COVID-19 hits 70% of Philippines businesses hard

MANILA, Philippines — Close to 70 percent of Philippine businesses were strongly affected by the coronavirus disease 2019 (COVID-19) pandemic and more than 80 percent have seen a reduction in sales, according to a report by the International Trade Centre (ITC).

In its report “Promoting SME (Small and Medium Enterprise) competitiveness in the Philippines: Compete, connect and change to build resilience to crises,” ITC, a joint agency of the World Trade Organization and the United Nations, said the pandemic has affected 99 percent of Filipino businesses, with 68 percent saying they were strongly affected.

ITC’s report is based on two surveys: one on SME competitiveness which covered 515 firms conducted in November to December last year, and a COVID-19 business impact survey of 454 firms undertaken with the Department of Trade and Industry - Bureau of Small and Medium Enterprise Development in April to May this year.

“Companies that were smaller or led by youth, and those involved in international trade, were more likely to be strongly affected,” the ITC said.

Firms with a greater capacity to compete before the pandemic, meanwhile, were less likely to be strongly affected by the crisis.

ITC said 88 percent of firms had lower sales in the January to April period compared to the previous year.

The COVID-19 outbreak has changed the way businesses operate with almost half or 46 percent of firms saying access to logistics services was reduced, and a third of companies saying their clients were not paying bills.

Given the impact of the pandemic on operations, nine percent of companies said they expect to shut down permanently.

The percentage of firms likely to close down in the Philippines is lower than the 36 percent in other Asian countries.

ITC said SMEs were twice as likely as large firms to predict closure within three months.

In terms of handling the crisis, ITC said firms that invested more in research and development (R&D) prior to the pandemic tended to be more resilient.

In particular,  60 percent of firms that said they invested in high levels for R&D last year were strongly affected by the COVID-19 crisis.

For those with low or no resources for R&D, 83 percent were strongly affected.

The report also said that while the COVID-19 crisis has stressed the importance of access to information to know about the market situation and assistance available to businesses, more than half or 58 percent of companies found it difficult to find out about the government’s COVID-19 programs.

To help prepare Filipino SMEs for the next crisis and ensure they recover from the pandemic, there is a need to address key constraints to competitiveness.

Among the recommendations of the report is to have customized skills training to ensure firms headed by youth and women can access workers that can help them innovate.

In addition, providing incentives for R&D can help firms compete.

Encouraging firms to engage with business support organizations is also recommended, as well as government investment in digital trade facilitation and expanded e-payment infrastructure to help reduce exposure to shocks to the cash economy and boost the competitiveness of remote businesses.

Trade undersecretary Blesila Lantayona said the recommendations provided in the study would serve as a guide for the DTI in crafting policies and support programs for the fast recovery of micro SMEs.

“Similarly, the findings will help us in identifying and bridging the gaps in our efforts for MSME development to foster more globally competitive MSMEs that are regionally integrated, resilient, sustainable, and innovative,” she said.