DEMAND AND SUPPLY - Boo Chanco - The Philippine Star

The news couldn’t have been more symbolic. Jollibee, the icon of successful Filipino entrepreneurship, is closing 255 stores. A P12-billion net loss in the 1st half of 2020 led to a system-wide closure due to the COVID pandemic.

Assuming 200 of those stores are in the Philippines employing about 50 persons each, almost as many jobs would be lost as the closure of ABS-CBN.

Every Jollibee store, specially those that are franchised, can be considered a small enterprise. Small and medium enterprises provide over 80 percent of total employment in the country. Imagine those enterprises shedding employees as downscaling and closure emerge as the only sane alternative under present economic conditions.

We can see it in our neighborhoods. Our favorite restaurants are struggling to remain open by catering to takeout orders. All the investment in dining facilities have gone down the drain. Most restaurant owners don’t have enough capital to wait out this virus.

While small entrepreneurs are obvious victims of this pandemic, “the biggest loser is the Filipino worker,” Rep. Stella Quimbo said. Unemployment rate, at 17.7 percent, is at an all-time high since 1956 when the government first conducted the nationwide Labor Force Survey.

“The pandemic is a wake-up call: we need a better social protection program for workers. When it comes to worker’s social protection, we’re behind our ASEAN neighbors,” the congresswoman from Marikina said.

Quimbo thinks the current system of providing unemployment assistance is fragmented, non-inclusive, and limited, noting that it is unable to efficiently offer a sufficient scale of social protection for workers, especially during exogenous economic shocks. She is proposing a national unemployment insurance program with compulsory participation by formal sector employees and voluntary participation by the self-employed and workers in the informal sector.

About eight million Filipinos will become jobless as the pandemic rages, while the Philippine economy reels from the most stringent lockdown in the region, slow disease containment, and an influx of returning migrant workers, according to Malaysian financial giant Maybank.

In a July 9 report titled “Labor Market: Retrenchments and Recovery,” Maybank Kim Eng analysts projected the Philippines’ unemployment rate to hit 18.5 percent this year – the highest in the ASEAN region.

In April, the jobless rate already stood at a 15-year high of 17.7 percent, equivalent to 7.3 million Filipinos unemployed at the height of the enhanced community quarantine. Unemployment rate in January was 5.3 percent while in April 2019, it was recorded at 5.1 percent.  All regions reported double-digit unemployment rates.

Compounding this local unemployment problem is a surge of OFWs losing their jobs abroad. Some 200,000 have returned, and I understand another 200,000 decided to stay where they are in Europe and the Middle East in the hope of eventually finding another job. They know going home to a certainty of unemployment is not an option

Unemployed and undocumented Filipino workers abroad will end up in an underground market where they are subject to abuse.

Emmanuel Geslani, an old hand in the recruitment industry, thinks 2021-22 will remain difficult because our traditional labor markets will still be barely recovering from the pandemic.

Geslani said in the Middle East, total deployment of OFWs for the past five months has gone down by 47 percent compared to the period of January to May 2019. The loss, he said, was mostly felt by re-hires which is down by 50 percent.

Even deployment of seafarers have considerably gone down by 62 percent, Geslani estimates. Deployment of seafarers  is not expected to improve in the coming months. Major cruise liners that repatriated more than 35,000 seafarers are  not expected to recall the cruise ships crews this year, as they have cancelled cruises till October and even till January next year.

Geslani said no major markets are open other than Hong Kong and Taiwan. He sees no positive developments for any major deployment this year except for health workers.

New markets in Europe are still in lockdown. Even Japan, which is our newest market, has closed its borders to 111 countries including the Philippines.

There goes one of the two legs of our economy. The other leg, BPOs, are doing better, but are also struggling from the effect of the lockdowns on their work schedules and COVID infection of their staff.

All presidents from Marcos to Duterte have managed to push back dealing with the unemployment problem because we are able to export our labor. Their remittances have held up our economy rather well, well enough for politicians to get away with wasting public funds. No more.

Now government will be hard pressed to save and create jobs. Yet, Rep. L-Ray Villafuerte amended the Bayanihan bill passed by the Senate to take away much needed assistance to small and medium tourism enterprises. Instead the P10 billion was reallocated to TIEZA for tourism infrastructure.

There is no need for additional tourism infrastructure at this time. The tourism industry asked for loans to be administered by GFIs to help them keep their businesses going. Obviously, the congressmen are eyeing potential pork funds embedded in TIEZA infrastructure projects.

Interestingly, TIEZA has a poor record in implementing projects, prompting Finance Secretary Sonny Dominguez to realign P12 billion unspent TIEZA funds for COVID assistance back in March.

Our officials should gear up to deal with the challenge of decreasing OFW remittances by helping industries like tourism. It employs a lot of people and has the potential to earn foreign exchange once the bubble strategy becomes possible. Until then, this sector of the economy that directly provided 12.7 percent of GDP, and 13.5 percent of national employment, needs government support before it entirely collapses, Jojo Clemente, president of the Tourism Congress of the Philippines appealed in a letter to congressmen.

Indeed, OFW remittances continued to fall in May, declining by19.3 percent YoY (Apr 2020: – 16.2 percent YoY). This could lead  to one analyst’s full-year forecast of -10 percent. A sensitivity analysis indicates every one percent drop in OFW remittances can shave 0.2 percent off private consumption expenditure and 0.1 percent off real GDP.

So we are facing big social problems arising from unemployment. Let us help our entrepreneurs struggling to save jobs. Leave infrastructure investment to the private sector. And cut the greed.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco

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