DTI chief draws disbelief at Senate after claiming more businesses during pandemic

MANILA, Philippines—While many Filipinos find themselves either jobless or closing shop, Trade Secretary Ramon Lopez claimed at a budget hearing that the formal economy now has more businesses than in 2019.

Lopez said at least 500,000 new enterprises registered during the pandemic, but the numbers seemed to be detached from reality, prompting Senate Minority Leader Franklin Drilon to warn Lopez against misleading lawmakers.

Lopez told senators on Tuesday (Sept. 28) that there were 2.08 million micro, small, and medium-sized enterprises (MSMEs) registered in the formal economy as of August 2021, citing consolidated data that he said came from local government units (LGUs) nationwide. He said there were 1.5 million registered MSMEs in 2019 and 1.7 million MSMEs in 2020.

“On the business registration, this is actually the final registration as done in the LGUs,” Lopez said during a hearing on the proposed Department of Trade and Industry (DTI) budget for 2022.

“We consolidate all the LGUs’ report. So from what appears in the National Statistics Office in 2015 of 900,000 businesses registered, now, when we consolidated all the LGUs nationwide, the registered businesses is coming out to 2.08 million for January to August of 2021,” Lopez said.

“So it’s a big jump,” he said. He added that the number was more than double from 2015.

“That is a good indication,” he told senators. “Many of the businesses are really the ones that are registering,” he said.

“In other words, they really like to professionalize their business and make them part of the formal sector,” Lopez added.

This, however, did not seem realistic to Drilon, who asked Lopez for the number of MSMEs that closed shop during the pandemic. Lopez, however, could not provide an absolute number.

Instead, Lopez said only 4 percent closed, citing an estimated based on a previous DTI survey. Based on this, Lopez said 76,000 MSMEs had closed. The closures, however, were outnumbered by openings of new businesses, Lopez added.

Drilon expressed disbelief, however.

“If I’m going to follow your explanation, when the pandemic hit us in 2020, you said there was an increase of 200,000 MSMEs from 1.5 million to 1.7 million,” said Drilon.

“And yet you said 76,000, or 4 percent of MSMEs closed,” Drilon added.

“So, are we saying that, withstanding the closure of 76,000” businesses, the number of MSMEs “still increased?” Drilon told Lopez.

“I find it hard to believe your explanation because it seems like we don’t have any problem,” the senator said.

Drilon then asked Lopez to provide the number of additional jobs that were created by the increase in number of registered MSMEs. Lopez could not provide an answer but said he would follow up on the information.

“I’m just following your data,” Drilon said, adding “that’s why the logical question is how many jobs did this generate.”

“How can our chairman of our finance committee fight for your budget when everything is fine and dandy?” Drilon told Lopez.

“I would like to hear what is the real score on the ground. If you keep insisting that there’s no problem, then why would [DTI] need its budget?” Drilon said.

There is also a huge discrepancy between the data Lopez cited and the data that is posted on the official website of the DTI.

Based on the 2020 List of Establishments of the Philippine Statistics Authority (PSA), the DTI website said there were 957,620 business enterprises in the country, 99.51 percent of which are considered MSMEs while the rest are big businesses.

The Inquirer asked National Statistician Dennis Mapa, who heads the PSA, why there there was a huge discrepancy between the PSA figure and the LGU figures.

Mapa said in a Viber message that this was because the PSA and the LGUs do not have the same criteria. He said PSA’s List of Establishments covers only establishments in a fixed physical location, but it does not include other units like ambulant vendors or open stalls in shopping centers.

At the Senate hearing, Lopez clarified that he was not saying that the country does not have problems, but he said those might be more reflected in the informal economy, or in the unregistered businesses.

“If we have 2 million [MSMEs] in the formal sector, there’s about 6 million in the informal sector that are unregistered,” Lopez said.

“That is where, I guess, some of the bad numbers are coming from. We really have a problem there. Of course, the impact of the pandemic is rampant. Many are displaced,” Lopez told senators.

Drilon then asked about exports, like which export sectors suffered during the pandemic, but Lopez was not able to respond to this, too.

He just said the information technology and business process management industry as well as electronics exports were doing well during the pandemic, but he didn’t say which export sectors suffered.

“It is quite obvious that the secretary has not brought with him the data on many of the essential questions, which, from where I sit, is really needed in order to see the prioritization of the budget of the DTI,” Drilon said, asking the department to provide the necessary information in the next hearing.

“Give us the real data, not the kind of data that will mislead us in our budget analysis,” Drilon said.

TSB