THE House Economic Stimulus Response Package Cluster on Tuesday proposed measures to flatten the recession curve and restore the country’s growth as the Philippines is expected to lose P1.08 trillion due to the Covid-19 pandemic.
The cochairman of the House Economic Stimulus Response Package Cluster, Albay Rep. Joey Sarte Salceda, proposed structural adjustment plans, which include a Negative Interest Loans (NIL) plan, a P350-billion loan package to provide loans at negative interest in exchange for worker retention.
Under the proposal, the maximum loanable amount shall be 50 percent of the company’s direct labor costs and the loan shall be payable for three to five years, with the corresponding interest rates as follows: three years, -9 percent, four years, -7 percent, and five years at -5 percent.
“The negative interest rate benefit will be reduced by 3 percent if the company violates the worker retention condition, 6 percent if those terminated comprise 1 percent to 5 percent of the firm workforce, 9 percent if at more than 5 percent to 10 percent of work force, and 12 percent if more than 10 percent of work force is terminated,” said Salceda, also the House Ways and Means Committee chairman.
“To ensure that eligible micro, small, and medium enterprises [MSMEs] will have access to negative interest loans, LandBank and DBP shall open an SME Safeguard Facility dedicated exclusively to these enterprises,” he added.
Salceda said the economic cluster also proposes a Credit Refinancing and Mediation Service (CRMS) to ensure that MSMEs can fulfill obligations under more favorable terms of credit.
With CRMS, he said the Small Business Corp. can provide an MSME Credit Mediation and Restructuring Service to help it negotiate more favorable credit terms with banks, lending institutions and financial intermediaries; provide technical advice and assistance with credit mediation; and offer loan guarantees and direct loans with favorable terms for refinancing the obligations of MSMEs.
Salceda also included in the structural measures the creation of a National Emergency Investment Corp. (NEIC), similar to the Power Sector Assets and Liabilities Management Corp. (PSALM Corp.) and the Central Bank-Board of Liquidators (CB-BOL) to act as a consolidator of private-sector debts, to service these debts in exchange for equity, and yield returns for the government.
“The NEIC will minimize permanent damage to the economy by bailing out firms who would go bankrupt because of current Covid-19-driven difficulties, but which would otherwise be profitable under different conditions,” Salceda said.
The NEIC will have these functions:
■ Consolidate troubled businesses and decide simultaneously how these would be resolved in a common procedure;
■ Offer loans in exchange for equity of the same value in corporations that would otherwise have continued operations but are at risk of bankruptcy due to the impact of Covid-19;
■ Assume, in exchange for equity of the same value, the financial obligations of corporations that would otherwise have continued operations but are at risk of bankruptcy from the pandemic’s impact;
■ Evaluate the performance and ensure good corporate governance in the corporations it is invested in;
■ Perform due diligence activities inherent in its nature as a capital allocation firm of the government; and
■ Perform such other functions as may be inherent or necessary to dispense of its role as a capital allocation firm from which reasonable returns are expected.
As Salceda’s proposals are loan-based, most of them are recoverable, and the net f wiscal cost will only be around 30 billion (for the negative interest benefit).
“This is the fiscally sustainable way to go,” said the House’s tax chairman. “In fact, we may also get revenue because of NEIC.”
Stimulus package
Marikina Rep. Stella Luz Quimbo estimated the potential loss of the Philippines in GDP due to Covid-19 is P1.08 trillion.
“Going from target 6+ percent growth to close to zero-percent growth—the loss is P1.08 trillion. So if the government spends P1 on infrastructure, this P1 will spur activity in related sectors like construction materials and trucking. So, in the end, the P1 spending of government will result in a P1.53 increase in GDP,” said Quimbo.
“With a multiplier of 1.53, dividing 1.1 trillion by 1.53 yields a required spending of about P700 billion,” she added.
Quimbo, an economist, said the government is already set to spend P330 billion for the implementation of the Bayanihan to Heal as One Act.
“[Of the P700 billion], P370 billion is [the] amount for fiscal stimulus package geared [toward]labor retention via business continuity,” she said.
Quimbo said her recently filed bill provides for subsidies, grants, loans, and other forms of aid to businesses totaling P370 billion, broken down as:
■ P110 billion for private businesses whose operations were temporarily disrupted during the ECQ but continued to shoulder payroll costs;
■ P1 billion for employees who contracted Covid-19, to ensure that sick leaves are fully paid;
■ P100 billion for government financial institutions so they can increase their ability to assist the private sector in managing their loans;
■ P50 billion for the estimated 1 million MSME establishments;
■ P43 billion for all sectors constituting the tourism industry; and
■ P66 billion for exporters or importers, particularly, in manufacturing.
For her part, House Committee on Economic Affairs chief Sharon Garin said over 1 million businesses need government help so they can help 30 million families.
“Business owners, waiters, managers, janitors, drivers, accountants, lawyers and all Filipino employees whether white or blue collar, in Metro Manila or in the provinces, salaried or daily-wage earners, need government intervention in order to help them out of this predicament. During ECQ we need to safeguard Filipino lives, but after ECQ we need to safeguard their livelihood,” she said.
Garin said there are 30 million daily-wage or informal workers—the most vulnerable should economic activity slow down post-ECQ.