₱10B bailout fund too small to revive ailing businesses, senators say

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Metro Manila (CNN Philippines, March 17) — Senators said the ₱10 billion bailout fund requested by the Department of Finance to save companies from going bankrupt during the COVID-19 pandemic is too small to make a dent in the economy.

A Senate body on Wednesday tackled the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery or GUIDE Act, another stimulus plan that will allow state-owned banks to invest in large firms in critical sectors like transportation––including airlines, retail trade, manufacturing, hotels and food service that face long-term cash flow issues after a year of lockdowns.

The lawmakers described the capital boost as anemic when compared to the ₱1.5 trillion economic losses last year that sent the country into a deep recession.

"I raise questions on the sincerity of the administration in helping our strategically important companies... These are companies that can save the employment of our people," Senator Franklin Drilon said.

"I am tempted to say that ₱10 billion as a rescue package is a joke, especially if you look at it in the context of a ₱19.5 billion anti-insurgency fund which is actually a pork barrel."

Drilon was referring to the budget given to the National Task Force to End Local Communist Armed Conflict, with ₱16.44 billion to be released as support to barangays once ravaged by armed attacks. Senators earlier questioned this allotment under the 2021 budget, saying it's money better spent on healthcare amid the coronavirus crisis.

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Senators Imee Marcos and Sherwin Gatchalian added they want to increase the capital made available to crippled companies, but National Treasurer Rosalia De Leon said ₱10 billion is what's available for now.

Guian Angelo Dumalagan, Land Bank of the Philippines chief market economist, said splitting the equity infusion across 15 "strategically important" firms would save 119,403 direct jobs and preserve over ₱5.4 trillion assets and production which would be lost if the companies shut down permanently. He added that up to 1,250 large companies may be in need of funding assistance to stay afloat.

After five years, Dumalagan said the best-case scenario would be for all 15 firms to generate a 9.63% return on investments, allowing the government banks to recover the capital. If two of the riskiest firms in the basket fail, government will recover only half the money infused in these establishments but will still make money from the operations of the 13 others.

De Leon said companies must not have any pending cases and should not lay off employees upon receiving the aid, with publicly listed companies at the Philippine Stock Exchange targeted for the stimulus. Salaries of top executives should also not be raised while the firm is benefiting from the capital boost, she added.

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