Rapid Situation Analysis of the Impacts of COVID-19 on Msmes in Malolos and Paombong
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Rapid Situation Analysis of the Impacts of COVID-19 on MSMEs in Malolos and Paombong Marjorie Muyrong Cymon Kayle Lubangco Charlotte Marjorie L. Relos October 2020 The publication of this document was supported by the multi-actor partnership on climate and disaster risk financing and preparedness in the context of the InsuResilience Global Partnership (MAPs), funded by the German Federal Ministry for Economic Cooperation and Development (BMZ). Rapid Situation Analysis of the Impacts of COVID-19 on MSMEs in Malolos and Paombong Marjorie Muyrong Cymon Kayle Lubangco Charlotte Marjorie L. Relos TECHNICAL REPORT October 2020 Photos by Jose4 Maria Rosalia Lapira Rapid Situation Analysis of the Impacts of COVID-19 on MSMEs in Malolos and Paombong EXECUTIVE SUMMARY The local economy of Bulacan has been showing dynamism in the recent decades. The economic growth in the province may be explained by its physical and economic proximity to Metro Manila. It may also be attributed to the rise of cooperatives in the province and the extensive efforts to foster the expansion of the industry through investment promotion and tax incentives starting in the 1990s. However, with the province’s proximity to Metro Manila, it faced significant disruptions to its local economy when the COVID-19 pandemic hit and community quarantine measures were imposed starting in mid-March of the current year. As a result of these disruptions, enterprises in Bulacan, particularly in the latter half of March 2020, faced significant constraints in the exportation of their commodities to Metro Manila and other provinces. The enterprises engaged in food production had to secure food passes to be able to move around and across borders. Nonfood manufacturers and retailers, meanwhile, faced significant reduction in demand from Metro Manila. The most affected sectors in Bulacan were the garment and bag manufacturers and the transport sector, both of which experienced a drastic decline in their earnings. With the move toward reopening the economy to help enterprises get back on their feet, Bulacan experienced firsthand that reopening the economy could lead to an increase in the number of COVID-19 cases, as observed in late July to early August. Of special interest are the coastal areas facing Manila Bay, especially Malolos and Paombong, which have developed a significant aquaculture industry and face flooding concerns. To assess the impacts of COVID-19 on MSMEs in the adjacent towns of Malolos and Paombong, a survey of 184 respondents from the micro, small, and medium enterprises (MSMEs) in Bulacan was conducted over the course of two weeks by field researchers. Key informant interviews provided complementary qualitative information on the recent experiences with COVID-19. On the one hand, the survey results showed that a large number of enterprises were significantly affected by COVID-19 and the mandated community quarantine measures. On the other hand, the survey revealed that some firms were able to adapt with a focus on the survival of their enterprises and the livelihood of their workers. The interviews and survey implemented in Malolos and Paombong further revealed that enterprises are aware of the need to reopen the economy. Although food and wage subsidies are necessary and urgent for households, these short-term measures remain insufficient, and MSMEs are in need of further support, as indicated in the survey. With the MSME sector tied to the informal labor sector, enterprises may find themselves discounting sustainable development strategies if they fail to receive support for economic recovery in the new normal. Despite the access to credit from informal sectors and other forms of support provided by cooperatives to their members who are small business owners, most MSMEs lack insurance awareness and coverage. Bulacan residents, in particular, seem comfortable with the face-to-face interactions provided Rapid Situation Analysis of the Impacts of COVID-19 on MSMEs in Malolos and Paombong 5 by cooperatives. Hence, they appear to exhibit resistance to the shift toward online platforms. In the new normal, MSMEs would need assistance in keeping their business activities running by not only gaining access to digital infrastructure but also building confidence in using online platforms for business transactions. In the case of Bulacan, three main elements can be put forward in the agenda toward recovery and resilience: 1. Public–private cooperation and coordination in setting up physical distancing and health and safety guidelines for business operations in the new normal; 2. Empowerment of Bulacan cooperatives as they provide urgent short-term measures for MSMEs, including one-time grants, to help keep them afloat; and 3. Massive campaign for social innovation toward crisis resilience of the local economy, including goals toward not only economic recovery from the pandemic but also sustainable development and crisis resilience. Given the findings and conclusions about how the COVID-19 pandemic has affected the MSMEs in Malolos and Paombong, the following areas for future research may be considered. First, the MSME survey may be complemented with a survey of households with the goal of understanding the changes in welfare due to COVID-19. Second, research may consider the quantification of the economic costs brought by the pandemic. Finally, the factors that enable recovery and resiliency amid crises may be explored. 6 Rapid Situation Analysis of the Impacts of COVID-19 on MSMEs in Malolos and Paombong TABLE OF CONTENTS EXECUTIVE SUMMARY ....................................................................................................................5 Table of Contents .......................................................................................................................7 List of Figures ..............................................................................................................................8 List of Tables ................................................................................................................................9 Appendices .................................................................................................................................10 I. INTRODUCTION .............................................................................................................................11 A. Overview of the Project ..........................................................................................................12 B. Socioeconomic Profile of the Province of Bulacan ..............................................................14 C. Overview of COVID-19 Situation ............................................................................................21 1. COVID-19 Situation in the Philippines ................................................................................22 2. COVID-19 Situation in the National Capital Region ...........................................................23 3. COVID-19 Situation in the Province of Bulacan and the Case Study Areas .....................23 II. ECONOMIC IMPACTS OF COVID-19..........................................................................................26 A. Analytical Framework of the Study .......................................................................................26 1. Circular Flow Model of the Economy .................................................................................26 2. Shutdown Decision of Firms ..............................................................................................28 B. Research Methodology ..........................................................................................................29 C. Economic Impacts of COVID-19 on the Philippine Economy ..............................................30 1. General Economic Situationer ............................................................................................30 2. Disruptions to the Market Economy ...................................................................................32 Impacts on MSMEs ..................................................................................................................36 III. RESULTS OF THE MSME SURVEY IN MALOLOS AND PAOMBONG ......................................38 A. Pre-pandemic Scenario in Malolos and Paombong .............................................................38 1. Profile of MSMEs in the Malolos–Paombong Economy ..................................................39 2. Financial Performance and Cooperative Financing in Malolos and Paombong ............41 B. Disruptions and COVID-19 Response Measures in Malolos and Paombong .....................45 1. Provincial Community Quarantine Policies .......................................................................45 2. MSME Shutdown Decisions and Operational Disruptions ................................................46 3. Amelioration and Aid ...........................................................................................................51 4. General Assessment on Revenues and Costs ...................................................................54 5. Summary of Disruptions .....................................................................................................55 C. Malolos–Paombong Enterprises in the New Normal ..........................................................56 1. Enterprise Adjustment Mechanisms in the New Normal .................................................57 2. Issues