A distress call to the IATF

Paging the IATF. The Restaurant Owners Association of the Philippines (Resto PH) reached out to me with a desperate call. They have been ignored and need to be heard. The IATF must acknowledge the plight of restaurant operators and retailers across the country.

Restaurant operators and retail shop owners in malls are at their breaking point. After imposing the world’s longest lockdown last year, plus another one in March and April, and again this month, restaurant owners and retailers have been subjected to immeasurable pain and anguish due to financial loss. The thousands without cash reserves have already closed. They, along with their employees, are now jobless. Those fortunate to have cash reserves are hanging on by a thread. Nearly all restaurant and retail shop owners belonging to the MSME category will not survive if the prohibitions on dine-in and mall operations are extended beyond Aug. 31.

In Resto PH’s letter to me, they lament how the restaurant industry has been discriminated against by the IATF. After studying their arguments, I must agree. Why are restaurants prohibited from dine-in operations under MECQ restrictions while offices, factories, BPOs, construction sites, seaports, airports, government offices and public markets are allowed? Aren’t the risks of infections the same in these places? The restaurant industry feels that they are perennially singled out as a high-risk sector when in fact, other sectors carry equal or greater risk. By constantly curtailing restaurant operations, the IATF is effectively undermining the right of restaurant owners and retailers to business survival.

The IATF assumes that take-out sales are sufficient to make restaurants survive. This is not the case. Truth is, take-out sales comprise less than 10 percent of gross sales for most restaurant types. Hence, to prohibit or limit dine-in capacity by 50 percent or more automatically consigns a restaurant to losses. As for al fresco dining, not all have these facilities. Allowing it does not make a difference to the majority.

What the IATF must realize is that whenever they prohibit dine-in operations, they cut off the main revenue source of restaurant operators. When they order retail stores in malls to be closed, shop owners lose their source of income. Being closed does not mean overhead obligations do not accrue. There is still payroll to meet, rent to pay (for offices, central kitchens and warehouses), utility bills to square off, insurance payments to make and so on. Restaurateurs and retailers are faced with an avalanche of obligations without the revenues to back it up. All these are paid with cash reserves. Not every company has the staying power of Jollibee, certainly not MSMEs.

Note that out of the 1.05 million business establishments operating in the Philippines, 996,000 are MSMEs. Of this number, the greater majority is involved in the food and retail trade. To kill the restaurant and retail sectors by prohibiting them to operate for weeks on end is tantamount to killing the lion’s share of our consumer-led economy.

Full disclosure, one of my businesses is a restaurant chain, which is why I am well aware of how lockdowns affect the industry. Fortunately, our group has enough scale to survive the lockdown, but of course, not without accruing massive losses like everyone else. I have seen too many of my industry colleagues succumb to insolvency over the last year.

The situation would be different if government provided financial lifelines to affected restaurant and retail shop owners like they do in other countries. We are not so lucky. Affected businesses are left on their own to sink or swim. Sure, the DTI’s Small Business Corp. provides financial loans to MSMEs. But it is too little, too late. Anyone who has tried to apply for a loan from SB Corp. knows that it takes at least three months to process. Besides, the loan ceiling is too small to be relevant (I believe it is P5 million, maximum). How are businesses supposed to balance their finances when the IATF declares lockdowns on 24-hour notice?

Despite the proclamation of BSP Governor Ben Diokno that banks are extending relief to MSMEs, banks are in fact doing the opposite (wake up call, BSP!). Members of Resto PH attest that banks call on loans even when not due, accelerate payment schedules, demand more collateral and cancel existing credit lines. Their actions only trigger more MSME closures.

Let it not be said that Resto PH and their peers do not recognize the risk that COVID presents. We all do. But it should be better balanced with the risks of business closure, employee retrenchment and joblessness.

Look, the fatality rate of COVID is only at 1.73 percent, while 91.5 percent of those infected eventually recover. It is the opposite for businesses. For every one business that goes belly-up, an average of 63 people lose their jobs. The consequential multiplier is far worse. As of last year, some 260,000 businesses have either closed indefinitely or turned insolvent, according to the DTI. The numbers are growing every day. How many more businesses must close before we stop rigid restrictions? Again, I emphasize, restaurateurs and retailers are now at their breaking point.

That said, Resto PH requests the IATF for the following: First, that restaurants be allowed to accommodate vaccinated individuals for dine-in with a capacity of at least 50 percent, which is enough for appropriate social distancing; second, that malls and retail shops be allowed to serve vaccinated individuals; third, that government provide a compensatory mechanism for beleaguered MSMEs – it is the least it can do. Direct cash infusions, tax holidays and exemption from tax audits for 2020 and 2021 are relevant forms of support.

COVID is here to stay and we must live with it – that is the reality. Restaurants and mall retailers cannot be made to stop operations whenever there is a surge, especially in Metro Manila where 70 percent of the population is already vaccinated with the first dose and 50 percent with the second dose. Doing so will kill the industry and consign millions to joblessness.

In closing, let me say that Singapore, Spain and Japan are right. They consider COVID as part of everyday life, like the flu. Our best defense is vaccination and strengthening our own immune systems. Lockdowns and quarantines are not the answer since their economic consequences are worse than COVID itself.

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Email: [email protected]. Follow him on Facebook @Andrew J. Masigan and Twitter @aj_masigan