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Hard climb to economic recovery

The bill is considered timely as the Philippine economy had shrunk by 8.3 percent for the fourth quarter of 2020, the year the Covid-19 pandemic had almost stalled global business.

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With the economic measures “still not enough” to fire off a quick recovery, the Senate on Friday moved to heed the call by the country’s economic managers for Congress to act on pending reform bills to stem the gross domestic product’s (GDP) downward trend.

Senate President Vicente Sotto III has filed a bill that seeks to assist strategically important companies (SIC) and micro, small, and medium enterprises (MSME) cushion the impact of the Covid-19 pandemic.

Sotto introduced Senate Bill (SB) 2003 or the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery. A similar bill was filed by Senator Imee Marcos last year.

The bill is considered timely as the Philippine economy had shrunk by 8.3 percent for the fourth quarter of 2020, the year the Covid-19 pandemic had almost stalled global business.

A joint statement released by President Rodrigo Duterte’s economic managers asked Congress to step up and ensure the long-term recovery of the economy by passing “not only our key economic bills but other pending measures that are immediately doable to attract more foreign direct investments and create more and better jobs.”

“We urge our legislators to swiftly pass the amendments to the Public Service Act, the Retail Trade Liberalization Act, and the Foreign Investment Act. All these are crucial in revving up the Philippine economy and sustaining its recovery,” the statement said.

“The measures complement other reforms we have done, such as the ‘Build, Build, Build’ program, Rice Tariffication Law, and the Ease of Doing Business Act,” it added.

The Development Budget Coordination Committee estimates that the economy will grow by 6.5 percent to 7.5 percent in 2021 and by 8 percent to 10 percent in 2022.

In his explanatory note, Sotto said there is a need to legislate a measure to complement the Bayanihan 1, Bayanihan 2, Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act and the Financial Institutions Strategic Transfer (FIST) Act.

He emphasized that the aforementioned laws are “still not enough” to bring back the economy on track and defeat Covid-19 at the same time.

Sotto said Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery bill will complete the country’s recovery plan.

The measure will target the transportation, storage, construction and manufacturing sectors which, according to the Philippine Statistics Authority in its 6 August 2020 report, are the main contributors in the decline of the Philippine economy.

“These particular sectors, among others, are the ones being targeted by the government to receive the needed assistance for them to be rehabilitated through this proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act,” he said.

SB 2003 will also assist the rehabilitation of SIC as these were acknowledged by the Department of Finance, Department of Budget and Management, and the National Economic Development Authority as vital to the economy considering their contributions to the gross domestic product.

“By helping save SIC, we help thousands of jobs that depend on these SIC, including the jobs associated with the SIC’s forward and backward linkages across multiple industries. This bill will likewise help lower the overall cost of borrowing for micro, small, and medium enterprises (MSME),” Sotto said.

Sotto noted the government’s economic cluster’s stand that the proposed GUIDE Act will “break the cycle” of deteriorating credit profiles, reduced investments, higher job cuts, financial market disruptions, slow economic recovery, and eventually deeper economic losses.

Under SB 2003, the Development Bank of the Philippines (DBP) and the LandBank of the Philippines (LBP) shall expand its loan program for qualified MSME affected by the pandemic.
The DBP and LBP may also rediscount loans to eligible MSME.

It likewise increases the DBP’s authorized capital stock from P35 billion to P100 billion to be divided into P1 billion common shares.

To help SIC, the measure will create an investment vehicle where the LBP and DBP will be authorized to invest in or enter into a joint venture agreement to incorporate a special holding company (SHC).

The SHC is a stock corporation to be organized under Republic Act 11232, or “The Revised Corporation Code of the Philippines,” within six months once the bill is enacted into law or from the day of effectivity of the rules and regulations of the measure.

It will have the powers granted to a stock corporation in accordance with RA 11232 and it will be governed by a nine-man Board of Directors.

The board will be composed of the Finance Secretary, LandBank president, DBP president, CEO or the SHC, two independent directors, and three directors who will be appointed by LBP, DBP, and the private equity investor.

The bill also gives emergency procurement privilege to LBP, DBP and the SHC subject to the rules under Negotiated Procurement under Emergency Cases under Section 53(b) of RA 9184, or the “Government Procurement Reform Act” for a period of three years.”

 

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