CREATING THE PHILIPPINE FOREIGN LOAN GUARANTEE CORPORATION, DEFINING ITS POWERS AND DUTIES AND FOR OTHER PURPOSES.

• Number: Presidential Decree No. 550
• Sections: 29

Preamble

WHEREAS, there is a need to supplement existing domestic

financial resources with borrowings from abroad in order to meet the

country's economic development requirements;

WHEREAS, such foreign obligations contracted by the private

sector may need to be adequately guaranteed by government financial

institutions;

WHEREAS, the Development Bank of the Philippines, the

Philippine National Bank, and the National Investment and Development

Corporation are the only government financial institutions presently

offering guarantee coverage to such foreign obligations incurred by the

private sector;

WHEREAS, there is a felt need to expand the Philippine

Government's guarantee coverage of foreign loans for the private sector

in order to ensure the continuous entry of these resources into the

economy;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the

Philippines, by virtue of the powers in me vested by the Constitution,

do hereby order and decree:

Section 1 Philippine Foreign Loan Guarantee Corporation.

SECTION 1. Philippine Foreign Loan Guarantee Corporation. —

(a) There is hereby created a body corporate to be known as the

Philippine Foreign Loan Guarantee Corporation, hereinafter referred to

as the Corporation, which shall have succession in its corporate name.

The Corporation shall have its principal office in the Greater Manila

Area.

The Corporation shall be deemed to be a wholly owned

Government corporation and shall accordingly be subject to provisions of

existing laws, rules and regulations applicable to Government-owned

corporations not otherwise inconsistent with the provisions of this

Decree.

Section 2 Primary Purpose.

SEC. 2. Primary Purpose. — The primary purpose of the

Corporation shall be to guarantee foreign loans, in whole or in part,

granted to any domestic entity, enterprise or corporation, majority of

the capital of which is owned by citizens of the Philippines.

Section 3 Functions.

SEC. 3. Functions. — The Corporation shall have

the following functions:

To promote and facilitate the entry of foreign loans into the

country for development purposes having special regard to the needs of

export-oriented industries, industries registered with the Board of

Investments, public utilities, and industries the promotion of which is

encouraged by government policy;

To meet requests from domestic entities, enterprises

and corporations to assist them in the coordination of their

development and expansion plans with a view to achieving better

utilization of their resources; and

To provide technical assistance to the preparation, financing

and execution of development or expansion programs,

including the formulation of specific project proposals.

Section 4 Corporate Powers.

SEC. 4. Corporate Powers. — The Corporation is hereby

authorized to make contracts, to lease or own real and personal

property, and to sell or otherwise dispose of the same, to sue and be

sued; and otherwise to do and perform any and all things that may be

necessary or proper to carry out the purpose of this Decree, or as are

essential to the proper conduct of such operations.

Section 5 Borrowing and other Miscellaneous Powers.

SEC. 5. Borrowing and other Miscellaneous Powers.

— In addition to the powers specified elsewhere in this Decree, the

Corporation shall have the power:

To borrow funds in foreign countries or in the Philippines

with the approval of the President of the Philippines and subject to

pertinent provisions of Republic Act No. 265, as amended, and Central

Bank rules and regulations;

To buy and sell securities the Corporation has issued or

guaranteed;

To underwrite, or participate in the underwriting of,

securities issued by any domestic entity or enterprise for purposes

consistent with the purpose of the Corporation;

To invest funds not needed in its operations;

To hold assets in foreign countries subject to Central Bank

rules and regulations; and

To exercise such other powers and establish such rules and

regulations as may be necessary and appropriate in furtherance of its

purpose and functions;

Section 6 Operating Principles.

SEC. 6. Operating Principles. — The operations of

the Corporation shall be conducted in accordance with the following

principles:

The operations of the Corporation shall principally

facilitate foreign loan financing of specific projects of domestic

entities or enterprises. They may, however, include guarantees and

counter guarantees for sign loans made by banks or other financial

institutions or other suitable entities in order that the latter may

finance specific development projects either by outright ban or

guarantees.

In considering an application for a guarantee, the

Corporation shall pay due regard to the ability of the borrower to

obtain guarantee facilities elsewhere on terms and conditions that the

Corporation considers reasonable for the recipient, taking into account

all pertinent factors;

In guaranteeing a loan, the Corporation shall pay due regard

to the prospect that the borrower will be in a position to meet its

obligations under the loan contract;

In guaranteeing a loan, or in underwriting the sale of

securities, the corporation shall receive suitable compensation for its

risk;

The Corporation shall take the necessary measures to ensure

that the proceeds of any loan guaranteed by the Corporation are used

only for the purposes for which the loan was granted and with due

attention to considerations of economy and efficiency;

The Corporation shall not guarantee a single borrower in an

amount exceeding the Corporation's subscribed capital stock nor shall

the aggragate outstanding guarantee obligations of the Corporation

exceed fifteen (15) times its subscribed capital stock plus surplus;

When payment is made by the Corporation pursuant to a guarantee

it has made, the Corporation shall be subrogated to any right, title,

claim or cause of action belonging to the creditor; and

The Corporation shall be guided by sound banking principles and

sound financial management in its operations.

Section 7 Capital Stock.

SEC. 7. Capital Stock. — The initial authorized

capital stock of the Corporation shall be One billion pesos (P1,000,

000,000) to be fully subscribed by the Government of the Republic of the

Philippines. For this purpose, the sum of One billion pesos

(P1,000,000,000) is hereby appropriated from any sums not otherwise

appropriated in the National Treasury. The Board may increase the

Authorized capital stock of the Corporation, subject to the approval of

the President of the Philippines.

Section 8 Loans from Central Bank.

SEC. 8. Loans from Central Bank. — The Central

Bank of the Philippines may grant the Corporation loans and advances

which it may need for its operations secured by any assets which are

defined as acceptable security by a concurrent vote of at least five (5)

members of the Monetary Board.

Section 9 Guarantee of National Government.

SEC. 9. Guarantee of National Government. — The

payment of obligations incurred by the Corporation under the provisions

of this Decree is fully guaranteed by the Government of the Republic of

the Philippines.

Section 10 Board of Directors; Composition.

SEC. 10. Board of Directors; Composition. — The

powers and functions of the Corporation shall be exercised by a Board of

Directors, hereinafter referred to as the Board, which shall be

composed of five (5) members, as follows:

The Secretary of Finance, who shall be the Chairman of the

Board. Whenever the Secretary of Finance is unable to attend a meeting

of the Board, he shall designate an undersecretary to attend as his

alternate, who shall not act as Chairman.

The President of the Corporation, who shall be the

Vice-Chairman of the Board, shall assist the Chairman and act in his

stead in case of absence or incapacity.

The Secretary of Industry. Whenever the Secretary of

Industry is unable to attend a meeting of the Board, he shall designate

and undersecretary to attend as his alternate.

The Director General of the National Economic and Development

Authority. Whenever the Director General is unable to attend a

meeting of the Board, he shall designate a deputy director general of

the Authority to attend as his alternate.

The Solicitor General. Whenever the Solicitor

General is unable to attend a meeting of the Board, he shall designate

an assistant solicitor general to attend as his alternate.

Section 11 Powers of the Board.

SEC. 11. Powers of the Board. — The Board shall have

the authority:

To formulate policies to carry out effectively the provisions

of this Decree;

To prepare and issue rules and regulations as it considers

necessary for the effective discharge of the responsibilities and

exercise of the powers assigned to the Corporation under this Decree;

To direct the management, operations and administration of

the Corporation;

On the recommendation of the President of the Corporation,

appoint, fix the remunerations and other emoluments, and remove the

personnel of the Corporation: Provided, however, That positions

considered by the Board to be policy-determining, primarily confidential

or highly technical in nature shall not be subject to the Civil

Service Law; and

To authorize such expenditures by the Corporation as are in the

interest of the effective administration and operations of the

Corporation.

Section 12 Meetings.

SEC. 12. Meetings. — The Board shall convene as

frequently as is necessary to discharge its responsibilities property,

but shall meet at least once every two weeks. The Board may be convoked

either by the Secretary of Finance or by the President of the

Corporation.

The presence of three (3) members shall constitute a

quorum.

All decisions of the Board shall require the concurrence of at

least three (3) members.

Section 13 Remuneration of Members for Attending Meetings of the Board.

SEC. 13. Remuneration of

Members for Attending Meetings of the Board.— The members of the

Board or their respective alternates, except the President of the

Corporation, shall receive a per diem of two hundred fifty pesos

(P250.00) for every Board meeting attended.

Section 14 President.

SEC. 14. President. — The chief executive

officer of the Corporation shall be the President who shall be appointed

by the President of the Philippines, upon recommendation of the Board,

for a term of six (6) years unless removed for cause or by reason of

incapacity. No person shall be elected President of the Corporation

unless he is a native-born Filipino citizen, at least forty (40) years

of age, of good moral character and of unquestionable integrity and

responsibility, and who is experienced and of recognized competence in

the fields of foreign loans and other international financial

transactions, banking and law. He shall be assisted by such executive

officials as may be necessary for the efficient operation of the

Corporation.

Section 15 Powers and Duties of the President.

SEC. 15. Powers and Duties of the President. —

The powers and duties of the President of the Corporation shall be:

To prepare the agenda for meetings of the Board and to submit

for the consideration of the Board the policies and measures which he

believes to be necessary to carry out the purposes and provisions of

this Decree;

To execute and administer the policies and measures approved by

the Board;

To direct and supervise the operations and internal

administration of the Board. He may delegate certain of his

administrative responsibilities to other officers of the Corporation,

subject to the rules and regulations of the Board; and

To exercise such other powers as may be vested in him by the

Board.

Section 16 Remuneration of the President.

SEC. 16. Remuneration of the President. — The salary

of the President of the Corporation shall be fixed by the Board with

the approval of the President of the Philippines. Until such salary has

been so fixed, the President of the Corporation shall receive a salary

of Sixty thousand pesos (P60,000) per annum. The Board may

authorized payment of allowances and other emoluments to the President

of the Corporation.

Section 17 Other Officials and Employees of the Corporation.

SEC. 17. Other Officials and Employees of the

Corporation. — All officials and employees of the Corporation shall

be appointed and removed by the Board, on recommendation of the

President of the Corporation.

Section 18 Assistance by Other Government Offices and Corporations.

SEC. 18. Assistance by Other Government Offices and

Corporations. — Other Government offices and Government-owned and

controlled corporations shall extend whatever assistance may be needed

by the Corporation, including the detail of its officials and employees

to the Corporation on a full-time or part-time basis under arrangements

satisfactory to the Corporation and the other Government offices or

corporations concerned. Said officials and employees may draw allowances

and other emoluments for such assignment, notwithstanding the provision

of any law to the contrary.

Section 19 Auditor.

SEC. 19. Auditor. — The Chairman of the

Commission on Audit shall act as the ex-officio Auditor of the

Corporation and, as much, he is empowered and authorized to appoint a

representative who shall be the Auditor of the Corporation and, in

accordance with law, fix his salary, and to appoint and fix the salaries

and number of the personnel to assist said representative in his work,

but in all cases subject to the approval of the Board. The salaries and

all other expenses of maintaining the Auditor's office shall be paid by

the Corporation. The Auditor of the Corporation and personnel under him

may be removed only by the Chairman of the Commission on Audit.

The representative of the Chairman of the Commission on Audit

must have at least ten (10) years experience as a certified public

accountant.

Section 20 Coordination of Policies.

SEC. 20. Coordination of Policies. — Unless

otherwise specifically prescribed by this Decree, the Corporation shall

coordinate its policies and operations with those of the Central Bank of

the Philippines, National Economic and Development Authority, and Board

of Investments.

Section 21 Availability of Foreign Exchange.

SEC. 21. Availability of Foreign Exchange. —

Subject to the provisions of Republic Act No. 265, as amended,

particularly Section 74 thereof, the Central Bank of the Philippines

shall make available to the Corporation the necessary foreign exchange

to enable it to comply with its obligations incurred under this Decree.

Section 22 Supervision and Examination by the Central Bank.

SEC. 22. Supervision and Examination by the Central

Bank. — The Corporation shall be subject to the supervision and

examination by the Central Bank of the Philippines in accordance with

Republic Act No. 265, as amended, and Republic Act No. 337, as amended.

Section 23 Applicability of Central Bank foreign exchange regulations.

SEC. 23. Applicability of Central Bank foreign

exchange regulations. — The guarantee operations and all other

transactions of the Corporation involving foreign exchange shall be

subject to the applicable foreign exchange regulations of the Central

Bank.

Section 24 Tax Exemptions.

SEC. 24. Tax Exemptions. — Notwithstanding the

provision of any general or special law to the contrary, the

Corporation, its assets, property, income and transactions shall be

exempt from all taxation and government fees and charges.

Section 25 Non-Applicability of WAPCO Standards and Scales.

SEC. 25. Non-Applicability of WAPCO Standards and

Scales. — The Corporation shall not be subject to standards and

salary scales prescribed by the Wage and Position Classification Office.

Section 26 Applicability of the Corporation Law and Civil Service Law.

SEC. 26. Applicability of the Corporation Law and

Civil Service Law. — The provisions of the Corporation Law and Civil

Service Law shall apply to the Corporation insofar as they are not

inconsistent with the provisions of the Decree.

Section 27 Repealing Clause.

SEC. 27. Repealing Clause. — All laws and

executive orders and parts thereof inconsistent herewith are hereby

repealed.

Section 28 Effectivity Clause.

SEC. 28. Effectivity Clause. — This Decree shall

take effect immediately.

Done in the City of Manila, this 11th day of September, in the

year of Our Lord, nineteen hundred and seventy-four.

(Sgd.)

FERDINAND E. MARCOS

President of the Philippines

By the President:

(Sgd.)

ALEJANDRO MELCHOR

Executive Secretary