Philippines eyes joint ventures, guarantees to save virus-hit businesses
MANILA, Philippines – The Philippine government is set to support businesses crippled by the coronavirus pandemic through liquidity or equity infusion or guarantees, depending on the size of the company.
Acting Socioeconomic Planning Secretary Karl Chua said in a virtual briefing on Thursday, May 14, that the government will be using taxpayers' money to get businesses out of financial trouble, while keeping in mind the risks involved and consumer confidence.
For micro firms or those that employ 9 employees or less, these companies can loan from microfinance institutions, cooperatives, as well as rural and thrift banks. (READ: 'Sariling diskarte': The heavy impact of lockdown on micro, small businesses)
These financial institutions would then be supported by Land Bank of the Philippines and the Development Bank of the Philippines. The state-run banks would "buy" loans granted by small lenders to small businesses in bulk.
For small and medium firms or companies that employ less than 200 employees, the government is eyeing credit guarantees through the Philippine Guarantee Corporation (PhilGuarantee) and wage subsidies.
Chua said in an interview with Bloomberg that PhilGuarantee may shoulder at least 50% of the loan risk.
For large businesses, the government is proposing "targeted equity support" which would match the loan needed by the companies.
Finance Secretary Carlos Dominguez III said a joint venture will be formed between the government and the distressed company.
The new company formed by the joint venture would then be "empowered to buy bonds, preferred shares, or common shares" of companies that need solvency support.
"In this new company, we will suggest we invite foreign investors like the World Bank and AIIB (Asian Infrastructure Investment Bank) and the ADB (Asian Development Bank) to make investments there," Dominguez said.
Chua added that businesses in the travel and tourism industries are among those widely considered for the equity infusion program.
Chua also said the joint venture agreements would be time bound and would have certain conditions to ensure that taxpayers' money will be spent well. – Rappler.com