The House Committee on Ways and Means approved Monday a bill granting incentives and exemption privileges to government financial institutions, including the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), to further strengthen their capacity to assist the country’s micro, small, and medium enterprises (MSMEs) unfavorably affected by the COVID-19 crisis.
In a virtual meeting, the House panel, chaired by Albay Rep. Joey Salceda, passed the substitute bill for House Bill No. 6795 or the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act, which is principally authored by Quirino Rep. Junie Cua, chairman of the House Committee on Banks and Financial Intermediaries.
Salceda expressed his panel’s full support to the measure, which seeks the creation of a holding company called Accelerate Recovery to Intensify Solidarity and Equity (ARISE) that will infuse equity under strict conditions to strategic enterprises, and will make more loans available to MSMEs.
“GUIDE was the culmination of our work on structural credit reforms, starting with what I then proposed to be the National Emergency Investment Corp., which became the ARISE Inc. under this proposal,” he said.
Salceda recalled that two weeks ago, he recommended to House Speaker Alan Peter Cayetano, in an aide memoire, the inclusion of the GUIDE provisions in House Bill No. 6953 or the proposed Bayanihan to Recovery as One bill (Bayanihan 2), which is expected to be passed on third and final reading Monday. The proposed P162-billion Bayanihan 2 provides P51 billion to help MSMEs.
He said the House leadership adopted his recommendation.
“We heard the substitute bill to GUIDE still, as a matter of the committee’s regular practice. This also manifests that we fully support the provisions in the proposal,” he said.
Cua thanked the Salceda panel for its “speedy action” on the measure.
The bill aims to provide financial assistance to distressed enterprises critical to economic recovery through programs and initiatives to be implemented by Philippine Guarantee Corp. (PGC), LBP, and DBP, “for purposes of addressing liquidity or solvency problems of MSMEs and strategically important industries, encourage their continued operations, and maintain employment levels.
“The refinancing and equity rescue portions of GUIDE are critical to economic recovery,” Salceda stressed.
The Salceda panel nodded to Section 16 of the proposed GUIDE Act which grants exemption privileges to the PGC, LBP and DBP, and to the ARISE, a special holding company that will be created by LBP and DBP.
ARISE, under the bill, seeks to rehabilitate strategically important companies affected by COVID-19 pandemic which are experiencing solvency issues, such as those with considerable impact on the economy, including those from the agriculture, infrastructure, service industry, and manufacturing industries, and other industries to be identified in the implementing rules and regulations.
“When my office was studying the core ideas that became GUIDE, we wanted to ensure that no strategic enterprise would go bankrupt. Many businesses – either by their size or by their relationship with other enterprises – are systemically important, and their closure carries systemic risks. That’s why it is important that we establish a national emergency investment vehicle,” Salceda said.
“It’s like government buying the dip. These are enterprises that would not have failed under better conditions. So, once we are able to bridge them towards better times, the government’s financial position stands to benefit immensely,” Salceda, who was among the country’s leading equity analysts in the 1990s, added.
The unnumbered substitute bill grants incentives and exemption privileges to PGC, LBP and DBP, and to ARISE and its subsidiaries, including exemption from payment of documentary stamp tax, capital gains tax, creditable withholding income tax, Value-Added Tax, gross receipts tax, and other taxes imposed under the National Internal Revenue Code of 1997.