest and roughest year in many people’s lifetime is coming to a close. 2020 will go down in the annals of history as the most challenging year ever in modern history.
In my own professional lifetime, I have lived through a good number of crises. The year that
I started my career with Toyota was the year of the OPEC oil crisis that carried through the early eighties. Due to the Iranian revolution in 1979, the supply of oil dropped 7% and disrupted oil prices worldwide.
Subsequent to the OPEC crisis, the Philippines was confronted with the EDSA Revolution in 1986. Though a victory for democracy – I like to think that the Filipinos were the original architects of “People Power” that eventually triggered a rash of popular but nonviolent uprisings in parts of the world– it resulted in a period of economic malaise that saw the Philippines fade as an economic powerhouse in Asia.
A decade later, the region was embroiled in the Asian Financial Crisis, resulting from the sudden and steep depreciation of the Thai Bhat. The entire Asia experienced a financial contagion that witnessed an unprecedented flight of capital. Economies were devastated and businesses were shuttered. This was a dark period for many companies.
Yet another decade later, the Lehman shock unleashed another financial crisis that, this time, impacted more on the developed world. Asia, having learned from the 1997 Asian Financial Crisis, was able to mitigate the fall-out. But, when the developed countries like the USA, Europe and Japan sneeze, the rest of the world catches a cold. And so global trade was disrupted and economic activity in the country slowed.
In 2011, supply chain disruptions significantly impacted automotive production and sales. This was a result of the Great Japan Earthquake and Thai floods. Vulnerabilities in the sourcing of parts and components were exposed. Also, business continuity safeguards were revealed as sorely inadequate.
Still another decade later, 2020 – a volcano eruption, a global pandemic and a rash of super typhoons. Details are superfluous.
This year, the automotive market in the Philippines will likely shrink by some 40%. It is steep. Certainly, auto companies are wringing their fingers and hoping that the worst is behind them. 2021 should be a year of recovery.
The government is doing everything it can within its fiscal and monetary abilities to restart the economy while making sure that it continues to keep the Corona virus in check. Government agencies are helping various sectors to reboot. The stimulus measures included in new legislation like the CREATE (Corporate Recovery and Tax Incentives to Enterprises) bill and the 2021 budget bill are encouraging and a source of much needed optimism.
Having said that, there is continuing uncertainty on the horizon. Though the vaccine is on the way, its administration and use is still not likely to be enough to create herd immunity. Some say that the threshold for mass immunity is 70% of the population, meaning that about 70 million Filipinos will need to be vaccinated. Also, second or third wave infections are still being reported in other parts of the world.
What is needed to assure a smooth path to recovery is a stable policy framework that allows businesses to take measured steps in its efforts to revive operations. Unfortunately, it seems that consideration of retaliatory trade measures against Thailand (including motor vehicles) and the imposition of Safeguard Duties on completely-built-up (CBU) vehicles are still actively being considered. This causes auto industry players to take pause in the face of these potentially added risks to their bottom lines. Jobs and revenues will surely be affected at a time when what is needed most is added certainty.
Crises happen. How we survive each one is a measure of how we become stronger in the face of adversity. The oil crisis of the seventies provided us the wisdom to build small cars. The EDSA revolution taught us the value of local industry. The Asian Financial Crisis allowed us to build a stronger banking system. The Lehman shock, underscored our need to build domestic consumption. The Japan tsunami and Thai floods gave us lessons in creating more robust business continuity programs.
What did we learn in 2020? The COVID pandemic made it apparent that we have to do a better job in safeguarding our borders against invisible dangers, including health threats. It also taught us that we need to be so much more flexible in our ability to sustain economic activity. Digital transformation is critical in this regard. We also learned that we have to adapt and innovate. Whoever thought that work-from-home would be a viable recourse? Most of all, we realized that the power of pulling together as one country and one people is paramount. We can and we will heal, as one.