Businesses scramble to lockdown mode with cash flow drying up

Ian Nicolas Cigaral - Philstar.com
Businesses scramble to lockdown mode with cash flow drying up
In this photo taken May 6, 2020, residents of Addition Hills in Mandaluyong City do their grocery before their barangay will be placed under a one-week total lockdown from May 7 to 13.
The STAR / Michael Varcas

MANILA, Philippines (UPDATE 6:52 p.m., August 3) — Given only 24 hours to prepare, businesses on Monday raced against time to downscale their operations and adapt to a sudden government decision to put Metro Manila and other economic hubs back on a stricter lockdown starting Tuesday.

Malls, supermarkets, airlines quickly obliged to remove some services over the next 15 days following President Rodrigo Duterte’s orders, but also stressed an earlier notice and a longer period to prepare would have at least minimized disruptions to operations already at the mercy of the changing quarantine regimes every two weeks.

“What businesses are saying is they could’ve been given two or three days to adjust but we can't do anything about it,” Sergio Ortiz-Luis Jr., president of Employers Confederation of the Philippines (ECOP) Inc., said in a phone interview.

“We don't like it but that’s how it is,” Ortiz-Luis added.


Apart from the National Capital Region, Laguna, Cavite, Rizal and Bulacan will all switch back to a modified enhanced community quarantine (MECQ) by 12 midnight, Tuesday until August. 18. The decision was a response to call from health workers swamped by a resurgence in coronavirus disease-2019 (COVID-19) cases two months since the economy reopened.

Under MECQ, all residents in covered areas are expected to stay indoors, except qualified employees who are permitted to report to work. Among those allowed out are supermarkets personnel, who now face the grueling task to get to work with public transport set to be halted anew. 

“One-day announcements are disruptive for businesses which are dealing with a host of other problems,” said Steven Cua, president of the Philippine Amalgamated Supermarkets Association Inc., a group of independent grocery stores, said in a text message.

“We are immediately faced with the double whammy of having to scrounge for additional employees to service increase in demand versus absences from existing employees due to lack of transport to take them to our establishments,” Cua said.

Worse, supplies which are likely to get depleted as consumers rush to stores to stock up basic necessities may not be immediately replenished given that checkpoints would again hamper deliveries.


The transport department, in a statement, said companies should provide shuttle services to their employees, but April Lee Tan, research head at COL Financial, said with cash flow drying up, lockdowns would be more difficult this time around for small firms. Around 98% of local companies are considered micro, small and medium-sized enterprises.

“I feel like it’s harder than this time around because when we first locked down in March we were coming in a position of strength. The companies had accumulated a lot of profits and at that time…,” Tan said in a television interview with ANC.

“But at this point, I think those reserves are finished and the government is saying they don't have money anymore... Even donations from businesses will be much less,” she added.

Jeepney drivers

The National Economic and Development Authority (NEDA) said the agency is currently coming up with an assessment on the economic impact of the unexpected 15-day lockdown, which may be released on Thursday when a report on the economy is likely to show the Philippines has entered recession last June.

As far as losing livelihoods go, jeepney drivers, some of whom were just recently allowed to ply back their routes, will be among the most affected. “We have not even started recovering from the months we were stuck, and yet here we are locking down again,” Mody Floranda, national president of Pinagkaisang Samahan ng mg Tsuper and Operators Nationwide, a transport group, said in Filipino.

“Our drivers are bound to lose P600-P700 a day at a minimum for our shortest routes,” he said in a phone interview.

Floranda said the government’s pledge to provide aid has not gone down to everyone. Among various subsidies offered during the pandemic, public utility vehicle drivers qualify under the social welfare department’s social amelioration program, which has not completed distributing the second tranche of P5,000-P8,000 of aid to its 13.5 million beneficiaries. 

Malls, airlines

On the flip side, big malls like Ayala Malls and SM Supermalls, meanwhile, said they are prepared to downscale operations to establishments that only cover essential services such as groceries and drugstores. The reduction in opened stores, in turn, can hit thousands of workers.

“We have gone through this before and we are guided by the initiatives that we have implemented previously when we were in MECQ last May,” Jennylle Tupaz, Ayala Malls president, said in a statement.

SM Supermalls President Steven Tan, in a separate statement, said: "Essential shops and services such as supermarkets, banks, pharmacies, hardware, computer stores, appliance stores...will remain open and select restaurants will be allowed for takeout and delivery."

Meanwhile, airlines led by flag-carrier Philippine Airlines (PAL) as well as Cebu Air Inc. and AirAsia Philippines Inc. are still awaiting for guidelines from aviation authorities although, for now, flights will proceed as scheduled on August 3.

“We will inform the public accordingly once such guidance/information is given,” PAL said in a statement. 


Banks, a critical source of liquidity on which the government has relied on for recovery, are also likely to face some challenges over the new lockdowns due to high losses incurred from unpaid loans. "Banks are prepared, though it's going to be more challenging now," said Suzanne Felix, executive director of Chamber of Thrift Banks, an industry group, said in a text message.

Unlike in March, central bank Governor Benjamin Diokno said grace period will no longer be offered for loans falling due during the MECQ, which means borrowers who will not be able to pay on time will be slapped with hefty penalties. For the lenders, the inability to collect payments will have repercussions to their otherwise healthy balance sheets.

"The expected increase in loan losses post-ECQ will do some damage as borrowers find themselves in increasingly vulnerable positions. We are, however, confident that the industry can surmount the challenge," Felix said.


Editor's Note: Added SM Supermalls' statement

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