THE EMERGENCY POWERS OF THE EXECUTIVE: AN EFFECTIVE TOOL

IN MANAGING THE DEVASTATING EFFECTS OF THE CORONAVIRUS (COVID-19)

IN THE PHILIPPINE FINANCIAL SYSTEM

A Position Paper Presented to the

UST Graduate School

In Partial Fulfillment of the Requirements for

Financial Management

By Marielle Buscato

16 March 2023
 TABLE OF CONTENT

Introduction

Identification / Acknowledgement of Possible Objections

Argumentation

Conclusion / Recommendations

References
Introduction

Evolution of COVID-19 in the Philippines

It took some time before there were any confirmed COVID-19 cases in the Philippines.

The first COVID-19 case in the Philippines was officially certified by the Department of Health

(DOH) on January 30, 2020. The nation's first COVID-19 death was reported on February 2.

The initial local transmission of the coronavirus sickness was not reported until March 7th.

Global economies implemented lockdown measures as a result of the COVID-19

pandemic's escalation. In the Philippines, immediate consequences on industries, businesses,

and workers were observed. On 11 March, the World Health Organization (WHO) declared

COVID-19 as a global pandemic. The next day, it was announced that Metro Manila would be

placed under a strict community quarantine for one month starting on March 15 in an effort to

stop the spread of COVID-19. Along with this step, there were prohibitions on mass gatherings,

closing of schools, and halt on domestic land, sea and air travel to and from Metro Manila (ILO,

2020).

The acceleration of the COVID-19 pandemic resulted in lockdown measures across

economies worldwide. In the Philippines, immediate effects on sectors, enterprises and workers

were felt. On 11 March, the World Health Organization (WHO) declared COVID-19 as a global

pandemic. The following day, it was announced that Metro Manila will be put on strict

community quarantine for a month starting 15 March in order to curtail the spread of COVID-19.

Alongside this measure was a halt on domestic land, sea and air travel to and from Metro

Manila, plus a ban on mass gatherings as well as the closure of schools (ILO, 2020).

On 16 March, the President of the Philippines declared a State of Calamity for the entire

country in the next six months. This measure enabled local government units (LGU s) to tap

their local calamity funds for COVID-19-related expenditures. It also extended the strict
lockdown policies in Metro Manila to the entire island of Luzon. The most stringent restrictions

were applied under this lockdown category, officially known as enhanced community quarantine

(ECQ) and later on had varying levels of stringency.

As described by Gregorio (2020), under ECQ protocols, the movement of people was

severely restricted. Mass public transportation services were suspended, while land, air, and

sea travel were restricted. The restrictions included transport network vehicle services. All

establishments were closed, except those that provide necessities like supermarkets,

convenience stores, hospitals, medical clinics, pharmacies, banks, food preparation and

delivery services, and water-refilling stations. Government offices, business process outsourcing

companies, and export-oriented industries were allowed to operate with skeletal staff. Work in

the private sector went on under work-from-home arrangements.

The Philippine government's COVID-19 policy response

Lockdown measures were carried out despite problems or worries about finances,

employment prospects, food security, available space, and population congestion. The health

crisis' unpredictability and the effects it had on the economy harmed the financial industry, a lot

of businesses, and ultimately the general populace. These businesses generate goods and

services, employ Filipinos, pay taxes, and contribute to the nation's economy. In this context,

the State needs to mobilize its limited resources to aid the most vulnerable and impacted

sectors and to fortify these sectors in order to facilitate a quicker and more sustained economic

recovery.

The Duterte administration sought the support of Congress to legitimize emergency

powers for the president to deal with the COVID-19 crisis. Republic Act No. 11469, otherwise

known as the Bayanihan to Heal as One Act, was enacted on March 25, 2020. It grants special

powers to the executive department and contains policy measures to curb the spread of the

virus, strengthen the healthcare system, and provide the affected sectors with social assistance.
The law authorized the government, among other things, to provide emergency subsidies to 18

million low-income households, reappropriate and realign the 2020 national budget, direct the

local government units to comply with national government guidelines, and direct the operations

of privately owned hospitals and health facilities to function as COVID 19 hospitals or quarantine

facilities, provides prompt testing for patients, and provides compensation insurance for front

line health workers. It also provides laws on profiteering and price manipulation (Vallejo & Ong,

2020).

The Philippine economy

The Philippine economy had been growing healthily at above 6 percent yearly for eight

years, when the COVID-19 pandemic crisis struck the world and the global economy. In terms

of macroeconomic fundamentals—still steady growth, well-controlled inflation, low interest rates,

and a solid fiscal position—the nation appeared to be relatively invincible to economic shocks.

Yet, this crisis was unique since it featured a public health shock that required robust public

health measures, which in the Philippines' instance included strict lockdowns and prolonged

quarantines. Consequently, the Philippines remains one of the most severely hit economies by

the COVID-19 pandemic.

The global pandemic and the Philippines' lockdown had a significant negative economic

impact. According to the Philippine Statistical Authority (PSA), tight lockdown measures were a

major factor in the economy's second quarter decline to 16.5%. The decline was much greater

than the 9% reduction predicted in a Reuters poll of analysts, making the Philippines the second

Southeast Asian nation, after Singapore, to enter a recession amid the coronavirus pandemic

(Dela Cruz & Morales, 2020).

The Philippines is currently experiencing its first recession in 29 years, breaking a pre-

pandemic trend in which it was one of Asia's economies with the fastest growth rates. A record-
breaking unemployment rate of 17.7% was also announced by the PSA in April 2020 as a result

of the lockdown (Lopez, 2020). With the rising unemployment, lower consumption and other

effects on the economy then follows.

Prior to the epidemic, the Philippines had one of Asia's fastest-growing economies, but

by 2020, the government anticipated a 5.5% loss in GDP, which would be the largest annual

decline in 35 years. The earlier prediction called for a decline of 2.0–3.4%. The administration

anticipates a recovery in the economy in 2021 and 2022.

Given that the central bank already reduced interest rates to historic lows in 2020 and

that economists believe there is limited room for more monetary easing as inflation increases,

pressure is rising on the government to provide more extensive support. In 2020, the central

bank cut interest rates by a total of 175 basis points, bringing them to a record-low 2.25%.

As inflation reached a six-month high of 2.7% in July, above the central bank's main

interest rate, it is "fundamentally difficult to further cut local policy rates at the present,"

according to Michael Ricafort, economist at Rizal Commercial Banking Corp.

According to experts, policy support will need to come from either further government

stimulus or further decreases in the reserve requirement ratio for banks, which would add

liquidity to the market.

Identification / Acknowledgement of Possible Objections

Aside from causing destruction to public health and the global economy, the coronavirus

epidemic is causing widespread disruptions in democracy and governance. It came at a time

when democracy was already in danger in many countries, and it runs the risk of accelerating

democratic regress and authoritarian consolidation. Some governments have already abused

the pandemic to strengthen the executive branch and curtail personal freedom.
 The Philippine response to COVID-19 has been described by Maru (2020) as being one

of the longest and strictest lockdowns in the world. Entire provinces and cities were put into

lockdown, mobility was restricted, and the wearing of masks and social distancing were strictly

enforced. Violations were met with punitive action. The government relied heavily on the police

and the military to ensure that order was maintained and that all health protocols were followed.

This has led some observers and scholars to describe the government response as either

“draconian,” “militarised,” or “police-centric”.

In an article by Hapal (2021), he argued that: 1) the government’s draconian response

was a consequence of securitising COVID-19, where securitisation was produced by framing

the pandemic response as a war against a so-called “unseen enemy,” characterized by an

observation of the overall militaristic and police-centric approach of the government, and 2) the

Philippines’ response reflects a continuation of President Duterte’s populistic brand of

leadership where such populism relies on the depiction of a bifurcated society – elite versus the

masses, criminals versus law-abiding citizens, the corrupt versus virtuous citizens.

A rapid global expansion of executive power is being caused by the pandemic, as many

observers have started to note, with potentially grave ramifications for democratic space. This

push for increased emergency powers and restrictions highlights four interconnected areas of

concern according to Brown, et. al (2020).

First, centralization of power. Illiberal leaders are using the crisis as an opportunity to

further undermine accountability systems and check-and-balance systems, solidifying their

control over society. In the Philippines, the parliament passed legislation granting President

Duterte nearly limitless emergency powers. Similar to this, a new proposed law in Cambodia on

a state of national emergency would grant the government the use of military force while

severely restricting civilians' political rights.

Second, abridgement of fundamental rights. Some authorities are already restricting

citizens' fundamental rights in the name of the crisis. One trend that stands out in particular is
the tightening of restrictions on free speech and the media, under the guise of fighting

“misinformation” about the virus.

Third, expanded state surveillance. The crisis is also hastening the use of new

surveillance tools by governments. Governments are using smartphone location data, for

instance, in Israel and South Korea to find residents who may have been exposed to the virus.

New entrants in Hong Kong are required to wear electronic location-tracking wristbands, while

Singapore does intensive contact tracing and makes each known case's information public.

Fourth, banishing protests. Governments run the risk of using the present crisis to limit

public gatherings as an excuse to repress the surge of anti government protests that have

agitated global politics over the past several years.

Looking ahead, all domestic and international actors concerned with the future of

democracy must keep a careful eye on the pandemic's broad and swiftly evolving political

implications, act quickly to mitigate any potential harm, and grab any chances the crisis may

bring for progress. The sustained dominance - and even increased consolidation - of the

Executive Branch over the other departments of government, particularly with a popular

President, could be a long-term consequence of this experience with emergency power.

Argumentation

Along with the president’s new powers came numerous criticisms especially on matters

of it being abused. However, in my opinion, being granted the emergency powers was what the

country needed at that time. It served as an urgent measure to combat the crisis.

As highlighted by Atienza (2020), in terms of impact, the government's ability to upgrade

and establish COVID-19-specific facilities helped to avoid the Philippines' total healthcare

capacity from being overwhelmed by the pandemic during the strict lockdown period. Testing
gradually improved, but not enough because of operational problems including a staffing and

supply shortage. Also, there are issues with contact tracking because there is not enough staff

to assist these initiatives. Yet now that the nation's severe lockdown restrictions have been

lifted, the number of cases is continuously increasing, and many hospitals have already reached

capacity.

External support was also present where the World Bank supported the country’s efforts

to scale up vaccination, strengthen its health system, and counter the impact of the pandemic,

especially on the poor and the most vulnerable. The Philippines COVID-19 Emergency

Response Project was organized to support the procurement and deployment of 33 million

doses of COVID-19 vaccine across the country. The project funded purchases of emergency

medical/laboratory equipment and supplies, ambulances, and civil works, including the

construction of negative pressure rooms for frontline health facilities. The project also supported

pediatric vaccination for 7.5 million Filipino children.

Monetary Policy Response

Bayanihan I provided for a 30-day mandatory grace period for the payment of loans (i.e.,

a moratorium on interest payments, penalties, fees, and other charges), including credit card

payments, that fell due within the ECQ period. Subsequently, Bayanihan II allowed for a 60-day

mandatory grace period for all loans that fell due until the end of 2020.34 The law also granted

regulatory relief to banks and nonbank financial institutions opting to extend or restructure their

loans.35 It notably allowed exemptions of these loans from NPL reports. (Reyes, 2022)

Bayanihan II likewise encouraged the BSP and the Securities and Exchange

Commission to temporarily relax regulatory and statutory restrictions and requirements to

encourage banks and other financial institutions to lend or offer other forms of financial

accommodation. This was intended to help businesses recover from the COVID-19 crisis and

enable banks to manage their risks better. (Reyes, 2022)

The fiscal policy response correspondingly focused on addressing the public health

crisis and providing relief to affected sectors in the initial stages.

Apart from allowing a stronger health-related response to the pandemic, Bayanihan I

notably provided for the government’s Social Amelioration Program (SAP), which aimed to

provide cash subsidies of between PHP 5,000 to PHP 8,000 a month, for two months, to low-

income households. About PHP 211.4 billion was allotted to the program in 2020, equivalent to

around 1.1 percent of GDP (DBM 2020b). The law also incorporated a wage subsidy for small

businesses and support measures for workers, especially those disadvantaged and displaced

by the pandemic, including OFWs (nearly PHP 65 billion); greater spending for learning

continuity in basic education (about PHP 11 billion); support for agriculture through diverse

programs; and some regulatory relief (e.g., delay in statutory deadlines for payment of taxes

and related fees and charges). The government also offered off-budget support to MSMEs and

agriculture in the form of credit guarantees worth a total of PHP 120 billion. All in all, the fiscal

package amounted to PHP 506.1 billion during the emergency relief stage, or about 2.6 percent

of GDP. (Reyes, 2022)

Bayanihan II included more fiscal stimulus measures to smoothen economic recovery. It

allowed the President to continue managing the national budget to address the public health

emergency and maintain some of the social protection and regulatory relief features of

Bayanihan I (e.g., cash subsidies and various payment moratoriums), alleviating some of the

uncertainty. It provided for another fiscal package worth up to PHP 165.5 billion (0.9% of GDP),

consisting of PHP 140 billion in supplemental spending for 2020 and a PHP 25.5-billion standby

fund that can only be used if additional funds can be generated from savings or unused

amounts. Bayanihan II also offered support to sectors severely affected by the pandemic, such

as transport (PHP 9.5 billion) and tourism (PHP 4.1 billion), and the disadvantaged in agriculture

and fishery (PHP 24 billion) to also raise productivity and ensure food security.42 It had more
traditional job-creating stimulus features than Bayanihan I, such as in the form of cash-for-work

programs (>PHP 13 billion) and the hiring of contract tracers to help contain the COVID-19 virus

(PHP 5 billion). (Reyes, 2022)

Furthermore, the use of emergency powers brought positive lessons about the

galvanization of more citizens and groups scrutinizing government actions and responses to the

pandemic, building of coalitions among various political groups and sectors including health

workers calling for faster government action on various issues and reforms in various political

institutions and processes, pro-active local governments and local officials responding to the

challenges of the pandemic in innovative ways, civil society and private sector groups

responding to the needs of sectors affected negatively not only by the pandemic but also by the

lockdown, greater demand and appreciation for verified, accurate information and data provided

by the academe and other sectors independent of government, increasing support for media

freedom, and relentless attempts to file cases in the Supreme Court about the constitutionality

of various laws and actions, including not just the Bayanihan Act but also the Anti-Terrorism Act.

Lastly, the government launched a 4-pillar socioeconomic strategy against COVID 19,

which includes support to vulnerable groups and individuals, expanded resources for frontline

medical workers, as well as fiscal and monetary measures (IMF, 2021). And, a 4-pillar labor

market policy which concerns stimulating the economy and employment, supporting enterprises,

jobs and incomes, protecting workers in the workplace and relying on social dialogue for

solutions (ILO, 2020).

We have seen several extraordinary measures taken by many nations in response to

COVID-19. Many of those measures make sense and still there are some who contest the

ground for restricting freedom in light of the pandemic. Truly, crisis-related risk and opportunity

are frequently two sides of the same coin. (Gross, 2020)

The risk in such challenging times is not limited to the threats that are so obvious, such

as terrorist attacks, hurricanes, an economic collapse, or pandemics. It also stems from the

reality that times of crisis give governments—democratic and authoritarian—a chance to

increase and expand their authority, often at the price of people's rights, liberties, and freedoms.

Other governments might be less willing, at least initially, to increase their own powers

and authorities, persuading both themselves and the people that such expansions and

concentrations of power, when they occur, are only a temporary and necessary evil required to

successfully address the specific challenge.

With the emergence of the pandemic, the government has stepped up their monetary

and fiscal responses to the COVID-19 pandemic. Nevertheless, authorities have reacted rather

quickly, and the majority of the policies they implemented coincided with the evolving agreement

regarding the optimal course of action for a pandemic recession.

Moreover, Molloy (2020) presented the following ways to reduce potential harm and

better manage the crisis should it happen again.

First, seize the opportunity to scrutinize outdated legislation that has been exploited to

engage in an emergency response that benefits the incumbent powers. These legal groundings

should be updated to harmonize legal frameworks and to ensure that a rule-of-law-based

response can be adopted in the future.

issues of overlapping jurisdiction and distribution of powers to solve multi-layered governance

could be focused on. This process should entail properly delineating responsibilities, addressing

the lack of intergovernmental coordination mechanisms and institutions and their capacity, and

building the capacity of sub state entities to respond to external shocks.

Third, recognize the problems associated with systems in transition and work with

political party representatives to understand the legal framework that may be used in

emergencies, and its limitations, as well as the issues (e.g. related to rights or the rule of law)

they need to pay special attention to.

Lastly, an article released by World Bank (2022) mentioned that the Philippine

government is taking into consideration more funding to expand testing capacity. Through the

Philippines COVID-19 Emergency Response Project, civil works ordered by the project are now

in use, and equipment has been obtained. For the project's ongoing execution of the

environmental and social safeguards used, such as COVID-19 waste management and

evaluation of vulnerable groups' access to healthcare services, an action plan is now being

established. These will be institutionalized using the manuals developed and through directive

issuances by the Department of Health. The project also supports the development of the

National Action Plan Towards Increased Accessibility of Health Care Facilities for Vulnerable

Groups. The World Bank is also supporting the Department of Health and priority LGUs in

strengthening local health systems for Universal Health Coverage.

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democracy and governance globally? https://carnegieendowment.org/2020/04/06/how-

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grim year on virus woes”. Reuters. https://www.reuters.com/article/us-philippines-

economy-gdp-idUSKCN25208X

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