THE Land Bank of the Philippines (LANDBANK) said 15 listed companies “of strategic importance” could qualify for government assistance under a bill authorizing the injection of capital to key companies affected by the pandemic.
Speaking at a Senate hearing, Guian Angelo S. Dumalagan, a LANDBANK market economist, did not identify the companies the bank deems qualified. He added that the bank will also include unlisted companies in the pool of firms to be aided.
Government banks will get P10 billion to support strategically important companies if the proposed Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act becomes law.
The GUIDE bill provides P2.5 billion to the Development Bank of the Philippines (DBP) and P7.5 billion to the LANDBANK which they will invest in a special holding company that will assist eligible companies affected by the pandemic.
At the hearing, Senator Franklin M. Drilon said the P10 billion is inadequate and called into question the government’s priorities in light of the large amounts set aside for other budget items.
“Given the size of the contraction of our economy, among the worst in the world, 9.5% of GDP, which is about P1.5 trillion, I am tempted to say, and I’m saying it, that P10 billion as a rescue package is a joke,” he said.
“P10 billion is nothing… it’s a drop in the bucket… So I would add, either we add more funds or we strike out this program because it does not help us,” he said.
Mr. Drilon also noted the P19.5 billion appropriated for the anti-insurgency fund.
National Treasurer Rosalia V. de Leon said the P10 billion is currently what the government can afford given its fiscal position.
The strategically important companies and other businesses linked to them account for a quarter of the expected gross domestic product (GDP) for 2021, she said.
“Kahit ganun na small amount that we are providing… given po ‘yung kanilang importance to the economy, malaki po ang kanilang magiging resulta if we will not also assist these companies (Even though we’re providing a small amount to such companies, given their outsized importance to the economy, the effect will be bigger if we do not assist them),” she said.
Mr. Drilon said that the assistance should be increased as the companies are capable of generating more jobs to propel the economic recovery.
Mr. Dumalagan said if the 15 companies identified as potentially eligible for GUIDE were to close, some 119,403 workers would be unemployed. Mr. Dumalagan also noted that these companies’ supplier networks include many micro, small and medium enterprises.
“So if these companies were to fold, then those companies that are depending on them might (reduce) their employee levels as well,” he said.
He estimated the impact of the companies and their “backward and forward linkages” on the economy at P5.41 trillion.
Mr. Dumalagan said investing in the 15 companies could yield returns of 9.63% over five years if they were to pay dividends annually.
Ms. De Leon said the bill is structured to help “resuscitate” the distressed companies while ensuring that taxpayers are adequately protected if the bailouts fail to keep the companies alive.
The government is also in talks with multilateral agencies to fund the holding company later on.
She said LANDBANK and the DBP can also add their own capital to the fund from their retained earnings.
Mr. Drilon said the funds to assist the companies should come from the national budget.
“We should put more funds from the national budget, not from the funds of LANDBANK or the DBP because it can cause difficulties to their financial position. Remember there is a risk involved here since it’s entirely possible that we cannot recover these monies because you know nothing is certain,” he said. — Vann Marlo M. Villegas