Gov’t eyes pumping P100B into emergency vehicle to save virus-hit firms

To save ailing corporations from the economic fallout due to the pandemic, lawmakers and the Department of Finance (DOF) are proposing to inject as much as P100 billion in capital to a state-run “emergency” vehicle.

In a presentation before members of the Philippine Exporters Confederation Inc. last Tuesday, Albay Rep. Joey Salceda said the House of Representative’s econo­mic stimulus package included a national emergency investment vehicle, which would serve as “the Philippines’ asset management and equity participation instrument.” The stimulus bill is meant to address the impact of COVID-19, or the disease caused by the new coronavirus, on businesses that were forced to limit operations as the country entered a long quarantine period.

The vehicle would be a “flexible mechanism for the government to enter into joint venture agreements or equity-participation schemes into troubled enterprises with critical economic roles,” said Salceda, who is cochair of the House economic stimulus response package cluster.

In the House proposal, the state-run National Development Co. would act as the vehicle and step in to bail out firms via equity or loan. The agency would need an initial P50 billion—P25 billion each this year and next year—in funds, although authorized capitalization would be up to P100 billion.

Finance Undersecretary Gil Beltran said in a text message the House proposal was similar to the DOF’s plan to form a joint venture firm between Development Bank of the Philippines and Land Bank of the Philippines to save the businesses.

Since a law was needed for this new government-owned and/or -controlled corporation, its capitalization would be funded by the national budget, Beltran said.

During last Monday’s virtual Sulong Pilipinas forum, Finance Secretary Carlos Dominguez III said “we intend to invite multilateral agencies, foreign and domestic investment companies to participate in this company.”

He said manufacturing and transport firms could later on tap this vehicle.

However, certain conditions must be met, he added. “Among the conditions are: limits to dividends; nondilution of equity; limits on bonuses and allowan­ces, retention and incentives of senior executives; clawbacks on bonuses; and no golden parachutes. Luxury expenditures related to entertainment or events, office and facility renovations, private aviation and transportation services as well as other expenses not related to the normal course of business will have to be curtailed,” Dominguez said.