Creating The Philippine Foreign Loan Guarantee Corporation, Defining Its Powers And Duties And For The Other Purposes

Case Overview and Summary

PRESIDENTIAL DECREE No. 550

Creating the Philippine Foreign Loan Guarantee Corporation

- Purpose and Functions (Sections 2-3):
• Primary purpose is to guarantee foreign loans, in whole or in part, granted to domestic entities/enterprises/corporations majority-owned by Filipino citizens. (Section 2)
• Functions include promoting entry of foreign loans for development purposes, assisting domestic entities in coordinating development/expansion plans, and providing technical assistance. (Section 3)

- Corporate Powers (Sections 4-5):
• Authorized to make contracts, own property, sue/be sued, and perform necessary acts to carry out its purpose. (Section 4)
• Can borrow funds with Presidential approval, buy/sell securities, underwrite securities, invest funds, hold foreign assets, and establish rules/regulations. (Section 5)

- Operating Principles (Section 6):
• Facilitate foreign loan financing for specific projects, but can also guarantee loans from banks/institutions. (Section 6a)
• Consider borrower's ability to obtain guarantees elsewhere on reasonable terms. (Section 6b)
• Consider borrower's ability to meet loan obligations. (Section 6c)
• Receive suitable compensation for risk. (Section 6d)
• Ensure loan proceeds are used for intended purposes efficiently. (Section 6e)
• Guarantee limit of 15 times subscribed capital stock plus surplus. (Section 6f)
• Subrogation rights upon payment under guarantee. (Section 6g)
• Guided by sound banking and financial management principles. (Section 6h)

- Capital Stock and Funding (Sections 7-9):
• Initial authorized capital stock of 1 billion pesos, fully subscribed by Philippine government. (Section 7)
• Central Bank can grant loans/advances secured by acceptable assets. (Section 8)
• Obligations guaranteed by Philippine government. (Section 9)

- Board of Directors (Sections 10-13):
• 5-member Board composed of Secretary of Finance (Chairman), Corporation President (Vice-Chairman), Secretary of Industry, NEDA Director-General, and Solicitor General. (Section 10)
• Board formulates policies, issues rules/regulations, directs management, appoints personnel, and authorizes expenditures. (Section 11)
• Meets at least bi-weekly, with 3 members as quorum. (Section 12)
• Members receive 250 pesos per diem for attending meetings. (Section 13)

- President and Officials (Sections 14-17):
• President appointed by President of the Philippines for 6-year term, with minimum qualifications. (Section 14)
• President prepares agenda, executes policies, directs operations, and exercises vested powers. (Section 15)
• President's salary fixed by Board with Presidential approval, initially 60,000 pesos per annum. (Section 16)
• Other officials/employees appointed by Board on President's recommendation. (Section 17)

- Other Provisions (Sections 18-26):
• Other government offices/corporations to assist the Corporation. (Section 18)
• Commission on Audit Chairman as ex-officio Auditor, with representative as Corporation Auditor. (Section 19)
• Coordination with Central Bank, NEDA, and Board of Investments. (Section 20)
• Central Bank to provide foreign exchange for obligations. (Section 21)
• Subject to Central Bank supervision/examination and foreign exchange regulations. (Section 22-23)
• Tax exemptions for Corporation, assets, income, and transactions. (Section 24)
• Not subject to WAPCO standards/scales. (Section 25)
• Corporation Law and Civil Service Law apply if not inconsistent. (Section 26)