Page last updated at 07:52 UTC, Thursday, 18 June 2020 PH
Next to the $34 billion I expect from our OFWs (which means about about 1.8 trillion pesos at my forecast of P53 to $1), another large source of purchasing power will come from 1.4 million highly educated and skilled Filipino workers in the BPO-IT industry. It is very providential that this is the sector that was considered among the essential services during the EQS and workers were allowed to continue working for the call centers and other BPO and IT enterprises, many of them being able to work at home or working and sleeping at their respective offices, or accommodated in nearby hotels or apartments to save them the trouble of commuting. Even in the darkest hours of the lockdown, some of the BPO enterprises were actually hiring more workers. It is no secret that this is the industry, together with the telecommunication sector, that have benefited most from the ECQ as work migrated to the homes of both the executives and the workers and teleconferencing and webinars became the norm, thanks to such applications as Zoom, Google Meet, Streamyard, Viber, etc. In fact, I foresee that even if the developed countries will suffer from high rates of unemployment only last seen during the Great Depression in the 1930s, many corporations will continue to outsource their business and customer services to the BPO-IT sectors of countries like India and the Philippines. I estimate total revenues for this sector in 2020 to be at least at $23 billion or at the exchange rate of P53 to $1, a whopping P1.3 trillion. These two engines of growth of the Philippine economy contribute a total of 17% of GDP, big enough to make a difference especially if put into the hands of consumers.
To supplement the purchasing power that will continue to flow from the two large engines of growth, i.e. OFW remittances and earnings of BPO-IT workers, the Government is expected to do a great deal of pump priming (moving fast and strong) through the Bayanihan To Heal as One Act that has a budget of some P220 billion to be distributed mostly in cash to low-income households with the help of LGU units. Then there is the P80 billion allocated to social amelioration package (SAP) of which P 71.2 billion has already been distributed to LGUs. There is also the Small Business Wage Subsidies to be provided consisting of P5,000 to P8,000 for two months to be distributed to qualified employees via SSS and BIR platforms. Secretary of Finance Carlos Dominguez referred to a P1.17 trillion war chest to help the vulnerable sectors and front-line health workers as well as to pump prime the economy. He enumerated four pillars:
The first pillar would consist of a P306.2 billion emergency support for vulnerable groups. This amount includes P205 billion in cash subsidies to 18 million household. From the business opportunity point of view, it is expected that more than 50 percent of this amount will be spent for food purchases since 50 % of the typical budget of a poor household is spent for food, 27% alone spent on rice purchases. The first pillar also includes P35 billion worth of wage subsidies for those employed by MSMEs, which constitute close to 99 percent of Philippine enterprises in absolute numbers. This subsidy is extremely important for social amelioration because it is estimated that the total lockdown could have resulted in the temporary loss of more than one million jobs, especially among the daily wage workers.
The second pillar consists of P35.7 billion to be spent in directly fighting the Coronavirus, including health insurance of all COVID-19-related payments, special risk allowance, hazard pay and Personal Protective Equipment (PPE) for first line workers as well as for the construction and equipping of testing capacities. All these would stimulate the health-related sectors such as pharmaceutical companies, insurance firms, private hospitals and clinics, and even the local manufacturing of some of the PPEs. In fact, some of the export-oriented companies in our Ecozones have shifted to manufacturing medical supplies and health-care related products. Electronics companies producing computer chips are now focusing on making hospital ventilators and Rx Boxes, a device that monitors a patient’s vital signs. Already, we are witnessing some local entrepreneurs going into the manufacturing of face masks and protective clothing for the front line health workers. Although we may have to depend heavily at the beginning from donations of face masks and other PPEs from generous countries like Taiwan, China and South Korea. there is no stopping local manufacturers to convert some of our garments factories into manufacturers of specific PPE items in the same way that many liquor companies have shifted part of their production to alcohol used as disinfectant.
I am impressed especially with the way local breweries like Tanduay and Victorias Milling have quickly come to the rescue by shifting their production to alcohol for disinfectants, such as those of Doctor J, which will now become part of basic necessities in the new normal. Filipino households and individuals, even after the pandemic is overcome, will become a lot more conscious of frequently washing their hands and using all of these disinfectants on door locks, elevator buttons, handrails, toilets, and other hard surfaces frequently touched by human hands, etc. These newly acquired habits would augur well for our combatting future outbreaks of even the simple flu or other variants, with the consequent improvement of the productivity of our workers. Already known as among the most hygienic among people of emerging markets (we take a bath every day), we will become even more conscious of sanitation and hygiene. These habits will become very valuable assets in future pandemics for which we should be prepared. As President Rodrigo Duterte told ASEAN leaders in a recent virtual meeting, “COVID -19 will not be the last pandemic the world will face. We have to be ready for future outbreaks. We therefore have to improve and expand existing ASEAN’s mechanisms to cover public health emergencies.” Thanks to what they learned from the SARS epidemic in 2012, Taiwan was more than ready to meet COVID-19 head on.
The third pillar will involve fiscal and monetary actions to fund emergency initiatives and to keep the economy afloat. According to Secretary Dominguez, this pillar would be worth some P830.5 billion , including P301 billion or $ 6.1 billion in borrowing from multilateral lenders and bilateral partners. As mentioned above, we can borrow these large amounts because of our having maintained fiscal discipline at least during the last decade or so with our debt-to-GDP ratio among the lowest not only among emerging markets but also compared to highly developed countries like the U.S., Italy and Spain. Here it must be mentioned that although the Central Bank is moving in the right direction by lowering interest rates, monetary policy in extreme recessionary situations like the one we are experiencing would have limited effectiveness in reviving the economy. Both consumers and businesses would have limited appetite to borrow because of the loss of income and employment on the part of consumers and huge losses on the part of businesses. What is needed is fiscal “pump priming.” That is why it is good news when Secretary Dominguez assured everyone that the budget of the Build, Build, Build program will not be touched and that as soon as the lockdown is replaced by a modified quarantine, all the ongoing and planned infrastructure projects will go full steam ahead. There is no question in my mind that the P4.4 trillion budget for the Build, Build, Build will be crucial for reviving the economy once both the delayed public infrastructure projects and the new ones can be implemented in the third quarter of 2020. These projects would not only lead to the redeployment of hundreds of thousands of workers but the revival of the construction materials industry such as cement, steel and wood. I am especially interested in the integrated steel mill project whose construction should be able to take off without any more delays once more factories other than the most essential ones will be allowed to operate in a modified quarantine arrangement. Secretary of Public Works and Highways Mark Villar and Presidential Adviser for Flagship Programs Vivencio Dizon, if allowed to do their work without more interference, can guarantee that the recovery in the second semester of 2020, not to mention the whole of 2021, will have the shape of a V, and not that of U and much less that of an L.