Gfis Unified Initiatives to Distressed Enterprises for Economic Recovery (Guide) Act

Dil. * Si: TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session 25 AUG -5 P4:03 SENATE RECE S. No. _ Introduced by Senator Jinggoy Ejercito Estrada AN ACT PROVIDING FOR GOVERNMENT FINANCIAL INSTITUTIONS UNIFIED INITIATIVES TO DISTRESSED ENTERPRISES FOR ECONOMIC RECOVERY (GUIDE, AMENDING EXECUTIVE ORDER NO. 81, AS AMENDED BY REPUBLIC ACT NO. 8523, AND FOR OTHER PURPOSES EXPLANATORY NOTE The unprecedented challenges of COVID-19 to the economy of the country, as in the entire globe, are still thriving in the daily lives of the Filipino people and in the social and macroeconomic sphere of the country. Improvements were achieved but several obstacles remain. As noted in "2021 Full-year Economic Report: Regaining Lost Ground" published by the Senate Economic Planning Office (SEPO) on March 2022, "The Philippine Gross Domestic Product (GDP) recorded a growth of 5.6 percent in 2021, signaling the start of an economic recovery. However, the quality of jobs remains a pressing challenge with the rising number of unpaid family workers and part-time workers. Moreover, an additional 3.9 million Filipinos fell into poverty in 2021 compared to the pre-pandemic period. The year also ended with soaring fiscal deficit and public debt levels." A study entitled, "Philippine economic recovery in a rebalancing world" published by the East Asia Forum on January 10, 2024, stated that the efforts of the country to full recovery continue to face persistent challenges including inequality,

poverty, poor quality of education, inaccessibility of healthcare, insufficient foreign investment, and corruption. 1 The "Government Financial Institutions (GFIs) Unified Initiatives to Distressed Enterprises for Economic Recovery (GUIDE) Act" is one of the programs recommended by the economic managers that will capacitate the country's economy to fully realize its goal for recovery. The measure seeks to strengthen the government financial institutions (GFIs) including the LandBank of the Philippines (LBP) and the Development Bank of the Philippines (DBP). Through this, the GFIs will be able to assist micro, small, and medium enterprises (MSMEs) and other strategically important industries in addressing their liquidity and solvency problems. The measure also provides various supports to MSMEs and other industries through financial assistance, loan programs, rediscounting and other credit facilities from LBP, DBP, Small Business Corporation (SBC) and Agriculture Credit Policy Council (ACPC). In view of the foregoing, the immediate passage of this measure is earnestly sought. ussst L JINGGOY EJERCITO ESTRADA 1 Philippine economic recovery in a rebalancing world | East Asia Forum

fire oft TWENTIETH CONGRESS OF THE REPUBLIC OF THE PHILIPPINES First Regular Session ) 25 AUG -5 P4:03 SENATE RECEI S. No. _ Introduced by Senator Jinggoy Ejercito Estrada AN ACT PROVIDING FOR GOVERNMENT FINANCIAL INSTITUTIONS UNIFIED INITIATIVES TO DISTRESSED ENTERPRISES FOR ECONOMIC RECOVERY (GUIDE), AMENDING EXECUTIVE ORDER NO. 81, AS AMENDED BY REPUBLIC ACT NO. 8523, AND FOR OTHER PURPOSES Be it enacted by the Senate and House of Representatives of the Philippines in Congress assembled:

Section 1. Short Title. - This Act shall be known as the "Government Financial

2 Institutions (GFIs) Unified Initiatives to Distressed Enterprises for Economic 3 Recovery (GUIDE) Act".

Sec. 2. Declaration of Policy. - The substantial disruption of the economy due

5 to the community quarantine measures restricted the operation of numerous 6 businesses. The State recognizes the role of these businesses composed of micro, small and medium enterprises (MSMEs) and strategically important companies in providing employment to the Filipino people and in supporting the Philippine economy. Thus, it is essential that these enterprises are given necessary access to credit and financial assistance. It is hereby declared the policy of the State to protect employment and assist distressed enterprises in order to reinvigorate the economy.

Sec. 3. Definition of Terms. - As used in this Act:

(a) Agribusiness value chain refers to a set of actors/players, such as farmers, fisherfolk, traders, suppliers, processors, and aggregators, who make up the linked sequence of value-added activities undergone

by an agricultural product when converted from raw material to the final form it is presented to the consumers; (b) Micro, Small and Medium Enterprises (MSME) refers to any business activity or enterprise engaged in industry, agribusiness, and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity's office, plant and equipment are situated, must have value falling under the following categories: micro: not more than Php3,000,000 small: Php3,000,001 - P15,000,000 medium: Php15,000,001 - Php100,000,000 (c) Senior executive officers refer to top management officials exercising responsible and critical roles, as may be described further in the rules and regulations to be issued to implement this Act. (d) Strategically Important Companies or SICs shall have the meaning ascribed in Section 9(b) of this Act. CHAPTER I Development Bank of the Philippines

Sec. 4. Loan Assistance Program of the Development Bank of the Philippines

(DBP). - The DBP shall its expand its loan program for qualified MSMEs affected by the COVID-19 pandemic under this Act and MSMEs covered on the Republic Act No. 11494 or "The Bayanihan to Recover as One Act": Provided, That such loans shall be granted in accordance with the rules and regulations to be issued to implement this Act and the following guidelines: (a) Eligible MSMEs under this Act should be engaged in infrastructure, service industry, and/or manufacturing business; and, (b) The loans granted hereunder should comply with the applicable prudential standards and regulations of the BSP. The DBP should likewise extend loans to local government units (LGUs) subject to existing rules and regulations.

Sec. 5. DBP Rediscounting and other Programs. - Subject to applicable

2 prudential standards and regulations of the Bangko Sentral ng Pilipinas (BSP), the 3 DBP may rediscount loans and other credit accommodations to enterprises enumerated in Section 4(a) of this Act, granted by BSP-supervised financial 5 institutions (BSFIs), the Small Business Corporation (SBC), and those granted 6 pursuant to credit programs of the Department of Agriculture-Agricultural Credit Policy Council (DA-ACPC) to MSMEs affected by the COVID-19 pandemic engaged in 8 infrastructure, service industry, and/or manufacturing business. The DBP may undertake other similar activities as may be provided under the 10 rules and regulations to be issued to implement this Act.

Sec. 6. Increase in DBP's Authorized Capital Stock. - Section 7 of Executive

Order No. 81, as amended by Republic Act No. 8523, otherwise known as "The 1986 Revised Charter of the Development Bank of the Philippines", ", as amended, is hereby further amended to read as follows: "Section 7. Authorized Capital Stock-Par Value. - The capital stock of the Bank shall be [Thirty five billion pesos (P35,000,000,000.00)] ONE HUNDRED BILLION PESOS (PHP100,000,000,000.00) to be divided into [Fhree hundred fifty million (350,000,000)] ONE BILLION (1,000,000,000) common shares with par value of One hundred pesos (P100.00) per share, which shall be fully subscribed by the [a]National [g]Government E. Upon the effectivity of this Charter, the National Government shall initially subscribe to One hundred twenty five million (125,000,000) common shares of stock worth Twelve billion five hundred million pesos (P12,500,000,000.00), Five billion pesos (P5,000,000,000.00) of which shall be deemed paid for by the government and the balance shall be paid for by the government out of the stock dividends to be declared by the Bank-from its unappropriated retained earnings: Provided, That the dividends due the national government pursuant to Republic Act No. 7656 shall first be paid.]: PROVIDED, THAT

THE PRESIDENT OF THE PHILIPPINES MAY APPROVE THE INCREASE IN THE CAPITALIZATION OF THE BANK, UPON THE RECOMMENDATION OF THE BOARD AND THE CONCURRENCE OF THE SECRETARY OF FINANCE, UP TO SUCH AN AMOUNT AS MAY BE NECESSARY TO ATTAIN THE OBJECTIVES OF THIS CHARTER." CHAPTER II LANDBANK OF THE PHILIPPINES

Sec. 7. Loan Assistance Program of the Land Bank of the Philippines

(LandBank). - The LandBank shall expand its loan program for qualified MSMEs affected by the COVID-19 pandemic under this Act and those covered under Republic Act No. 11494 or "The Bayanihan to Recover as One Act": Provided, That such loans shall be granted in accordance with the rules and regulations that shall be issued to implement this Act and the following guidelines: (a) Eligible MSMEs under this Act should be engaged in activities in the agribusiness value chain; and, (b) The notes granted hereunder should comply with the applicable prudential standards and regulations of the BSP. The LandBank shall likewise extend loans to LGUs subject to existing rules and regulations.

Sec. 8. LandBank Rediscounting and other Programs. - Subject to applicable

prudential standards and regulations of the BSP, the LandBank may rediscount loans to eligible MSMEs engaged in activities in the agribusiness value chain granted by BSFIs, the SBC, and those granted pursuant to credit programs of the DA-ACPC to MSMEs affected by the COVID-19 pandemic. The LandBank may undertake other similar activities for purposes of this Act as may be provided under the implementing rules and regulations to be issued. CHAPTER III SPECIAL HOLDING COMPANY

Sec. 9. Creation of Investment Vehicle. - To ensure that Strategically

Important Companies (SICs) remain solvent, the LandBank and DBP are hereby authorized to invest in, or enter into a joint venture agreement to incorporate a

1 special holding company (the "SHC") that is a stock corporation to be organized 2 under Republic Act NO. 11232, otherwise known as "The Revised Corporation Code 3 of the Philippines," within six (6) months beginning from the date of effectivity of the rules and regulations of this Act, or effectivity of applicable revenue regulations, whichever comes later. The establishment, administration, and operation of the SHC shall be governed by the following principles: (a) The purpose of the SHC is to rehabilitate SIC affected by the COVID-19 pandemic which are experiencing temporary solvency issues; (b) SICs are investee companies that are nationally significant, or those with high economic returns or high employment potential, and which are engaged in any of the following "strategically important industries or sectors," such as, but not limited to, agriculture, construction, education, food industry, health care, infrastructure, low-cost and socialized housing, manufacturing, power and energy, product distributor/retailer, services, tourism and hospitality, transportation and logistics, water and sanitation, and other industries to be identified in the rules and regulations issued to implement this Act: Provided, That an SIC must be able to demonstrate upstream and downstream linkages to other firms and/or industries, substantial employment to the community, and exhibit high degree of process efficiency, cost efficiency, product quality, and environmental soundness: Provided, further, That an SIC can show proof of temporary solvency problems due to the pandemic, financial soundness prior to the pandemic, and credible and sound financial rehabilitation plan. (c) Equity participation in the SHC may be offered to, and held by qualified private investors, including multilateral companies and lending institutions, as may be determined by the LandBank and DBP: Provided, That majority ownership of the total outstanding capital stock in the SHC shall be held by the LandBank and DBP until such time that they have recovered or will be able to recover their investment in the SHC;

(d) The LandBank and the DBO shall dispose of their stockholdings in the SHC to qualified private investors as they may determine. The LandBank and DBP Shall provide equal opportunity for equity participation in the SHC to all qualified investors, including multilateral companies and lending institutions. When private shareholdings in the SHC reaches fifty percent (50% of the total outstanding capital stock, the stockholders thereof shall cause the adoption and registration with the Securities and Exchange Commission (SEC) of the companies amended articles of incorporation within three (3) months from such transfer of ownership; (e) The SHC, as government-owned and controlled corporation (GOCC). and the investments of DBP and LandBank therein, should be subject to the power of the Commission on Audit (COA) to audit and examine GOCCs and the investments of government in corporations: Provided, That the audit of the SHC by the COA shall not preclude the SHC from engaging the services of a private auditing firm when equity participation in the SHC is offered to qualified private investors: Provided, further, That even if the services of the latter are availed of, the audit report of the COA shall serve as the report for purposes of compliance with audit requirements as required of a GOCC under applicable law;

Sec. 8. Separability Clause. - If any provision or part hereof is held invalid or

unconstitutional, the remainder of the law or the provision or part not otherwise affected shall remain valid and subsisting.

Sec. 9. Repealing Clause. - Any law, presidential decree or issuance,

executive order, letter of instruction, administrative order, rule, or regulation contrary to or inconsistent with the provisions of this Act are hereby repealed, modified, or amended accordingly.

Sec. 10. Effectivity. - This Act shall take effect fifteen (15) days after its

publication in the Official Gazette or in a newspaper of general circulation. Approved,