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CPBRD POLICY B RIEF

CONGRESSIONAL POLICY AND BUDGET RESEARCH DEPARTMENT
JULY 2011

NO. 2011-6

FINANCIAL EVALUATION
OF GOVERNMENT CORPORATIONS*
Stocktaking of financial performance by the public sector has become more relevant in the light
of recent controversies involving Government-Owned and Controlled Corporations (GOCCs).
Reports of unconscionable expenses, extravagant compensation package for executives/staff,
and large subsidies to losing corporations have drawn much flak especially at a time when the
national government is back on the deficit track.1 Under the new administration where prudence
and operational efficiency are critical in achieving optimal spending2, GOCCs are very much
challenged to prove their worth and existence.
The recently approved GOCC Governance Act (RA 10149) seeks to strengthen the role of the
State in promoting financial viability and fiscal discipline among GOCCs and in making them
more responsive to the needs of the people. Under the law, the newly-created Governance
Commission for GOCCs or GCG, among other things, is tasked to conduct periodic study,
evaluation and assessment of the performance of GOCCs and require reports on their
operations and management including, but not limited to asset and finance management –
functions which aim to determine their relevance. Further, GOCC officers are required to “apply
sound business principles to ensure the financial soundness of the corporation”.
Performance assessment among GOCCs is a daunting task as it requires not only substantial
time/ resources but also a certain level of expertise to generate a comprehensive and objective
report on their accomplishments (or non-accomplishments). The size of the sector is another
factor that renders the performance evaluation of all existing GOCCs in the country difficult. As
of December 2009, there are 659 GOCCs, 485 or 73.6% of which are local water districts. Thus,
fiscal performance monitoring in the past has been confined to 14 major corporations whose
financial position would have significant impact on public sector borrowing requirement. 3

Prepared by Shimz R. Manaois-Battung in consultation with Director Dina de Jesus-Pasagui and CPBRD OIC Director General
Romulo Emmanuel Miral, Jr. The views, opinions, and interpretations in this report do not necessarily reflect the views of the House of
Representatives as an institution or its individual members.

1 In 2007, the government almost balanced the budget primarily due to revenue gains from the RVAT. The ensuing years saw
deterioration in government’s tax effort resulting from tax policies whose main intentions were to grant tax relief to individuals and
corporations to further encourage productivity. Moreover, there are existing measures that have yet to be corrected such as redundant
fiscal incentives and non-indexation of excise taxes to inflation. Government’s efforts to pump-prime the economy and provide social
safety nets following the financial crisis in 2008 also weighed down on the fiscal position.
2
By convention optimal spending would mean benefiting as much people as possible at least costs and minimal losses/wastage.
3
The 14 monitored GOCCs include the Home Guaranty Corporation, Light Rail Transit Authority, Local Water Utilities
Administration, Metropolitan Waterworks and Sewerage System, National Development Company, National Electrification
Administration, National Food Authority, National Housing Authority, National Irrigation Administration, National Power
Corporation, Philippine Economic Zone Authority, Philippine National Oil Company, Philippine National Railways, and Ports
Authority.

GOCCs tend to crowd out private enterprises since the former are given preferential access to credit because of government guarantees. yet they are called upon by their governments to deliver better services to more people at lower prices [ADB 2007]. innovate. that of providing goods and services at reasonable price. is organized as follows: the first part discusses the nature of GOCCs and the rationale for performance assessment. In general. One. Moreover. they create opportunity cost – i. etc. etc. thus GOCCs are created to provide certain goods/services at socially optimal prices (e.) which have widespread externalities or socio-economic impact. private firms cannot be relied upon to engage in projects (e. 2 . Lesser pressure is also placed on these corporations since the national government subsidizes a large part of GOCC operations and capital investments.  Socio-economic growth and development. mass transportation require very huge capital that competition among different players may not be possible. which focuses on the financial performance of GOCCs. rice. Goods and services that are considered natural monopolies e. They help stabilize the economy through the exercise of their supervisory. diversify and economize are absent. unlike private corporations which are mostly profit-oriented. foregone resources in terms of tax exemptions and government subsidies to losing corporations could have been channelled to high-yield investments instead.). monopoly breeds inefficiency since the incentives to improve. GOCCs are therefore necessary to fill in the gaps left by the private sector.This paper.e. especially those with social mandates. GOCCs can also under-price their services. government-owned-andcontrolled corporations (GOCCs) face a dual burden – i. And when there is only one provider of good/service. area development and regulatory sector (Cluster B) covering the period 2007 to 2009 as presented in the Annual Financial Report of the Commission on Audit (COA) were used. irrigation. Two. chances are that prices would be uncontrollably high. And three. NATURE OF GOCCS State-owned enterprises (SOEs) around the world are mostly resource-constrained. water services. The poor cannot compete fairly in a free market due to resource constraints. regulatory and police functions. government corporations exist for the following reasons:  Natural monopolies. GOCCs are a means by which the government can intervene when the market fails. financially and physically.  Protection of the disadvantaged. electricity. financial data of corporations belonging to public utilities. the existence of too many GOCCs has several drawbacks. GOCCs provide low returns on investments.g. while raising their own revenues to finance operating expenses and leave a reasonable income/profit. road network. healthcare services. However. Likewise in the Philippines. if possible.g.e. vulnerable and poor. education. For the analysis portion. housing. the second part describes commonly-used financial ratios while the third part presents a comparative analysis of GOCC financial performance across time. Due to their profit-maximizing nature.g.

PMCC. In particular. liabilities and capital while the income statement gives an idea on the sources of income. OWWA. ECC. internal control measures. Optimal use of cash could mean investment in activities with potential high yields (e. debt-toasset ratio and personal services expenditures-to-income ratio. earning GOCCs are required to pay dividends4 while losing corporations are a drain to state resources in terms of subsidy. temporarily setting aside the socio-economic impact. For instance. the number of times current assets exceed current liabilities is a valuable expression of a business or a corporation’s fund adequacy or solvency.ASSESSING GOCC PERFORMANCE Existing literature provide substantial resources / references for performance evaluation of stateowned corporations. FINANCIAL RATIOS There are conventional financial analysis techniques/tools that may be used to measure performance.g. land properties. Typical measures would include financial ratios. Thus.public service and profit-maximization – using just one type of performance measure would naturally result to biases. etc. The current ratio – derived by dividing total current assets by total current liabilities – measures a corporation’s liquidity or financial strength (see Table 1). The balance sheet shows the state of a going concern as of a certain period while the income statement shows the financial operation during a specific timeframe. Exempted from this rule are those that are in the business of administering real or personal properties or funds held in trust for the use/benefit of their members e. 4 5 Under RA 7656. systems and processes.g. Given the dual nature of GOCCs . On the positive side. including a review of corporate structure. this paper will only focus on the business/financial side of GOCCs.). it would be difficult to undertake an holistic much less regular performance review of the entire public corporate sector. cost-efficiency and profitability of an organization. a corporation with a current ratio of two (2) means that for every thousand liabilities it owes. stock or property dividends to the national government. GOCCs are obliged to remit at least 50% of their annual earnings as cash. A more comprehensive evaluation of performance requires a combination of all measures. return on assets (ROA). i. their financial condition is crucial for the following reasons: (a) it determines the viability and eventually capacity of GOCCs to respond to their societal goals. It provides information on whether the current assets of a corporation will be able to pay its current liabilities as scheduled with a margin of safety. Since GOCCs are designed to be operationally independent. 3 . the balance sheet and income statement 5 present a picture of GOCC profitability and stability. Too high current ratios however are also not desirable as this could mean that a corporation does not utilize its cash optimally. Financial ratios – or mathematical relationships among assets. current ratio should be equal to 2 or better. As a rule of thumb. (b) it affects operating performance and the quality of their services and most importantly. debt-worth ratio. But due to the number of corporations involved and the complexity/diversity of their operations. The financial ratios that are most relevant to GOCCs are the current ratio. Basic information that may be derived from the balance sheet includes the size and growth of assets. depending on the availability of or access to data / information. additional equity infusion and at times even bail-out or debt absorption. advances. return on investment (ROI). purchase of equipment. economic returns and social impact. its assets are capable of paying these liabilities two times without putting its daily operations at financial risk. liabilities. income and equity .e. Hence. Measures of performance may vary by country and by income. (c) it impacts on the fiscal position of the national government.may be used to benchmark GOCC operations. GSIS. etc. HDMF.

the GOCC has a negative equity. But when liabilities exceed assets (A<L). If GOCC assets are greater than its liabilities (A>L). unpaid taxes. Some corporations may require higher assets (asset-intensive) resulting in lower ROAs while corporations engaged in industries that require lower assets (asset-light) may have relatively higher ROAs.Return on assets (ROA) is derived by dividing net income by total assets. Long-term assets are those that are not easily convertible to cash.g. mortgage. GOCCs engage in the provision of public goods/ services except that the latter charge user fees – usually at subsidized cost.g. land and land improvements. retained earnings. heavy losses in operations by the old Central Bank were capitalized i. e. Equity is the owner’s share in the assets of the GOCC. They are usually listed in the order of their liquidity. deferred charges and capitalized losses6. GOCCs have to recover cost without jeopardizing public welfare. They are generally classified into current. buildings and structures. bonds and loans. Other assets may consist of patents. Liabilities represent the claim of creditors over the assets of the GOCC. proceeds from the sale of assets and other income. It determines a company’s level of efficiency in resource management as well as asset strength. In terms of interpretation. A high ROA suggests efficient management of assets while a low ROA suggests inefficient management. etc. notes payable. other intangibles. or manufacturing industry that requires specialized and expensive machineries and equipment) and anything above 20% is less asset-intensive (software companies. gains and premiums. Like other government agencies.g.g.e. etc. it is also referred to as the net worth or the value of its assets less its liabilities. long-term liabilities are those whose settlement extends beyond the year of operation e. prepayments. pay for maintenance costs and service its debts. Current assets are those that are easily convertible into cash within one operating cycle . Intuitively.normally one year. long-term and other assets. receivables.20 centavos of profits for every P1 worth of asset. payroll liabilities. e. e. Owing to their dual role of societal obligation and profit maximization. advertising firms or industries that do not heavily rely on expensive equipment). Conversely. Financial Statement Accounts Assets are items of commercial values which are owned by a particular GOCC. inventories. 4 . cash. these capitalized losses (assets) were transferred to the national government in exchange for equity infusion (capital) to the new Bangko Sentral ng Pilipinas (BSP). unpaid utilities. ROAs differ by industry. infrastructure businesses like railroads and telecommunications. In the 1990s. donated capital and surplus reserves are among the variables that affect government equity. Box 1. property and equipment. Current liabilities are obligations that are payable within the year. GOCC income consists of business and service income. Variables like share capital. GOCCs that impose fees and charges should post high ROA while those in the socio-civic activities or those with missionary functions/mandates would have lower returns. and short-term investments. due from regular suppliers.g. Later. a corporation with a 20% ROA means that it could generate 0. plant. temporarily parked under asset section and to be credited against future incomes. While academic literature does not suggest any 6 These are losses which are not charged against current income/revenue. the GOCC is said to have a positive equity. The ability of a GOCC to put a price on goods/services determines its capacity to generate revenues. Various accounting textbooks apply the general rule that anything below 5% is more asset-intensive (e.

This ratio is an indication of the worthiness of the investments put into the company or business. debt should be between 50% and 80% of equity for a corporation to be considered solvent. A debt ratio greater than one (1) means that its equity or net worth is negative.asset ratio (or simply debt ratio) which indicates the extent of GOCC reliance on debt. A very low ROI suggests either poor management performance or a highly conservative business approach. the greater the longterm financial safety for the corporation. It indicates how much of a corporation’s business is owned and how much is borrowed (a debt/worth ratio of 2 means that for every peso of shareholders funds. this ratio measures how much of a corporation’s capital is financed by borrowing. this measure can be used to compare similar industries. In addition. A very high ROI on the other hand indicates that the company either manages the business well or is undercapitalized. the higher the ratio. Expressed as debt divided by asset. 5 . indicating bankruptcy.0. then its creditors have more stake in the business than the shareowners.e.e. if the liabilities of the corporation exceed its equity or net worth.standard or ideal ratio for bad or good ROA. In other words. A rule of thumb is that around 10% to 14% of ROI is needed in order to fund future growth. Debt Ratio Total Assets divided by Total Liabilities Measures the extent of reliance on debt no standard ratio but  1 indicates bankruptcy The debt/worth ratio (or leverage ratio) measures a corporation’s solvency. the greater the risks a corporation’s creditors assume while the lower the ratio. TABLE 1 DEFINITIONS AND USES OF FINANCIAL RATIOS Ratio Derivation Purpose Rule of Thumb Current Ratio Total Current Assets divided by Total Current Liabilities Measures liquidity or financial strength 2 Return on Assets (ROA) Net Income divided by Total Assets Measures level of efficiency in resource management no ideal/standard ratio but can be used to compare similar industries/GOCCs Return on Investment (ROI) Net Income divided by Owner’s equity/Net Worth Measures profitability 10% to 14% is needed to fund future growth Debt/Worth Ratio Total Liabilities divided by Owner’s Equity/Net Worth Measures solvency 0. how dependent a business is on debt financing (or borrowings) vis-à-vis owner's equity. debt should be between 50% to 80% of equity. For instance. i.e. ROI is derived by getting the ratio of net income to owner’s equity/net worth. i.8 i. Another measure of financial leverage is the debt-to. This ratio focuses on a corporation’s ability to meet its long-term debt obligations such as bonds.8. Return on investment (ROI) is considered one of the best measures of a company’s profitability. the corporation owes two pesos to its creditors). corporations with low debt/worth ratio are more likely to have greater borrowing flexibility in the future while corporations with high debt/worth ratio are more likely to experience business/economic risk and have a greater propensity to default on their debt.5 and 0.5 . A rule of thumb is that debt/worth ratio should be between 0. This ratio is computed by dividing total liabilities by net worth/equity.

694.45 5 36.06 8 30.84 6 PRA 29.859. more than thrice lower than the total deficit posted by Cluster A GOCCs and 34% lower than that recorded by Cluster C GOCCs. energy. socio-cultural and civic activities).35 4 53.30 4 51. trade.008.44 8 29.32 3 56.e. Cluster C GOCCs are those that are accountable for the promotion and development of policies and implementation of projects related to agriculture.398.447. finance and insurance) and 60% higher than that extended to Cluster C (agriculture.119. banking and credit towards the promotion of balanced and sustainable economic growth.832.01 4 Water Dist 30.926. trade.420.7 Consistently listed among asset-light corporations are 7 2008 and 2009 figures are based on the 2009 COA AFR whereas 2007 figures are derived from the 2008 COA AFR.60 6 37.36 1 102.740. Cluster A GOCCs are those responsible for the formulation and implementation of policies in the areas of money. science and socio-cultural and civic activities. PRA. these documents (as audited by the resident auditor and published in the Annual Financial Report) may be used to test the performance of major GOCCs over time.030. NHA.456. Further. Almost all except NEA and MWSS registered increases in assets ranging from P520 million to P16. FINANCIAL PERFORMANCE (GOCCS IN CLUSTER B) GOCCs are grouped according to their functions and activities. In terms of impact on national government resources.824.958.88 2 93.95 2 MWSS 60.652. This amount is three times higher than the subsidy given to Cluster A (banking.393.28 7 33.94 9 26.299. housing as well as efficient transportation and postal services. SBMA.52 10 19.289. TABLE 2 TOP TEN [CLUSTER B] GOCCS BY TOTAL ASSETS (IN MILLION PESOS) GOCCs 2007 2008 2009 Amount Rank Amount Rank Amount Rank BCDA 98. These GOCCs are responsible for ensuring adequate and affordable supply of oil.Given that all GOCCs are required to submit financial statements to the Commission on Audit.71 10 Source of Basic Data: COA Annual Financial Report (AFR) for GOCCs.18 8 NHA 29. water.698.20 1 PPA 90.63 9 NEA 18.997.454.04 9 26.669. MIAA and NEA have consistently been at the top ten (10) in terms of total assets (see Table 2).221. Water Districts. On average. Cluster B mainly consists of public utilities corporations and those in charge of industrial and area development and other regulatory functions.406. the bottom ten GOCCs by total assets vary due to late submission or nonsubmission of financial reports to COA.176. various years As shown in Table 3.587. science.5 billion.13 6 29.744.69 5 40.38 2 91.70 10 17. Out of 44 to 56 corporations which submitted audited financial statements.7 billion between 2007 and 2009.557. GOCCs under Cluster B received the largest subsidy totalling P18.06 7 30.14 7 MIAA 26. the BCDA.336. among others.49 billion during the same period. 6 . Asset Accumulation.349.48 3 57. i.97 3 LRTA 46. PPA.10 5 SBMA 29. Cluster B GOCCs that ran deficits in all these years recorded a total of P34. MWSS. total assets of GOCCs belonging to Cluster B make up about 8% of the country’s gross domestic product from 2007 to 2009. three to five years. LRTA.40 1 115.

49 6 14. The rest of the GOCCs registered decreases in assets of between P75.25 1 BCDA 24. The LRTA. The liabilities of these GOCCs have grown from P172.22 5 19.423.00 13.38 IIGSI 17. On average.72 PRC 2.70 PDMC 0.85 2. asset growth ranged from P37.15 1.422. PRA. MWSS. TABLE 3 BOTTOM TEN [CLUSTER B] GOCCS BY TOTAL ASSETS. In nominal terms.68 0.70 9. GYREI.809. PRC. Meanwhile.78 5 16.21 8.33 13.83 4 18. IIGSI. TABASCO. TABASCO.29 Source of Basic Data: COA AFR for GOCCs.967. The other GOCCs that went to the bottom 10 in 2007 are NPCTI.13 5 PPA 11.000 to P392 million.695.posted increases.95 6 Water Dist 16.54 9 MIAA 8.666.87 8 11.884.873.66 KRC 11. the total liabilities of these GOCCs alone comprise around 78% of total liabilities of all GOCCs in Cluster B.35 7 17.65 9. KRC and PDMC.44 10 SBMA 10.7 billion in 2007 to P226.50 7 LWUA 11.716. TABLE 4 TOP TEN [CLUSTER B] GOCCS BY TOTAL LIABILITIES (IN MILLION PESOS) GOCCs 2007 2008 2009 Amount Rank Amount Rank Amount Rank LRTA 44. PPA.969.39 NSW 2.35 2 42. of less than one percent to three percent.NSLC. PMPC.527.37 2.863.889.69 TABASCO 8.22 LINSI 2.62 NTFC 2.15 1 60.934.21 13. Water Districts.207. albeit minimally.5 billion in 2009 or approximately an increase of 30%.76 10 12. FCIEI and LINSI were among the GOCCs that had the lowest asset values in 2008 and 2009. NTFC and PMPC.772.24 2 MWSS 20. NEA.087.66 3 23.971.50 10 11. BCDA.07 2 36.66 4 21.827.29 2.41 14.899.99 PMPC 0. various years 7 . only three – NSLC.437.574. Of all the GOCCs whose asset data are comparable across time.82 2.79 9 12. various years Accumulation of Liabilities.149.476.66 0.24 8 14.519.36 1 64.144. IN MILLION PESOS GOCC 2007 2008 2009 NSLC 13.503.73 3 NEA 17.19 4 PRA 14.74 3 21.06 8 NORTHRAIL Source of Basic Data: COA AFR for GOCCs.29 8.77 2.39 GYREI 9.33 9 13. NSW.654.000 to P300 million.671. LWUA and SBMA were found to have the largest amount of indebtedness during the period 2007-2009 (see Table 4).84 7 15.141.13 6 16.85 NPCTI 18.70 FCIEI 13.64 2.

458.80 5 17. Table 6 presents the equity of top ten corporations which on average.674.45 1 BCDA 73.871.34 5 16.36 0.73 6 16. Further comparison with other GOCCs posting small amounts of liabilities (MRHI. The GOCCs with least financial liabilities from 2007 to 2009 include NSW.83 3 33.958.56 TABASCO 0. PDMC.403. equity deficiencies of these GOCCs 8 .565.24 3 NHA 22.98 2 MWSS 39.46 PMPC 1. MIAA which placed 10th in 2007 moved down to 11th slot the following year.748.974.36 4 26.002%) in total GOCC liabilities of the entire sector.09 2 72.07 0. From 2007 to 2009 the Authority's total debt rose by P1.53 1.12 0.63 7 MIAA 17.43 2. TABLE 6 TOP TEN [CLUSTER B] GOCCS BY EQUITY (IN MILLION PESOS) 2007 GOCC 2008 2009 Amount Rank Amount Rank Amount Rank PPA 78. TABLE 5 BOTTOM TEN [CLUSTER B] GOCCS BY TOTAL LIABILITIES.348.407.15 PRC 0.044.05 ASADI 0.14 0. various years On the other hand.969.01 0.7 billion in 2008 and 2009.at P13 billion and P14.30 6 Water Districts 14.24 9 10.802. constitute 92% of total equity of all GOCCs belonging to Cluster B. NPIC.809. the combined liabilities of these six (6) corporations amounted to P4 million which is a very meager share (0.96 8 15.59 3 34.91 10 5.90 5 PRA 14.20 9 9.55 1 76.062.62 10 Source of Basic Data: COA Annual Financial Report for GOCCs.261.998. IN MILLION PESOS GOCC 2007 2008 2009 NSW 2. or (b) they have significant retained earnings or accumulated profits from prior years’ operations.08 0.235.55 1. TABASCO. PMPC.814.169.332. From P601 million in 2007.12 Source of Basic Data: COA AFR for GOCCs.39 9 LWUA 5.01 4 SBMA 19.877. various years Equity Accumulation.71 8 12. respectively.07 GYREI 0.125.03 7 18.2 billion increased by about 15%.48 10 5.377.44 2.18 6 17.916. PRC. PEATC.05 0.567. BLCI.Northrail was included among the top ten GOCCs with large amount of liabilities .14 0.74 1 77. On average.29 2 65.003.437.01 8 PNOC-EC 6.769. PDGCC and MGC) cannot be made due to limited data/non-submission of financial statements. GYREI and ASADI (see Table 5). This could either mean: (a) NG subscription or capital payments to these GOCCs are high. there are about nine (9) GOCCs that posted negative equity during the period 2007-2009 (see Table 7).24 7 16.78 4 28.780.

41 -56. Thus. In the case of water districts.).86 PDMC -0.4% and 22. 9 . A lesser proportion of GOCCs – 19 out of 56 or 33.76 -59.000 to about P1 billion but posted ROAs of less than 5%. ASDI. MWSS MIAA. Listed in the upper portion of Table 9 are the GOCCs which are considered asset-intensive or those that require high assets resulting in low ROAs (less than 5%).worsened to almost a billion in 2009. etc. NSLC while posting a high ROA of 57.6%) in 2007.74 -32. PEATC. water districts are only able to generate around P5 profit. assets are not translated into long-term revenue or income.9% . A number of circumstances may cause equity to decrease or turn negative including but not limited to operational losses. In 2007.79 -57.4% in 2008. however. NTFC.97 NSLC -12. 39 out of 56 (69.12 -387. the NSLC and PNOC-EC stand out with 57. This suggests that PNOC-EC was better at converting its investments in 2008 than in 2007 and 2009.16 -593.17 -298. Equity goes down or decreases when assets decrease assuming that liabilities remain constant or unchanged.96 Source of Basic Data: COA AFR for GOCCs.88 NPCTI -57.7%.86 IIGSI -56. Return on Assets. is that this measure should not be taken as the single determinant of financial performance as some GOCCs with high current ratios failed to generate net income before subsidy (see Table 8).6%) in 2008.85 -9.87 -0.86 -0. NDC and PPA. some GOCCs posted surpluses despite low current ratio . respectively in 2008. then equity likewise goes down/turns negative.7 billion even as their assets ranged from P700 million to P93.registered low ROAs in 2008 only because some corporations were not included in COA AFR for the year specifically (BCDA.7%) in 2009.39 NTFC -32. By contrast.000 to as much as P66 million.7 billion. If the value of assets is unchanged and liabilities increase/exceed assets. For instance. For 2009. it may be construed that more than half of the corporations involved in public utilities can meet their near-term operating needs sufficiently.89 -33.17 -4. 24 out of 44 GOCCs (54.15 LINSI -9. While these corporations may be able to pay their short-term obligations on time. On the other hand. A caveat.000 to P2.e. 25 out of 54 (46. PPMC. decrease in assets and increased borrowing.04 PMPC -0.95 BTPI -143.59 -4. its record in 2007 and 2009 were actually below 5%.8% return on assets. TABLE 7 [CLUSTER B] GOCCS WITH EQUITY DEFICIENCIES (IN MILLION PESOS) GOCC 2007 2008 2009 PDA -354. and 36 out of 54 (66. they could also face the risk of not growing the business – that is. Most of the GOCCs that underwent COA review from 2007 to 2009 obtained a current ratio of two or better – i. 23 out of 44 GOCCs or 52. LRTA. the ROA during the period averaged 4. ZCSEZA have consistently reported high current ratios while incurring net loss of about P100. various years Current Ratio.3% posted net income after tax and before subsidy of between P1. PPA. Among the GOCCs with ROAs greater than 5%.44 -223.3%) earned income of P2. This means that for every P100 worth of asset.as in the case of PHILSUCOR. NSW. CEZA.

2 billion.99 -1.78 NSW 94.10 0.89 35. FSC and JHMC (2008) and NDC (2007). a large number of GOCCs under this cluster registered negative income during the period.78 -149.35 0. various years Return on Investment.66 Current Ratio 2009 Net Income Before Subsidy Current Ratio Net Income Before Subsidy 2.95 18.38 -0.31 -0.26 2. In 2007.84 6.95 29.10 2.01 61.23 21. Others that registered good return on investment are KRC.72 -4. PEZA.07 PAFC PEATC 68.51 5.80 209.59 CIAC 4.48 68.10 2. respectively.28 185.83 NDC 0.10 -0. albeit at a decelerating rate (see Table 10).81 184.082. Debt/Worth Ratio.94 203.28 32.27 0. Based on COA report.17 -2.15 43.49 -803.60 -52.33 PRC ZCSEZA 65.04 0.48 -1.960.80 6.76 PHILSUCOR 0. As explained earlier.24 NORTHRAIL 3.13 PSTC 0. Those that 10 .15 PADC 2.51 -0.53 FCIEI 3. corporations whose debt-to-net worth ratio is within 50% to 80% are considered financially viable.63 104.08 2.44 Source of Basic Data: COA Annual Financial Report for GOCCs.36 -15.11 MRHI MWSS NHA 2.59 2.35 -0.77 10.300.10 PPA PPMC 0.78 23.28 219.28 -52. PDGCC and Philsucor (for 2008-2009).42 Earning GOCCs with current ratio of less than one (1) CPA 0.55 417.54 0.42 -5.553.11 3.Unfortunately.66 10. at least 70% of all GOCCs had positive net income with debt ratio/worth ratios falling below 80% (see Table 11). PNOC-EC and PRA have constantly posted ROIs within the ideal range.84 -0.39 -1.15 -3.02 -819.32 -14.99 -1.10 -0.31 27.16 -0. From 2007 to 2009.80 -2.60 -4.92 -6.92 -0.49 40.97 2.692.14 -66. i.00 SPDA 32.e.12 JHMC LINSI 26.62 0.72 0.07 45.12 -58.85 -6.95 BCDA 2.51 LLDA 0. 15 corporations representing 34% of total were in the red while 50% (28) and 39% (21) of Cluster B GOCCs similarly posted revenue losses in 2008 and 2009.70 0.94 CEZA 8.81 NPIC 2.92 -118.77 5. GOCCs that were considered profitable during the period. Government corporations with ROI ranging between 10% and 14% are considered good performers and are assured of future growth.36 0.37 -0. TABLE 8 CURRENT RATIOS AND NET INCOME (LOSS) BEFORE SUBSIDY OF CLUSTER B GOCCS (IN MILLION PESOS) 2007 GOCC Current Ratio 2008 Net Income Before Subsidy Losing GOCCs with current ratio greater than two (2) ASDI 3. high ROIs with positive earned a profit averaging P6.07 NTFC 43.19 -54.88 -68.43 -13.32 41.94 LRTA 0.

45 KRC LLDA 5.95 PNOC-EC 13.15 0.05 LWUA 0.19 PRC 2.87 2.include LRTA.04 2.24 0.00 3.91 MWSS 3.70 22.91 2.71 2.86 3.52 1.64 PPMC 1.04 BMHI 1.97 PEZA 14.43 MGC 1.64 4.73 0.71 0.37 LRTA 0.75 6.01 0.73 2. TABLE 9 RETURN ON ASSETS OF CLUSTER B GOCCS (IN PERCENT) 2007 2008 2009 Asset-Intensive GOCCs.89 GOCCs with net income>0and ROA>5% JHMC 16.98 1.68 5. debt/worth exceeding 80% .06 PDMC PHILSUCOR 3.32 PRA 5.75 NORTHRAIL 2.29 3.79 13.43 Water Districts 2.44 1.03 Water Districts 5.06 0.39 6.77 2.38 0.81 4. NDC.20 PPA 2.66 1.81 13.14 1.24 2.38 1.80 PMPC 0. Northrail.39 PDGCC 11.68 4.69 MRHI 4.20 MCIAA 4.76 1.65 0.19 6.39 1. LWUA. with net income>0 and ROA<5% BCDA 1.were not found to be in good standing .80 2.98 9.47 NDC 4.43 GYREI 1.10 5.72 LLDA 0.83 CEZA 2.06 2.38 Source of Basic Data: COA AFR for GOCCs.91 MCIAA 5.86 MIAA 4.75 JHMC 1.53 PAFC 0.15 NPIC NSLC 0.86 1.15 PNL 2.51 CPA 2.i.80 4.46 PSTC TABASCO 1.35 1.07 4.59 CDC 2.e.36 0.00 9. various years 11 .07 0.24 0.63 NSLC 57. PNOC-EC and Water Districts.66 NHA NPCTI 0.58 BLCI 0.

62 1. IN PERCENT GOCC 2007 2008 BCDA 2.13 10.24 3.74 GYREI 1.34 PRC 2.85 CDC 3.000. however.39 31.68 5.000 and P500.43 1. The net earnings of NSLC during the period ranged from P200.04 4.31 6.42 PAFC 0.27 PDMC 10. while posting positive net income.45 0.40 MWSS 5.88 1.90 MRHI 5.72 0.76 1.58 22.000 to P7.20 5. Recurring negative net worth accompanied by weakening profits over the years could be a sign of concern for these GOCCs. various years Table 11 also presents that at least four GOCCs.01 19.74 3.81 3.70 PNL 4.6 million while PMPC and NPCTI net income averaged P100.47 NHA 4.98 PPMC 6.29 NDC 19. Philsucor had negative debt/worth ratio due to equity deficiency in 2007 but its debt/worth remained extremely high in the next two years.68 10.04 8.TABLE 10 GOCCS WITH POSITIVE (>) NET INCOME AND EQUITY BY ROI.08 0.65 16.84 3. i. is that there are losing GOCCs (net income<0) which have exceptionally high debt/worth ratio.51 7.21 PPA 3.57 8.79 1.05 73.99 FSC 2009 1.45 PHILSUCOR 23.53 PSTC 17.71 NPIC 1.07 7.87 LLDA 8.12 0. Based on COA reports.33 CEZA 2.93 PRA 12.17 7.30 1. more than 80%.19 20.16 17.74 KRC 0.87 0.08 Source of Basic Data: COA AFR for GOCCs.98 PEZA 23.82 2.95 CPA 2.89 61.87 1.94 3.87 PDGCC 12. also incurred negative debt/worth ratio during the period because their liabilities exceeded their assets. What is more worrisome.01 2.03 5.25 BMHI 1.21 11.85 BLCI 0.44 TABASCO 1.97 0.84 12.11 3. the NEA and NSW had constantly topped the list of GOCCs with high debt / worth ratios and negative net 12 .15 PNOC-EC 26.76 JHMC 2.10 LWUA MCIAA MGC MIAA 6.31 0. respectively.45 LRTA 1.18 NORTHRAIL 0.e.02 Water district 11.20 2.

50 0.71 LRTA 1999.70 MCIAA 4.4 billion.72 324.48 20.65 -405.89 Source of Basic Data: COA Annual Financial Report for GOCCs.31 114.50 -180.11 PNL PNOC-EC PPA 14.76 6.46 12. reported liabilities for NEA and NSW averaged P17.95 MGC MIAA 46.78 BMHI 48.36 NHA 55. 13 .93 5.000.69 -133.99 MWSS 52.000 to P66.63 34.72 0.29 NDC 378.69 96.97 18.86 EXPOCORP 6.45 5.08 3.60 296.08 NPCTI -131.30 45.30 294.43 PSTC Water Districts 205.17 4.01 LWUA 218.69 PHILSUCOR -35143.TABLE 11 DEBT/WORTH RATIO OF EARNING [CLUSTER B] GOCCS (IN PERCENT) 2007 2008 2009 GOCCs with net income>0 and debt/worth ratio<80% BCDA 33.73 34.44 79.82 921. NEA’s losses ranged from P171 million to P2.80 -132.25 PNOC-EC PPMC 91.00 PDGCC 11.96 MRHI 9. respectively.71 NSLC -206.99 8.27 486.83 1419.22 PRA 106.97 PEZA 63.73 PDMC 35.65 CPA 6.48 7. various years earnings (see Table 12).4 billion while that of NSW was around P5.52 40.68 KRC 181.90 GOCC with net income>0 and negative debt/worth ratio (<0) PMPC -176.04 TABASCO 1.83 -387.66 1.13 CDC 48.15 FSC 125.74 2.33 0.51 0.17 63.40 6. During the period.92 28.79 59.01 26.71 4.39 GYREI 0.92 12.08 138.7 billion and P2.24 NPIC 31. On the other hand.81 PRC 3.46 KRC 39.94 64.56 JHMC 27.73 BLCI 3.09 LLDA 45.27 NORTHRAIL 6832.41 27.74 CEZA 17.56 201.07 112.20 36.81 PHILSUCOR 3626.39 12.37 121.82 GOCC with net income>0 and debt/worth ratio > 80% CDC 82.28 PAFC 20.78 1.

72 GOCC with net income<0 and debt/worth ratio > 80% FSC 141. From 2007 to 2009.66 -194.04 PDA -274. In particular.37 609.17 CIAC -561.The twin problem of negative net worth and negative equity could be a serious concern as this indicates near bankruptcy for these GOCCs. Among the highly-indebted government corporations.1 million to P126.53 -106.07 NTFC -107.46 SBMA 84.67 -124.53 PDA BTPI -254.03 LINSI -124.10 1411. 14 .7 while its losses ranged from P1.1 million to P12.00 -106. losing their capacity to be transformed into profits. two agencies relied heavily on national government subsidy.8 million to P48.31 NEA 51809. Table 13 lists the six (6) GOCCs which may be considered as technically bankrupt (i.02 IIGSI -130.97 NDC 430.53 1041.05 -123. this indicator measures the extent of reliance on debt such that a percentage higher than one (1) indicates negative equity or possible bankruptcy. In terms of profitability. NPCTI.03 -385.27 -579.4 million.61 Source of Basic Data: COA Annual Financial Report for GOCCs. NTFC.7 million while PDA got P47.82 -291. LRTA’s negative debt/worth ratio average was -604.85 PMPC -178.3 while that of PDA was at -253.5.4 million TABLE 12 LOSING [CLUSTER B] GOCCS WITH HIGH AND/OR NEGATIVE DEBT/WORTH RATIO 2007 2008 2009 2363.68 KRC 164.5 million in total assistance during the period.48 942.55 -142. the combined equity of these GOCCs worsened from -P601million to -P988 million. CIAC posted net losses of between P53. The CIAC debt/worth ratio averaged -473. This scenario likewise suggests that assets lose their values.66 GOCC with net income<0 and negative debt/worth ratio LRTA -630. Around eight (8) struggling GOCCs had exceedingly high negative debt worth ratios during the period. various years Debt-to-Asset Ratio Simply called debt ratio. The LRTA received P783.e.30 PPMC 746. hence.69 -174. BTPI. and PMPC) and yet they continue to operate. PDA. NSLC.93 NORTHRAIL NSW 22976.7 million while PDA lost from a range of P22.

19 1.94 1. i. combined quantitative (financial and economic returns) and qualitative (governance factors) could be undertaken to obtain a more comprehensive or complete picture of GOCC performance. etc. telecommunications. Better yet. socio-cultural activities.06 3. etc).06 PMPC 2.16 5.29 16. trade.58 PDA 1. power/electrification. Due to time and resource limitation. To improve GOCC performance.97 NSLC 1. solvency. various years In addition to the 12 GOCCs listed above.32 17. and (2) they are expected to be financially-viable and self-reliant. and (d) bail-out. Hence. A holistic study on GOCCs would normally cover financial analysis. about 20% of the remaining GOCCs have average debt ratios greater than 0. This means that many GOCCs are still at risk and that their continued operation could mean any of the following: (a) equity infusion.TABLE 13 [CLUSTER B] GOCCS BY DEBT RATIO.e. area development. profitability.30 PHILSUCOR 1.34 LRTA 1.52 2.38 NPCTI 4.24 PDMC 2. Congress. finance their internal operations.33 NTFC 15.34 3.02 LINSI 5. efficiency in resource management and reliance on debt.35 1.30 2.65 2. 2007-2009 GOCC 2007 2008 2009 BTPI 1. DBM and the newly-created Governance Commission for GOCCs (RA 10149) maintain a close watch on these corporations. all of these options put a strain on NG position. (c) advances. SUMMARY Government corporations have dual roles: (1) they are mandated to fulfill societal goals through the provision of public goods and services including policy formulation. (b) outright financial assistance or subsidy.00 CIAC 1.6. The paper provides a glimpse on their liquidity. This method of analysis could be used to analyze GOCCs Cluster A (financial) and Cluster C (agriculture.21 Source of Basic Data: COA AFR for GOCCs.14 4. Obviously.35 IIGSI 4. it is essential that oversight agencies. the role of GOCCs will continuosly be important. COA.57 1. there is a need to ensure that the resources being spent on state enterprises will not undermine the government’s overall fiscal condition. produce income surplus and remit dividends to the national government. project implementation and missionary functions.22 1.27 2. this paper focused on the financial aspects of public corporations belonging to Cluster B or those involved in transportation.26 5. The financial position of each GOCC is crucial in gauging its financial viability – a necessary condition for continued operation and quality of public service delivery.e. In a country like the Philippines which is characterized by shallow capital markets and very modest market competition. i. 15 . socio-economic impact evaluation and organizational/systems review.

Laguna Lake Development Authority Light Rail Tansit Authority Local Water Utilities Administration Mactan Cebu International Airport Authority MGC Manila Gas Corporation PSTC MIAA MRHI SPDA SRA MWSS Manila International Airport Authority Marawi Resort Hotels.LIST OF ACRONYMS BMHI Alabang-Sto. PDGCC FSC GYREI IIGSI JHMC Freeport Services Corporation GY Realty Estate. Metropolitan Waterworks and Sewerage System NDC National Development Company TABASCO Water Districts NEA NHA National Electrification Administration National Housing Authority ZCSEZA PPMC ASDI BCDA BLCI NORTHRAIL North Luzon Railway Corporation NPC NPCTI National Power Corporation National Precision Cutting Tools. Inc. Inc. Inc. Tomas Development. John Hay Management Corporation PDMC PEATC PEZA PHILSUCOR KRC LINSI LLDA LRTA LWUA PMPC PNL PNOC-EC PPA PRA MCIAA Kamayan Realty Corporation Luzon Integrated Services. Inc. Inter-Island Gas Services. Inc. Inc. NDC-Philippine Infrastructure Corporation National Stevedoring and Lighterage Corporation National Slipways Corporation National Trucking and Forwarding Corporation Philippine Aerospace Development Corporation PNOC Alternative Fuels Corporation NPIC PDA PRC Partido Development Administration Palacio del Gobernador Condominium Corporation PNOC Development and Management Corporation PEA Tollway Corporation Philippine Economic Zone Authority Philippine Sugar Corporation PNOC Malampaya Production Corporation Philippine National Lines PNOC Exploration Corporation Philippine Ports Authority Philippine Reclamation Authority Pinagkaisa Realty Corporation PNOC Shipping and Transport Corporation Southern Philippines Development Authority Sugar Regulatory Administration Tacoma Bay Shipping Corporation Water Districts Zamboanga City Special Economic Zone Authority Poro Point Management Corporation 16 . Incorporated Bases Conversion Development Authority Batangas Land Company. Incorporated BTPI CDC Bataan Technology Park. Clark Development Corporation NSLC NSW CEZA Cagayan Economic Zone Authority NTFC CIAC CPA PADC PAFC EXPOCORP Clark International Airport Corporation Cebu Port Authority Philippine Centennial Expo 98' Corporation FCIEI First Cavite Industrial Estate Inc. Incorporated BCDA Management and Holdings.