To those who responded to last week’s column on the various businesses in Mindanao successfully adapting to the new normal, an additional statement I would like to make is that the adaptations and innovations they undertook were easily engaged because they are used to the disruptions over the last 20 years, such as climate change, calamities, conflict, and recent trade wars.
That they have adapted without much fanfare shows adaptation is the norm and not the exception, exhibiting an innate resilience and flexibility when faced with adversities.
Therefore, the ability to focus and adapt and innovate will empower us all as we move forward.
Whats going for us in the economy
To help us adapt is the fact that there are elements of strength in our economy that improve the chances of business recovery.
Inflation and interest rates are low, and that strong Philippine credit ratings can make borrowing easier.(https://mb.com.ph/2020/07/17/ph-keeps-investment-grade-credit-rating/) The Philippines’ external debt to GNI ratio is 19.9%, also lower compared to neighboring economies.
The peso-dollar exchange rate is also below 50, and has remained as such for some time, with many opining that it will remain as such for an extended period even as demand picks up. This allows many businesses, especially those importing inputs to buy more supplies and possibly, at lower rates due to a strong peso.
Banks therefore need to review their portfolios as reserve requirements have been lowered and capital adequacy ratios remain healthy as reported by the Bangko Sentral (https://mb.com.ph/2020/07/25/banks-car-remains-healthy-diokno/.
Their ability to lend more or restructure loans of manufacturers will allow these businesses to sustain operations and keep more jobs. The Philippine Chamber of Commerce and Industry has called on banks to extend loan relief to borrowers.
Added confidence is provided by the better than expected government revenue collections, and new investments reported by the Board of Investments and the new special economic zones under the Philippine Economic Zone Authority.
With these, the “reasonable balance,” as pushed by our economic managers will keep recovery efforts up.
In my view, this balance between the right kind of measures to manage the direct effects of the disruption, in this case, COVID-19 infections and a level of economic “opening up” that allows enough business and trade activity to keep unemployment, living costs, and new infections low.
This balance will depend on the conditions and advantages of each region or country. Some regions will be more successful in achieving this reasonable balance and perhaps, encounter higher recovery rates than others.
Moving forward, what will boost adaptation further
Moving forward, strong implementation of RA 11293, the innovation law to identify innovative business concepts in each region to harness local talentand resources, will create new opportunities.
In particular, the recent buzz over virgin coconut oil as a possible immuno booster against the COVID-19 infection, and the possibility of increased local coconut-based content in our diesel fuel to reduce diesel imports invigorate prospects for local manufacturing and our 2 million coconut farmers, a bigger part of which are in Mindanao.
Another is the Personal Property Security Act and how banks and financial institutions apply this. The recovery efforts of many struggling businesses can be financed with this law’s provisions, since they can use equipment as collateral if they do not have real property.
Implementing these reforms will strengthen innovation and recovery. You can download copies of these laws from the official gazette.
Stay safe everyone, and continue to buy local to support our recovery!
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