PCC cautions against COVID-19 subsidies which distort market
The Philippine Competition Commission (PCC) yesterday cautioned government on implementing subsidies to businesses, including the local airline industry, affected by COVID-19 to avoid distortions and uneven playing field.
PCC Chairman Arsenio Balisacan issued this caution during a webinar by Management Association of the Philippines (MAP) as Congress is deliberating on the proposed consolidated bill or the Philippine Economic Stimulus
Act (PESA), which seeks to grant subsidies and nointerest loans to critically-impacted enterprises by the COVID19 crisis.
The PESA bill calls for equity acquisitions of private firms through the creation of National Emergency Investment Corporation. It sought for ₱328-billion stimulus package for transitional and institutional adjustments.
Critically-Impacted Businesses refer to non-essential business entities which belong to, or operate in, industries that have been either directly impacted by the disruption in travel and the transport of goods and services (such as tourism, air transportation and trade), or significantly displaced such that their liabilities have become more than their assets or are generally unable to pay or perform their obligations as they fall due in the ordinary course of business as a result of the COVID-19 outbreak, as jointly determined by the National Economic and Development Authority (NEDA) and the Department of Trade and Industry (DTI).
The aviation sector, which has been grounded belongs to the critically impacted businesses, has petitioned for indirect state subsidies. The Air Carriers Association of the Philippines (ACAP) has sought government loans, credit lines and guarantees on debt rather than direct cash subsidies.
“We have to look at these issues closely and the point I would like to note that bailouts although not respond to short and midterm considerations like firms going bankrupt that need to protect jobs, we have to make sure our response not create bigger problems in the future,” said Balisacan.
The anti-trust watchdog chief noted of instances where government bought private firms but eventually these firms were a failure or unsuccessful not only in the fiscal front.
“But I am more worried on competition issue because if there are only three firms in an industry and one gets bankrupt and one player buys the other so the concentration becomes higher. This is not necessarily prohibitive but again the issue is are there potential buyers in such a way that competition in that industry is preserved,” he added.
ACAP, which is composed of Philippine Airlines, Cebu Pacific, AirAsia Philippines and their affiliates, recently got together with senators to discuss their financial support requirements once the government ends lockdown.
“Airlines are typically one of the first key indicators of a recovery post any downturn in travel or crisis. These are unprecedented and extraordinary times," stressed AirAsia Philippines CEO Ricky Isla, who currently sits as Chairman of ACAP.
"Governments around the world are already providing a much-needed lifeline to assist the air travel industry to stimulate the economy,” he pointed out.