ADB: Pandemic expected to cripple more PH firms
More enterprises will be running out of cash in the next few months, further crimping their capacity to pay their workers’ wages and their social security contributions, according to a survey done by the Asian Development Bank (ADB).
In a report titled “The COVID-19 Impact on Philippine Business: Key Findings from the Enterprise Survey” released on Monday, the Manila-based multilateral lender said the enhanced community quarantine imposed by the government from mid-March to May to contain the spread of the new coronavirus had a “significant impact on business activity” across micro, small and medium-sized enterprises (MSMEs) and large corporations.
Based on a survey of 2,481 businesses from April 28 to May 15, ADB said about two-thirds closed temporarily while 29 percent reduced operations.
“Of those remaining open, most (78 percent) operated at half capacity or less. Only 4 percent of the enterprises maintained full operation,” ADB said.Across Philippine businesses, “liquidity was a serious concern for most enterprises as working capital became scarce,” ADB said.
By the time of the survey, one-third of the respondents already ran out of cash while another one-third expected to see the same fate over the next one to three months, ADB added.“Constraints on additional credit were also binding: just over half (53 percent) could not arrange to borrow P50,000 within a week, if needed,” it said.
The ADB said firms struggled to pay their workers’ salaries and social security contributions, hence the need for wage subsidies, especially among micro and small businesses.
Surveyed companies also sought to defer their tax payments while seeking access to low-interest or subsidized loans and tax credits or reductions.
And even with less-restrictive quarantine measures in place, businesses foresee some difficulty restarting their operations.
“The most frequently cited challenge after reopening is providing face masks to workers (63 percent),” the ADB said.
For the country’s chief economist, the pending Corporate Recovery and Tax Incentives for Enterprises Act (Create) would address MSMEs’ liquidity problems. The bill seeks to cut companies’ income tax rate—currently 30 percent and the highest in the Association of Southeast Asian Nations—to 25 percent retroactively beginning July.
Citing a series of surveys conducted by the government in April, May and this month that generated responses from over 44,000 MSMEs, Acting Socioeconomic Planning Secretary Karl Kendrick Chua told RTVM that small businesses sought lower income taxes, wage subsidies and deferment of loan and rental payments.
“We are responding directly to the needs of the businesses, and one of [those] needs is lower income tax … While we are pushing for some fiscal stimulus and financial sector support, Create, or bringing down [firms’] income tax, is also important,” said Chua, who heads the state planning agency National Economic and Development Authority. INQ
