By Elijah Felice E. Rosales & Jovee Marie N. Dela Cruz
The Department of Trade and Industry (DTI) has called on lawmakers to legislate the proposed stimulus package in time for the expected lifting of quarantine restrictions since the measure will ensure that more than P600 billion is available to shore up the finances of troubled companies.
In a news statement, Trade Secretary Ramon M. Lopez said the DTI is seeking for the urgent approval of the Philippine Economic Stimulus Act (PESA) filed in Congress. He argued that the proposed law will secure sufficient funding once the state embarks on a rescue mission to save businesses adversely affected by the lockdown.
In the House of Representatives, meanwhile, lawmakers are now rushing to approve two economic measures to mitigate the impact of Covid-19 to businesses and the banking sector.
This after the House Defeat Covid-19 Committee (DCC) approved the proposed P1.3-trillion Philippine Economic Stimulus Act and the Financial Institutions Strategic Transfer (FIST) Bill.
Restart
HOUSE Majority Leader Martin Romualdez, co-chairman of the DCC, said these bills will now be transmitted to the plenary for another round of deliberations.
Romualdez said these proposals are both seeking to restart the economy severely affected by the Covid-19 pandemic.
“These measures are not the panacea to all our problems. But these pieces of legislation may be considered as the next step in our calibrated response to ease the suffering of our people,” the lawmaker said.
“We all know that these dole-outs are not forever. We have to jump-start our economic activities, while keeping our people healthy, the soonest time possible to ensure our survival as a nation,” he added.
Timely passage
THE DTI chief declared: “We affirm the need to sustain the income of workers and businesses adversely impacted by the pandemic as we gradually reopen our economy.”
Passing the PESA bill the soonest will be timely, he added, as most of cities are expected to have their lockdown restrictions eased by end of May. With funding in hand, Lopez explained that it will secure the sustained operations of private firms, as well as the continued employment of workers.
“By providing working capital assistance, technical and entrepreneurial education, and financial management, among others, we will be able to protect Filipinos by ensuring businesses will continue operating post-lockdown and help turn the tide for businesses and workers affected by the health crisis,” Lopez said.
The PESA bill seeks to earmark P1.3 trillion for the government to utilize post-lockdown efforts. It aims to inject cash in various sectors to keep the economy afloat, inserting at least P650 billion for an expanded infrastructure program on health care, education and food security.
In particular, the PESA bill will allocate P300 billion for the National Emergency and Investment Corp. to be used to alleviate the damage of the coronavirus pandemic to the economy.
Further, it will set aside P200 billion for the wage subsidies and the grant of interest free loans to micro, small and medium enterprises. Also, P128 billion will be allotted by the measure for the credit mediation and restructuring guarantee fund, an expanded loan portfolio that will cover all critically impacted businesses nationwide.
All in all, the measure is filed to restore business confidence and operations, as well as to prevent firms from shutting down operations due to losses incurred for the duration of the lockdown.
“Businesses have already lost a significant amount of income due to the challenges in logistics brought about by the ECQ [enhanced community quarantine],” the trade chief lamented.
“As we work towards the gradual lifting of the quarantine, more businesses will be able to operate, but at lower capacities due to limited capital resources that dwindled during the quarantine period. There are also strict health measures that are being imposed and the firms would need working capital loans,” he added.
Initial allocation breakdown
FOR his part, House Committee on Ways and Means Chairman and Albay Rep. Joey S. Salceda, one of the principal authors of the proposed PESA, said this program is an employment protection stimulus for 30 million workers.
The proposed PESA includes:
- P10 billion for massive testing this year and another P10 billion next year.
- P110 billion this year for payroll expense subsidy, which requires employee retention to qualify for subsidy. This would include self-employed, freelancers and overseas Filipino workers.
- P30 billion for cash for work of the Department of Labor and Employment this year.
- P15-billion assistance to students.
- P50 billion for Small Business Corp.’s (SBCorp) existing loan programs for MSMEs this year and another P25 billion next year.
- P50-billion program for SME and agro-fishery this year under the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines’s (DBP) Interest-Free Loan Program.
- P40 billion this year and another P20 billion next year as loan guarantee by Philippine Guarantee Corp.
- P10 billion to DTI as additional assistance to MSMEs this year.
- P58 billion to the Department of Tourism (DOT) as assistance to the tourism industry this year.
- P44 billion this 2020 to the Board of Investments (BOI) for grants and technical assistance to business entities engaged in exporting, or importing, and those manufacturing new products and services to meet the needs of the domestic market, in order to restore, or identify new global market trends to increase competitive advantage.
- P70 billion to the Department of Transportation (DOTr) as assistance to the transportation industry this year.
- P56 billion as assistance to the country’s agro-fishery this 2020.
- P25 billion this year and another P25 billion next year to National Development Company (NDC) to minimize permanent damage to the economy and enable faster recovery of certain critically impacted businesses.
Also, the proposed PESA will include an enhanced “Build, Build, Build” (BBB) program worth P650 billion in three years starting 2021. The bill allocates P216.6 billion next year for the BBB program.
FIST
TO complement the proposed PESA, the House DCC also approved the Financial Institutions Strategic Transfer Bill (FIST).
House Committee on Banks and Financial Intermediaries Chairman Junie Cua said the FIST bill seeks to help banks and other financial institutions from the impact of the Covid-19.
“This bill actually is a program. It is a proactive response of Congress to address the plight of the banking industry, an industry so important to our economic recovery in the light of this Covid pandemic,” he said.
“Now the concern of the banking industry is the inevitable increase on their nonperforming loans, or their nonperforming assets and this is inevitable because as everybody would expect because of the closing of businesses as a result of the enhanced community quarantine, there is an expected huge failure of these businesses to bid maturing obligations,” he added.
According to Cua, the banking sector must continue to provide credit since this sector “has to be liquid all the time to be able to meet the continuous flow of credit to the economy, the very lifeblood of economic activity.”
The FIST aims to help financial institutions in their bad debt resolution and management of their nonperforming assets (NPAs) in order to cushion the adverse impact of the pandemic on their financial operations.
To date, as a result of the pandemic and disruption of economic activities, Cua said most financial institutions are facing a period of delayed loan collections and are at risk of recording higher NPAs across all borrower segments.
NPAs consist of financial institutions’ nonperforming loans (NPLs) and real and other properties acquired (ROPAS) in settlement of loans and receivables.
According to Cua, NPAs prevent banks and financial institutions from effectively performing their crucial role of financial intermediation.
Citing the Bankers Association of the Philippines, Cua said simulation shows a potential increase in NPLs from an estimated 5 percent today to 20 percent or more in a matter of months.
The bill encourages financial Institutions to sell NPAs to asset management companies, created as Financial Institutions Strategic Transfer Corporations (FISTC), that specialize in the resolution of distressed assets.
‘Critical’
AS such, Lopez labeled it critical to pass the PESA bill on time, as this would give the government means to support firms and save the jobs of their workers.