Topic : Nature and Scope of Public Enterprise

Reporters : Reynavi Marquez-Olivares

Catherine N. Anito

Public Enterprise Defined

 …corporate bodies, stock or non-stock, owned or controlled by the government created by special
law under the corporation law for the purpose of performing governmental or propriety functions
which are socio-economic in nature (Commission on Reorganization, March 1972)
 …publicly owned and/or controlled enterprises. These are incorporated public corporation, or large
unincorporated units (government enterprises) that sell most of the goods they produce to the public
Public Enterprise
 government-owned or controlled
 engaged in business activities
PH Definition
 Public Enterprise is a corporate body, stock or non-stock, owned or controlled by the government, and
created by special law under the corporation law for the purpose of performing governmental on
proprietary function.

Public Enterprise (International Center on Public Enterprises, 1980)

A public enterprise is an organization:
 owned by public authorities, whether central state or to the extent of 50% or more;
 under top managerial control of the owning public authorities
 established for the achievement of a defined set of public purposes, which may be multi-dimensional
in character;
 engaged in activities of a business character;
 involved in basic investment and returns; and
 which market its outputs in the shape of goods and services

Problems on the definition of public enterprises:

 The Philippine definition focuses on the legal personality of a GOCC and government ownership
 The international definition adds the dimension of engagement in activities of a business character,
the idea of investment and returns, and marketing or outputs.

A COMPARISON OF ORGANIZATIONAL FORMS OF PUBLIC ENTERPRISES

ORGANIZATIONAL FORMS
ORGANIZATIONAL INDIVIDUAL
CHARACTERISTICS PROPRIETORSHIP PARTNERSHIP CORPORATE- COOPERATIVE
OWNED PATRON-
OWNED

1. Management The Proprietor The Partners Board of Board of Directors

Control Directors

2. Management The Proprietor The Partners Investors User-Members

Orientation
 3. Functions To buy, produce or Same as Same as To purchase and
provide goods and Proprietor Proprietor provide suppliers
services for sale and secure or
market and process
commodities

4. Objectives Profit for Proprietor Profit for the Profit for the Savings for the
Partner investors member patrons
Stockholders

5. Users The Public The Public The Public Member-patrons

6. Ownership The Proprietor The Partners The investors- Members-usually

Representation one vote per one vote cash
share owned

7. Legal Base Legal agreement of Legal agreement Incorporated Usually

Associates under state of Associates under State Law incorporated under
law under state law special state
enabling registration

8. Liability Assets of the Assets of the Assets of the Assets of the

Proprietor Partners Corporation Cooperative

9. Proceeds The Partners The Partners The Members-

Recipients Stockholders- proportionate to
proportionate to patronage
ownership

10. Return on Unlimited Unlimited Unlimited Limited by law

Investment
Capital

Conceptual Framework of Public Enterprises

Public Enterprise is divided into two components:

1. Financial - primarily engaged in acquiring financial assets and some of them are owned and
controlled by the government
2. Non-Financial Institutions – government owned/controlled corporations engaged in the
large-scale sales of commercial and industrial goods services to the public

Public Enterprise Functions

 The primary function of public enterprise is the production and sale of goods and services in
which government agencies exercise and control.
Conditions under which Public Enterprises are expected to operate:

1. In cases where the private sector is unwilling or unable to provide goods and services vital to the
society
2. When there is a need to create a bias in favor of the disadvantaged sector of the society
3. To spur the development of strategic activities with wide ranging economic impact
4. In the existence of natural monopolies which government want to control to protect the consuming
public

Characteristics of Public Enterprises

1. Government Ownership, Control and Management

2. Public Accountability
3. Public Purpose
4. Contributes to government revenue
5. Financially independent

Dimensions of Public Enterprise

1. Enterprise Dimension
2. Public Dimension

Three Types of Roles of Public Enterprise as Development Institution

1. As state agencies, accountable for their implementation of and compliance with official
policy
2. As business organizations, accountable for their economic efficiency in producing and
marketing goods and created surplus revenues
3. As institutional fiduciaries, accountable for their handling of public resources entrusted to
them for meeting the needs of intended beneficiaries

Public Enterprises in the Philippines

Legal Framework

1973 Constitution. The state may, in the interest of national welfare or defense, establish and operate
industries and means of transportation and-communication, and, upon payment of just compensation, transfer
to public ownership utilities and other private enterprises to be operated by the government.

Article XII (National Economy and Patrimony) of the 1987 Philippine Constitution

SECTION 6. The use of property bears a social function, and all economic agents shall contribute to the
common good. Individuals and private groups, including corporations, cooperatives, and similar collective
organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of
the State to promote distributive justice and to intervene when the common good so demands.

SECTION 16. The Congress shall not, except by general law, provide for the formation, organization, or
regulation of private corporations. Government-owned or controlled corporations may be created or
established by special charters in the interest of the common good and subject to the test of economic
viability.
SECTION 17. In times of national emergency, when the public interest so requires, the State may, during the
emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any
privately owned public utility or business affected with public interest.

SECTION 18. The State may, in the interest of national welfare or defense, establish and operate vital
industries and, upon payment of just compensation, transfer to public ownership utilities and other private
enterprises to be operated by the Government.

SECTION 19. The State shall regulate or prohibit monopolies when the public interest so requires. No
combinations in restraint of trade or unfair competition shall be allowed.

The Evolution of GOCCs in the Philippines

1. Before political independence

 Pre-war governments scrupulously limited the role of GOCCs to a few sectors
e.g financing, public utilities and agricultural development
 GOCCs created during American colonial period were engaged in public transportation e.g
Manila Railroad Company, Philippine National Bank

2. Commonwealth Period
 Expanded the role of GOCCs to agricultural development
e.g - PNB for the mobilization of capital for agricultural activities particularly sugar
- creation of new GOCCs to focus on agriculture and trading such as National Rice and Corn
Corporation, National Coconut Corporation National Trading Corporation

3. World War II
 GOCCs were created with duties unique to the crisis at that time
e.g Emergency Control Administration - created in 1941 to execute all government welfare
policies and programs as consequence of the war effort

4. Post War Period

 The ‘Reconstruction Period was characterized by significant growth of the GOCC sector
 Alarm in the proliferation of GOCCs and duplication of activities

5. The Martial Law Period.

 During President Ferdinand Marcos’s first 10 years, GOCCs reach up to 120
 There were 327 GOCCs in 1986

REFORMING PUBLIC ENTERPRISES IN THE PHILIPPINES

Administrative Order No 59
 The primary role of the private sector and the policy of avoidance by government from competing
with private sector,

Republic Act 10149

 An act to promote financial viability and fiscal discipline in government-owned or controlled
corporations and to strengthen the role of the state in its governance and management to make them
more responsive to the needs of public interest and for other purposes
GOCCs at Present

The Governance Commission for GOCCs (GCG)

 The GOVERNANCE COMMISSION FOR GOCCS (GCG) was created under Republic Act No.
10149 (RA No. 10149), otherwise known as the “GOCC Governance Act of 2011”, as the central
policy-making and regulatory body mandated to safeguard the State’s ownership rights and ensure
that the operations of GOCCs are transparent and responsive to the needs of the public.

 It is a central advisory, monitoring, and oversight body with authority to formulate, implement and
coordinate policies to govern Government-Owned or-Controlled Corporations, which shall be
attached to the Office of the President

Classification of GOCCs (According to GCG)

Classification
Government Financial Institutions
Trade, Area Development, and Tourism
Sector
Education and Cultural Sector
Gaming Sector
Energy and Materials Sector
Agriculture, Fisheries, and Food Sector
Utilities and Communications Sector
Healthcare Services Sector
Holding Companies
Examples
Landbank of the Philippines(LBP),
Development Bank of the Philippines
(DBP)
Bases Conversion and Development
Authority (BCDA), National Housing
Authority (NHA)
Boy Scouts of the Philippines (BSP),
Development Academy of the
Philippines (DAP)
Philippine Amusement And Gaming
Corporation (PAGCOR)
National Electrification
Administration (NEA), National
Transmission Corporation
National Food Authority (NFA),
Sugar Regulatory Administration
(SRA)
Light Rail Transit Authority (LRTA),
Civil Aviation Authority of the
Philippines
La Union Medical Center
Batangas Land Company, Inc.
References
Briones, L. M. (1985, October 1985). The Role of Government-Owned or Controlled Corporations in
Development. Philippine Journal ofPublic Administration. Vol. XXIX, No.4, 355-391.
defenseph.net. (n.d.). Retrieved from The Philippine Public Enterprise Sector: https://defenseph.net/drp/index.php?
topic=4815.0
Dimatulac, J. L. (2015). Public Enterprise: Theories and Practice in Public Administration . Retrieved from
www.scribd.com: https://www.scribd.com/document/282982941/Public-Enterprise
Portfolio of GOCCs . (n.d.). Retrieved from https://icrs.gcg.gov.ph/gocc-portfolio/
Romano, G. B. (1996). Philippine Public Enterprises and Privatization. Mandaluyong City: Fiscal Administration
Foundation Inc. (FAFI).
Villamejor-Mendoza, M. F. (n.d.). Enhancing Performance in Philippine Public Enterprises: A Revisit of Recent
Reforms and Transformations. Retrieved from ncpag.upd.edu.ph:
https://ncpag.upd.edu.ph/wp-content/uploads/2015/08/Enhancing-Performance-in-the-Philippine-Public-
Enterprise-Sector_FVMendoza.pdf