Economic Freedom

Strengthening SMEs at the Time of a Pandemic: The Philippine-German Experience

Access to aid

These similarities and key issues were raised in a webinar in May 2020 to discuss the situation of SMEs in the Philippines and Germany during COVID-19 and what measures are needed to support them. The German-Philippine Chamber of Commerce and Industry (GPCCI), in cooperation with the Friedrich Naumann Foundation for Freedom (FNF), organized the online forum.

The FNF has been supporting SMEs and startup businesses by giving them an avenue to discuss ways to ease doing business in the Philippines and cooperate with each other.

Kulitz stated that while “the Federal System helps tackle the crisis regionally, focusing the efforts in what companies really need, there is confusion because of the different uncoordinated approaches. This pandemic is a serious challenge for everyone’’. 

Participants gathered further insights on how the German government and the European Union (EU) have been handling the crisis. 

For example, as of March 19, 2020, the EU agreed that its member states provide SMEs access to aid in form of direct grants with repayable advances or tax advantages, guarantees and loans, and subsidized interest rates, among others. Read the “Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak (2020)” here:

Dr. Martin Henkelmann, executive director of the GPCCI, concluded with the measures needed to support SMEs in the Philippine-German business community so that they are able to keep their employees. Among others, the government should prioritize financial assistance to the sectors that were badly hit during the pandemic. 

FTA

Moreover, “SMEs should also enjoy eased travel restrictions to promote global trade,” Henkelmann said. “This would definitely benefit if the negotiations for a Free Trade Agreement (FTA) were taken up again by the Philippines and the EU.” 

Formal negotiations for a Philippine-EU FTA began in 2015. However, it has been stalled because President Rodrigo Duterte resents the EU’s position against human rights violations in the country.

In a 2020 survey conducted by the GPCCI and the Singaporean-German Chamber of Industry and Commerce (SGC) among its members in, 83% of German companies were in favor of the resumption of the FTA. (Read the evaluation of the survey results on the resumption of EU-Philippines Free Trade Agreement (EUPHFTA) here:

Economic recovery bill

Meantime, In the Philippines, legislation to spur economic recovery is being tackled in the House of Representatives. Also known as the CREATE bill—the Corporate Recovery and Tax Incentives for Enterprises—it provides financial support to SMEs . If passed into law, there will be a cut in income taxes and a flexibility to receive both fiscal and non-fiscal incentives. 

The bill also defines the Philippines’ “Doing Business Framework” which aims to improve performance of Philippine - German companies in the country, among others. 

Panelists:

• Sergio Ortiz-Luis Jr., President of the Philippine Exporters Confederation (PHILEXPORT)
• David Lehmann, Chair of Economic Policy Committee, Die jungen Unternehmer, VERBAND DER FAMILIENUNTERNEHMER
• Alexander Kulitz, Member of the German Parliament
• Dr. Martin Henkelmann, Executive Director of the German-Philippine Chamber of Commerce and Industry