Entirely new government guarantee system in the works

The Department of Finance (DOF) is looking at the likely merger of the Philippine Export-Import Credit Agency (PhilExim) with other state-run guarantee firms and creating a single entity providing fresh funds for a new government guarantee system.

Finance Secretary Carlos G. Dominguez III said that under Republic Act (RA) 10149, which aims to promote the financial viability and fiscal discipline of government-owned and -controlled corporations (GOCCs), the Governance Commission for GOCCs (GCG) can carry out the reorganization, merger or streamlining of state-controlled firms.

Under the law, the GCG can also recommend to the President the abolition or privatization of GOCCs.

The PhilExim provides credit, credit insurance and guarantee facilities primarily to export-oriented industries, including small and medium enterprises (SMEs).

The finance chief added that the consolidation of PhilExim with other state guarantee firms, such as the Small Business Guarantee Corp., Quedan & Rural Guarantee Corp. and the Home Guaranty Corp., can be done through executive fiat as provided under RA 10149, or the GOCC law.

“We have a GOCC law so we can put them all in one organization and then just create a new one without necessarily going to Congress,” Dominguez said.

He directed DOF Undersecretaries Antonette C. Tionko, who heads the Corporate Affairs Group; Bayani H. Agabin, who is in charge of legal services; Karen G. Singson, who heads the Privatization Office; and National Treasurer Rosalia V. de Leon to draw up a plan carrying out the proposed consolidation or merger.

According to de Leon, she recommended a merger separating the old PhilExim structure from the new PhilExim.

The plan is for the old PhilExim to be primarily a collecting agency in charge of handling the existing assets of the firm, while the new PhilExim would be a new corporation exclusively handling guarantee services.

The budget of P500 million of the existing PhilExim would be carried over to the new corporation, but another P500 million would be needed as fresh capital, consistent with Bangko Sentral ng Pilipinas (BSP) requirements. The fresh funds would enable the new PhilExim to grow, according to de Leon.

Singson said the GOCCs involved in the plan would have to take a write-down or a reduction of the book value of their respective assets, before the consolidation can take place.

Among the functions of the PhilExim is the facilitation of international trade, by which it offers financial assistance to Philippine enterprises, particularly SMEs. The agency also facilitates government projects encouraging international trade.

source:  Business Mirror