The COVID-19 outbreak and its impact on business establishments: a study on challenges and strategic approaches

The Management Association of the Philippines (MAP) commissioned the School of Economics of the University of Asia and the Pacific (UA&P) to conduct a study aimed at understanding the impact of the COVID-19 outbreak on various industry sectors and to draw possible policy measures for both government and private institutions to help the affected sectors deal with the pandemic’s negative effects and gradually return to stable business operations. An online survey of pre-selected thirty-three (33) representatives from key priority sectors which recorded sharp contractions in the first two quarters of 2020 and which had a share to GDP of above 1 percent was conducted. To validate the survey results, stakeholder interviews were also conducted with more than 10 firms via the zoom video conferencing platform. The survey results confirmed the negative impact of the pandemic at the firm-level (i.e., decrease in employee compensation, decline in headcount, loss of revenue and other liquidity crunches, prolonged collection periods, problems in logistics, delayed or cancelled projects and disrupted supply chains and access to labor; among others). Some have had to close branches or altogether cease operations. The sudden and likely permanent shift towards digitization of operations has disrupted operations and exerted pressure to digitally transform business operations in order to survive in the so-called “new normal.” Moreover, this requires investments in equipment and training. Additional costs and investments are also needed to meet health and safety standards and protocols. Thus, required assistance commonly cited by firms were loans, subsidies, and tax relief In the short term, the national government must restore consumer confidence and deploy its fiscal powers to stimulate aggregate demand. With assistance, business can invest in platforms and meeting health and safety protocols for workers and customers to return to work and patronize their business, whether on site or online. Resuscitating the economy is not solely the responsibility of government. It also requires solidarity and coordinated response from the private sector. Over the long term, both government and business must build more resilient organizations and strategies. This would include adopting digital transformation by both private and public sectors for a more nimble and agile economy. Business may also revisit the concept of “coopetition”. The interconnectedness of each industry calls for a more collaborative approach among businesses. When firms who have been negatively affected by the pandemic recover, this can also increase the rate at which the economy bounces back.

Measuring the telework potential of jobs: evidence from the International Standard Classification of Occupations

The coronavirus disease (COVID-19) pandemic has triggered and accelerated the shift of firms and businesses to adopt flexible alternative work arrangements such as teleworking or working from home (WFH) set-ups. To effectively transition to the ‘new normal’ of work, this paper measures the telework potential of jobs or the degree to which a job can be feasibly done at home or offsite. Using the task-based framework, this paper constructs continuous ‘teleworkability’ indices by implementing a classification process of the occupational tasks listed in the International Standard Classification of Occupations 2008 (ISCO-08) and based on the telework indicators in the literature. The correlates of these indices are estimated. Also, the indices are applied to Philippine occupations. The primary contribution of this paper is the set of ‘teleworkability’ indices for all 427 occupations (4-digit ISCO) to describe the telework potential of jobs in countries which pattern their local occupational codes to ISCO-08.

Targeting ‘highly vulnerable’ households during strict lockdowns

In this brief article, we attempt to quantify the number of households in the country which are ‘highly vulnerable’ to hunger and poverty due to sudden and highly restrictive lockdowns, such as the enhanced community quarantine, and other social distancing measures, as well as estimate the budget that will be needed to address their vulnerability. ‘Highly vulnerable’ households are defined in this study as those unlikely to have incomes during strict lockdown periods because of the employment characteristics of their employed members and which likely have little or no savings to tide them over. Using nationally-representative household data, we define a job loss index to identify the employment characteristics that are most sensitive to the lockdown measures, and given these employment characteristics, identify the ‘highly vulnerable’ households. Depending on the pre-lockdown income threshold eligibility used, we estimate the number of ‘highly vulnerable’ households in the country at anywhere from 7.4 million to 11.3 million. At ₱5,000 per ‘highly vulnerable’ household, the estimated costs amount to ₱36.9 billion to ₱56.5 billion, again depending on the income threshold used. We also propose a way for the government to operationalize the process of identifying and helping ‘highly vulnerable’ households.

Transportation policy potholes: analyzing Metro Manila’s COVID-19 response

Before the COVID-19 pandemic, the Philippine government was already implementing policies and building infrastructure aimed at improving the country’s road-based public transportation system and alleviating impacts of traffic congestion, especially in Metro Manila. However, with the pandemic, new priorities emerged. Public transportation now plays a vital role in controlling the spread of the disease while, at the same time, ensures that essential services are accessible, and public transport providers are sufficiently supported. This paper analyzes the road-based public transportation policies of the government during the pandemic using a multi-dimensional framework. In general, and in principle, we see that the government policies issued are consistent with the recommended transport policies that must be implemented during such crisis. However, there are some strategies that are untimely implemented, such as the mandatory utilization of the integrated terminals, the forced consolidation of transport providers, and the continuing modernization of jeepneys.

How influential are COVID–19 data points? A fresh look at an estimated small scale DSGE model for the Philippines

Shocks emanating from the global pandemic continue to reshape the macroeconomic landscape—dimming national growth prospects, prolonging widespread financial distress among households, firms, and governments and heightening uncertainty. Using a small-scale New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model for the Philippines, we examine the model’s sensitivity to COVID-19 datapoints or extreme observations. Relative to estimates during the base period (2002Q1 to 2019Q4), the inclusion of extreme datapoints worsens the model’s log data density progressively, from the consideration of the first quarter of 2020 to the full sample – an indication that shock propagation mechanisms associated with COVID–19 and other natural disasters should be integrated into the model. Even with the inclusion of said extreme observations, however, the model’s parameters are identified, provided identification schemes are evaluated at posterior median estimates. Judging from the sets of parameter estimates relative to the base sample, the effects of extreme observations are found to be non–uniform, especially the size of the shocks. But there are other parameters, notably those that are embedded in the Taylor rule, which are relatively as stable as some household related parameters. These results imply that the size of standard errors for demand, supply, and monetary policy shocks adjust to partially capture the impact of extreme datapoints.

Pandemic Threat, Ostrom Threshold and Pre-Emptive Public Goods: why East Asia performed better in the COVID-19 crisis

The COVID-19 pandemic is an eminent threat posed by nature to the survival of the whole community. The cost X it imposes upon the community can be mitigated by the community’s pre-emptive public goods: an early warning system, capacity for monitoring, contact tracing and isolating infected persons, the strength of its public health system and the cultivated readiness to cooperate with anti-COVID protocols. The community provides these public goods in a nonstrategic game N (Nature) where the probability of a “bad outcome” (being symptomatically infected) falls with the total spending on pre-emptive public goods. Aside from N, members of the community play an Economic Dilemma Game (EDG), a symmetric Prisoner’s Dilemma Game (PDG) with strategy set (C, D), where the community earns its economic income which in turn provides the financing of the pre-emptive public goods. Games EDG and N are fused into a composite game N+EDG by defining the probability of a good outcome as increasing with the level of public goods financing. N+EDG has the same strategy set (C, D) as EDG but the payoffs of players are composite: the payoff from EDG less the expected share of the pandemic cost to the members. We show that there is a threshold pandemic cost X0 (Ostrom threshold) so that if X ≥ X0, the N+EDG has dominant strategy in C. At the cooperative equilibrium, the community is at its peak strength: economic output from EDG is largest and the contribution to pre-emptive public good is highest. A severe-enough cost of the pandemic threat as perceived by the group (i) causes players to exhibit an altruistic phenotype (choosing C every time) and (ii) leads to the lowest probability of a bad outcome. We argue that previous experience with pandemics in the last two decades on top of a higher tendency to follow authority in East Asia supported both the provision of better pre-emptive public goods and the higher abidance with anti-COVID protocols. These explain better performance.

Coping strategies of selected MSMEs in Laguna one year after COVID-19

This paper investigates the coping strategies employed by sample micro, small, or medium enterprises (MSMEs) in Laguna using the SME Competitiveness Grid framework developed by the International Trade Centre (ITC). The paper finds that sample MSMEs in Laguna did not find it easy to access MSME assistance programs, and that many are not even aware that such assistance programs exist. However, most MSMEs were found to be flexible and innovative when it comes to their coping strategies; the most common are through using online platforms and customizing or making new products. The paper also finds that assistance on reduction of fixed and operating costs, improvements in credit access, and greater ease in doing business are the most desired forms of government intervention, consistent with the findings of earlier surveys.

Disruptions in global value chains due to COVID-19: stylized facts and policy lessons

This paper provides an early assessment of global value chains (GVCs) amid the disruptive effects of COVID-19 on world trade. Using the Asian Development Bank’s updated Multiregional Input-Output Table, key indicators were estimated to identify important stylized facts about the contraction of GVC activities in 2020. Econometric models were also estimated to analyze the disruptive effect of COVID-19 outbreaks and stringent containment measures on GVC trade. The input-output analysis confirms that all major economic sectors suffered large losses, especially services. However, the bulk of the decline in overall GVC trade can still be traced to lower backward transactions in manufacturing. On the aggregate level, stronger backward GVC participation was associated with relatively milder contraction while the opposite was observed for forward participation. The regressions showed that positive growth of GVC trade was less likely in sectors with relatively larger exposure to foreign downstream shocks. Further, the combined effects of stringent containment measures and severe COVID-19 outbreaks also reduced the probability of growth in both backward and forward GVC transactions. These findings indicate that on top of foreign suppliers’ internal disruptions (foreign supply shock), weak global consumption (foreign demand shock) and local producers’ domestic sourcing problems (local supply shock) contributed to the steep contraction of GVCs in 2020. Against this background, the major challenges to robust recovery were also identified. These include the downside risks of a prolonged pandemic, the resurgence of protectionist tendencies, the strength of global demand, the reconfiguration of broken supply chains, and the ability of countries to coordinate their actions especially with respect to vaccination.

National Health Insurance Program financing during the COVID-19 pandemic: financial viability and

This paper examines the state of National Health Insurance Program (NHIP) financing during the COVID-19 pandemic in the Philippines, an event which coincides with the implementation of the Universal Health Care (UHC) mandates on restructuring the NHIP premium schedule, providing immediate eligibility to NHIP benefits, and expanding member benefits. Using the ratio of total expenditures to total revenues as the measure of financial viability, it shows that the NHIP remains financially viable during the COVID-19 pandemic year of 2020. Projections for 2021 however show that NHIP financial viability may be adversely affected by the significantly higher number of COVID-19 cases with the negative effect mitigated only if COVID-19 benefit claim patterns remain as weak as observed for 2020. On the revenue side, the potential for a lower premium is observed to be offset by the higher rates in the UHC mandated premium schedule. On the expenditure side, potential increases associated with the implementation of immediate eligibility and the introduction of COVID-19 benefits are mitigated by lower NHIP benefit utilization due to reduced mobility and access to health facilities. Secondary analysis on who has to bear the burden of paying for NHIP benefits, however, shows that the implementation of UHC financing initiatives may heighten adverse incentives on members’ willingness to pay premiums. Using the benefit expenditure-premium contribution ratio as the measure for the burden of paying for NHIP benefits, it is shown that the Formal Economy sector shoulders the burden of funding the NHIP benefits of the Informal Economy and Sponsored sectors.

Life in the times of the COVID-19 pandemic: the experiences and responses of households in Guimaras and Miagao, Iloilo

This paper assesses the experience and responses to the COVID-19 pandemic of households in the province of Guimaras and the municipality of Miagao to gain insights and lessons that can be applied during similar disruptions in the future. Survey data using a questionnaire were collected in July to early August 2020 from 580 households in Guimaras and 401 households in Miagao using convenience sampling. As a health threat, COVID-19 caused many households to feel unsafe and worried. The COVID-19 pandemic has highlighted the economic vulnerability of households to disruptions affecting their livelihood and income sources. The effects on loss of livelihood and income sources were worse with lower-income households whose income status and the ability to meet basic needs were worse than the pre-pandemic period. The paper recommends several approaches and interventions to improve household resilience and to be better prepared for similar challenges and threats in the future.