Companies and industries pummelled by COVID-19 may get help through capital infusion but this would not be free and would come with conditions, the country’s chief economist said on Friday (May 15).
Acting Socioeconomic Planning Secretary Karl Kendrick T. Chua said the proposed Philippine Program for Recovery with Equity and Solidarity, or PH Progreso, being pitched by the Duterte economic team to Congress seeks to grant large companies “equity support to match bank lending with conditions.”
“I remind everyone and the industries who are asking for help the two economic principles—number one, nothing is free from heaven; number two, there’s a trade-off—and we will apply them,” Chua told members of the Financial Executives Institute of the Philippines (Finex) during its general membership meeting.
“We are concerned about the plight of the tourism and the airline industries, especially because they were affected as early as January when Taal Volcano erupted,” Chua said.
“And we think there are multiple ways of supporting them,” Chua added. This week, airlines sought P8.6 billion in monthly subsidy as they reeled from losses inflicted by the COVID-19 pandemic on domestic and global travel.
“To some extent, the problem is temporary, and so liquidity would be the way to help them,” said Chua, who heads the state planning agency National Economic and Development Authority (Neda).
“Some have problems beyond liquidity. That is why we have a program to infuse capital also,” he said.
But Chua said equity infusion must be “very targeted, time-bound, and with conditions.”
“We are in discussion with Congress about the mechanism to have that,” Chua said.
So far, the tourism and travel sectors were the worst-hit by weak global demand, Chua said in an earlier interview with Bloomberg TV. But he said the government was open to helping “many more” industries.
Despite the government’s plan to step in, industries themselves should “rethink their business strategy,” Chua said.
For instance, he said, “hotels, motels or hostels that rely on tourists will have to rely probably on workers who need to be closer to their work or office” under a new normal.
“New business models are also important” so that affected companies and sectors could recover, Chua said.