THE House of Representatives on Thursday approved in the third and final reading a bill to fund small businesses, particularly those crippled by the coronavirus disease 19 (Covid-19) pandemic and other significant economic challenges of national and international scope.
A staggering 282 yes votes were cast for House Bill 1, the Government Financial Institutions Unified Initiatives to Distressed Enterprises for Economic Recovery, or “Guide”, Act.
The legislation aims to provide financial support to ailing businesses that are vital to economic recovery. Support would be provided through Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP) programs and initiatives to address liquidity or solvency issues faced by micro, small and medium-sized enterprises (MSMEs). and strategically important industries, among others.
The support is expected to encourage continued operations and maintain employment levels at these companies.
The bill also expands LBP, DBP, Small Business Corp.’s loan assistance programs, rediscounting and other lending capabilities. and the Agriculture Credit Policy Council (DA-ACPC).
HB 1 also identifies sectors and intended beneficiaries of various credit facilities as follows: for LBP, actors involved in activities in the agribusiness value chain; and MSMEs eligible for the DBP that are active in infrastructure, services, service industry and/or manufacturing companies.
The draft law defines MSMEs as “any business or enterprise engaged in industry, agribusiness and/or services, whether sole proprietorship, cooperative, partnership or corporation, all of whose assets, including those arising from loans, but excluding the property on which the relevant business is located, office, plant and equipment of the company.”
These assets must have a value falling within the following categories: no more than P3 million for micro-enterprises; P3 million to P15 million for small businesses; and 15 to 100 million pesos for medium-sized companies.
LBP would be mandated to rediscount loans to eligible MSMEs.
The proposed law provides for an amount of P10 billion for the expanded loan program: P2.5 billion for DPB and P7.5 billion for Land Bank.
HB 1 also increases DBP’s share capital from P35 billion to P100 billion, divided into 1 billion shares of P100 each, fully subscribed by the national government.
The president can increase the bank’s capitalization on the recommendation of his board of directors and with the approval of the finance minister, the bill said.
The bill mandates the LBP and the DBP to set up a special holding company that would revitalize strategically important companies that are experiencing liquidity problems due to significant economic challenges of national or international scope. These companies were assigned to agriculture, infrastructure, services and manufacturing.
It also grants incentives and exemptions to LBP, DBP and the special holding company. These companies would be exempt from paying documentary stamp duty, capital gains tax, creditable withholding tax, value added tax, gross receipts tax and other taxes required by Republic Act (RA) 8424, or the National Internal Revenue Code of 1997 (as amended), for a period of three years.
The bill also grants these institutions an exemption from RA 9184 (Government Procurement Reform Act) for mandate-related procurement for a period of three years. They would also receive an exemption from RA 10149 (GOCC Governance Act of 2011) and RA 10667 (Philippine Competition Act) for a period of three years for the acquisition of assets of an investment company.
“It is therefore important that these companies have the necessary access to credit and financial support,” the measure says. “This explains the state’s policy of protecting employment and helping ailing businesses revitalize the economy.”
The measure creates a joint Congressional Oversight Committee composed of five members of the House of Representatives and five Senators to oversee its implementation.
The Treasury would be tasked with issuing implementing rules and regulations along with LBP, DBP, the Bureau of Internal Revenue, Bangkok Sentral ng Pilipinas and the Securities and Exchange Commission.
Spokesman Martin G. Romualdez’ original co-authors of the proposed policy law were Senior Majority Leader and Ilocos Norte Rep. Ferdinand Alexander A. Marcos and Reps. Yedda Marie K. Romualdez and Jude A. Acidre of the Tingog party list.