Leyte 1st District Rep. Martin Romualdez has filed the first bill in the 19th Congress, seeking to allocate P10 billion to two state banks to expand their lending capacities to micro, small, and medium enterprises (MSMEs) to help these recover from the Covid-19 pandemic.
Romualdez, a shoo-in for the House speakership, was the principal author of the bill co-authored by presidential son and Ilocos Norte Rep. Ferdinand Alexander “Sandro” Marcos, and Reps. Jude Acidre and Yedda Marie K. Romualdez of Tingog party-list.
House Bill No. 1, entitled, “An Act providing for government financial institutions unified initiatives to distressed enterprises for economic recovery (GUIDE),” allocates P7.5 billion to the Land Bank of the Philippines (LBP) and P2.5 billion to the Development Bank of the Philippines (DBP) or a total of P10 billion to help affected MSMEs in the agriculture, infrastructure, manufacturing, and service industries.
The bill also seeks to help “other strategically important companies (SICs)” heavily affected by the COVID-19 pandemic.
SICs include companies in agriculture, construction, education, food production, health care, infrastructure, socialized housing, manufacturing, power and energy, product distribution, retailing, services, tourism and hospitality, transportation and logistics, and water and sanitation.
“To this end, the government financial institutions are mandated to expand their credit programs in order to assist MSMEs to meet their liquidity needs. In particular, the LBP and DBP are mandated to expand their credit and rediscounting facilities to affected MSMEs in the agriculture, infrastructure, manufacturing, and service industries,” the bill said.
Under the bill, the term MSME “refers to any business activity or enterprise engaged in industry, agribusiness, and services, whether single proprietorship, cooperative, partnership or corporation” whose total assets, inclusive of loans but exclusive of the real estate, have a value of not more than P3 million for micro, P3 million to P15 million for small, and P15 million to P100 million for medium.
The GUIDE bill will also increase DBP’s capital stock from P35 billion to P100 billion, which will be divided into one billion shares of P100 each to be fully subscribed by the national government.
The President has the discretion to increase the bank’s capitalization upon recommendation of its board and the concurrence of the Secretary of Finance.
The proposed law also authorizes LBP and DBP to create a special holding company (SHC) “to further reinvigorate” MSMEs and SICs heavily impacted by the pandemic.
This holding company can be open for investment from the private sector. Still, the two state banks will retain majority ownership of the special firm until they have recovered their investment.
Expected to be a significant player in the financial industry, the holding company will be authorized to invest or place funds in equity, execute convertible loans or purchase convertible bonds and other securities in SICs, and incorporate subsidiaries.
The SICs, however, will not be allowed to reduce the number of employees to a certain level determined by the holding company.
They will also be limited in declaring their dividends and restricted in increasing salaries, separation, retirement pay, and other board benefits.
This ensures that the holding companies’ investments “are properly utilized, and SICs are successfully rehabilitated.”
The bill also grants certain tax exemptions to the two state banks and their holding company.
The measure creates a joint congressional oversight committee composed of five House members and five senators to oversee its implementation.