Corporate Watch
By Amelia HC Ylagan
“We need to immediately shift to MGCQ (modified general community quarantine, the second loosest quarantine level) for the entire Philippines. Perhaps starting March 1,” Acting Socioeconomic Planning Secretary Karl Kendrick Chua told President Rodrigo Duterte during a televised late evening Cabinet meeting last week, according to Philstar.com on Feb. 16.
That must have added to the pique of the confused common citizen, already puzzled why, just after Valentine’s Day, it was announced that movie houses, theaters, museums, video game rooms, and other places for community entertainment were to be allowed to open their gates after almost a full year’s closure in the pandemic. Metro Manila mayors protested, saying such enclosed spaces would be too inviting for contagion. Movie theater owners said they were not ready to incur huge operational costs, not knowing if people would watch movies in movie houses instead of on Netflix at home. People said they wanted to watch a movie munching snacks, which they will not be allowed to do in theaters. They would also have to watch the films in masks and face-shields while physically distancing in theaters.
Why the seemingly whimsical change of heart of government to relax general community quarantine (GCQ), especially when Health Undersecretary Maria Rosario Vergeire had confirmed on news channel ANC on Jan. 26 that the new, highly contagious British COVID-19 coronavirus variant B117 had spread among 12 people in Bontoc, Mountain Province, with 17 such cases in the country? Reacting to the tightening of quarantine in other countries to contain the spread of the B117 variant, President Duterte scrapped a plan that would have started Feb. 1, to allow children ages 10 to 14 in low-risk areas to go outside the home. Since March last year, minors have been prohibited from leaving the home. Face-to-face classes are still being evaluated versus the cumbersome but safer online learning.
Chua said the proposal of the National Economic and Development Authority (NEDA) to “further open the economy to MGCQ for the entire Philippines, especially NCR (National Capital Region)” is backed by the entire national pandemic task force, according to a Rappler report on Feb. 16. But the Inter-Agency Task Force for the Management of Emerging Infectious Diseases (IATF) knows the much-debated vaccines have not arrived yet. First the vaccine, before the relaxation of quarantine!
The NEDA’s former chief, Ernesto Pernia, already harped in mid-2020 on the need for test kits to “flatten the curve” (of contagion), warning of “social unrest if a massive lockdown in the main northern Luzon region, home to more than 50 million people, is extended indefinitely.” Pernia resigned soon after “for personal reasons and partly to differences in development philosophy with a few (of my) fellow Cabinet members.” At about the same time, a majority of senators demanded the resignation of Health Secretary Francisco Duque III, blaming him for inefficiency, partly for failing to immediately stockpile coronavirus test kits and making them available to the public. Duterte rejected the senators’ call and retained Duque in his position as lead of the IATF, the government’s inter-departmental response team to the virus.
The government seems unclear in its priority, between reining in the coronavirus and the reopening of the economy. Further mucking up the issue is the reluctance of many citizens to be vaccinated — the distrust of the vaccines (especially the Chinese vaccines?) probably indicating that economic reasons, even if it means joblessness, do not matter as much as the possibility in their minds of the risk to health (complications, adverse reactions) or even, in the extreme, death. Nearly half (47%) of Filipinos said they would not get vaccinated against COVID-19 (coronavirus disease 2019) because they feared the vaccines’ safety, according to a poll conducted in January by Pulse Asia.
NEDA’s Chua sounds noble: “40% of the people are below 20 (years old) and the median age is 25 and most of them cannot go out, then I think the economy cannot go back to normal levels,” he said. “That is reality, that is data, that is economics,” he was quoted as saying on Jan. 29 by Philstar.com. But — no offense meant to Dr. Chua — a simple housewife’s instinctive economics will know that “going out” (being available for work or business) does not mean there will be something (opportunities) to “go out” for. Businesses reopening will not mean these will simply take up where they left off.
Will there be work for the eager and capable young people who have been stuck for months in isolation, and now “going out” into heightened competition for the fewer jobs available? Will decimated and pruned businesses and other employers take in additional workers on top of their whittled-down workforce, reduced by the equally reduced demand due to the pandemic? Will employers risk capital and be charitable institutions to employees, clients and customers, suppliers and their other publics while they are waiting for the “New Normal” to slowly bring back profits?
At a Citibank Zoom economic briefing for clients last Thursday, it was lamented how Philippine gross domestic product (GDP) grew 6.3% in 2018 and 6% in 2019 and plunged to -9.5% in 2020. Prophets of boom that banks must be, Citi hopes for a 7% GDP recovery in 2021 and 6.3% more in 2022, at which time net growth will be positive. It was again pointed out that only the COVID-19 vaccine will ease the tension on world economies, as the resulting herd immunity will allow the gradual reopening of global interaction and trade.
The US and China will remain the leaders and movers of the world economy, their positions assured by the sheer size of their economies, which in the first place buttressed them against the buffeting of the COVID-19 pandemic. China has 20% of global GDP. It is the top supplier for the world economy — “Made in China” will still be the label on almost anything needed and wanted by the world. It can be said that wily and shrewd China has mastered the capitalist maximization law of Supply and Demand.
At the Citi briefing, it was pointed out that America’s saving grace post the trials of the pandemic is the forced savings of individuals (the consumers) during the lockdowns, from spending withheld from closed shops and leisure/entertainment outlets. (The US is a consumer-driven economy, with 70% of its GDP driven by consumption [spending], while China is more investment-driven with investment [more by the public sector because it is a controlled economy] at nearly 50% of GDP.) Citi estimates the “forced savings” of American consumers to be around $1.5 to $2 trillion — which would certainly pump-prime the economy when normal businesses and activities resume and consumer spending returns with expected vengeance.
There are some points to be made for the dream rebound of little Philippines from the prognosis for the big boys, the US and China, after COVID-19 is tamed by the vaccine. First, that the health of the people must come first before the health of the economy is planned for. China would be the better example with the way it tightly isolated Wuhan in Hubei province where the coronavirus was first discovered. It was a total lockdown (tighter than ECQ) of 11 million people from January to June 2020. This controlled the viral spread to the rest of China. In the full year of the pandemic, China has had just under 100,000 recorded infections (in a population of 1.4 billion) with only around 4,800 deaths linked to COVID-19, according to a BBC report on Jan. 22. Meanwhile, the Philippines has had 553,424 confirmed cases (in a population of 109 million) and 11,577 deaths as of Feb. 18 according to the WHO (World Health Organization) coronavirus tally. And the government wants to relax quarantines before even getting the vaccines? Health before wealth.
The second lesson is that consumer-driven economies are most vulnerable in the levelling of a world pandemic such as COVID-19. “Consumer spending accounts for 66% of the Philippine GDP… driven by robust government and infrastructure spending, a higher employment rate, manageable inflation, and robust overseas Filipino workers remittances,” First Metro President Francis Arjonillo said in the February 2020 issue of Finance Asia magazine. The Philippine recipe for having the second highest GDP growth rate of 6% in ASEAN (Vietnam is No. 1) failed in the fires of the pandemic. Lesson learned: Consumerism and supply-side economics are unreliable and unstable in a crunch such as a pandemic.
To our government planners: Opening up the economy by arbitrarily relaxing quarantines and restrictions at the risk of the people’s health will not work — mainly because it is not the same market, global or local, as before the devastation of COVID-19. It will be prudent to wean ourselves away from the Spend, Spend, Spend mentality (consumerism) and focus on developing the more stable and indigenous “sweat of the brow” economic activities such as agriculture and manufacturing to revive the economy.
Health before wealth, even in economics.
Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.
