GOVERNMENT-OWNED

AND/OR CONTROLLED
CORPORATIONS
(GOCC)
What is a Government-Owned
and/or Controlled
Corporation?
 It refers to any agency organized as a stock or nonstock
corporation, vested with functions relating to public needs whether
governmental or proprietary in nature, and owned by the
Government of the Republic of the Philippines directly or through its
instrumentalities either wholly or, where applicable as in the case of
stock corporations, to the extent of at least a majority of its
outstanding capital stock.
 Definition of GOCCs

As defined under PD 2029, a GOCC is “a stock or a non-stock

corporation, whether performing governmental or proprietary
functions, which is directly chartered by special law or, if organized
under the general corporation law, is owned or controlled by the
government directly or indirectly through a parent corporation or
subsidiary corporation, the extent of at least a majority of its
outstanding capital stock or of its outstanding voting capital stock.”
EO No. 64 of 1993 expanded the definition as follows: “…a corporation
created by special law or incorporated and organized under the
Corporation Code and in which government, directly or indirectly, has
ownership of the majority of the capital stock. Any subsidiary of a
GOCC shall be deemed a GOCC. Likewise, it is also a corporation…which
is explicitly intended under the law and government policy for ultimate
transfer to private ownership under certain specified conditions, shall
be considered a GOCC until it is transferred to private ownership and
control” (CPED, 2002).
In the Philippines, the government widely used government
corporations for economic and social development. GOCCs were
created to provide infrastructure, public utilities and consumer price
stabilization services. The COA identified GOCCs in accordance with
their involvement in the following sectors: agriculture, trading and
promotional sector, industrial and area development, educational,
social, cultural, scientific, civic and research and financial sector.
 RATIONALE FOR GOVERNMENT CORPORATIONS

Government corporations are created as a way of helping to correct

market failures. The conditions where GOCCs are expected to operate
are:

1. In cases where private sector is unwilling to provide goods and

services vital to society such as the construction of large infrastructure,
i.e. roads and ports;
2. When there is a need to create bias in favor of disadvantaged sector
of society in a free market operation such as distribution of staples like
rice and sugar;

3. To spur the development of strategic activities with wide-ranging

economic impact;

4. Natural monopolies which government wants to control to protect

the consumers.
Chartered GOCC refers to a GOCC, including Government
Financial Institutions, created and vested with functions by a
special law.
Nonchartered GOCC refers to a GOCC organized and operating
under Batas Pambansa Bilang 68, or “The Corporation Code of
the Philippines”
Subsidiary refers to a corporation where at least a majority of
the outstanding capital stock is owned or controlled, directly
or indirectly, through one or more intermediaries, by the
GOCC.
The GOCC is not producing the desired outcomes, or no longer
achieving the objectives and purposes for which it was originally
designed and implemented, and/or not cost efficient and does not
generate the level of social, physical and economic returns vis-à-vis the
resource inputs;

The GOCC is in fact dormant or nonoperational;

The GOCC is involved in an activity best carried out by the private

sector; and

The functional, purpose or nature of operations of any group of GOCCs

require consolidation under a holding company.
According to Wikipedia, there are over 200 partial GOCCs here in the
Philippines.

The latest article wrote by Manila Bulletin stated that the Government
Service Insurance System (GSIS) and Social Security System (SSS)
registered the highest income among 604 government-owned and
controlled corporations in the country in 2017.

The Bangko Sentral ng Pilipinas (BSP) and the Power Sector Assets and
Liabilities Management Corporation (PSALM) paid the largest amount
of corporate taxes with P14.7 billion and P13.47 billion, respectively.
On the other hand, the Philippine Deposit Insurance Corporation (PDIC)
and Development Bank of the Philippines (DBP) topped the list of state-
owned firms with highest dividend remittances. PDIC registered a
dividend of P7.46 billion while DBP, P2.51 billion.

In the recently-released Annual Financial Report for Government

Corporation, the Commission on Audit disclosed that total
comprehensive realized in 2017 by GC’s totaled P287.82 billion, an
improvement of P74.85 billion or 35.15 percent compared to the
P212.87 billion in 2016.

Total revenue was P1.141 trillion, P44.40 billion or 4.05 percent higher
than the previous year’s P1.096 trillion.
On the other hand, total expenses reached P924.09 billion, lower by
3.28 percent or P31.31 billion from 2016’s P955.40 billion.

GSIS topped the list of highest income earners, with over P276 billion in
earnings in 2017. The SSS gained P202.3 billion in income.

The other top earners: BSP with 3) Philippine International Convention

Center, P93.3 billion; 4) PSALM, P79.59 billion; 5) Philippine Health
Insurance Corporation, P62.99 billion; 6) Philippine Gaming
Corporation, P6015 billion; 7) Land Bank of the Philippines, P54.09
billion; 8) Home Development Mutual Fund P54.01 billion 9) PDIC,
P31.38 billion and 10) Water Districts, P28.55 billion.
SSS and GSIS ranked 1 and 2 as highest spenders with P182.6 billion
and P181.2 billion respectively.

Also spending the largest in 2017 were: 3) PHIC, P117 billion; 4) PSALM,
P82.72 billion; 5) BSP, P68.72 billion 6) LBP, P38.27, billion; 7) National
Food Authority, P 29.55 billion; 8) PDIC, 25.69 billion; 9) HDMF, P23.74
billion and 10) water districts, P23.19 billion.

PAGCOR expenditures for the year were apparently low for the year.
Not a top ten earner, NFA placed seventh among the biggest spenders.
The list of top government corporation taxpayers: 1) BSP, P14.70 billion;
2) PSALM, P13.47 billion; 3) PaGCOR, P11.76 billion; 4) LBP, P9.15
billion; 5) Philippine Charity Sweepstakes Office, P8.7 billion; 6)
Philippine Ports Authority, P3.36 billion; 7) DBP, P2.91 billion; 8) Manila
International Airport Authority, P2.52 billion; 9) PHIC, P1.78 billion and
10) GSIS, P1.12 billion.
COA also listed the top government corporations in terms of dividend
remittances: 1) PDIC, P7.4 billion; 2) DBP, P2.51 billion; 3) MIAA, P2.2 billion;
4) Civil Aviation Authority of the Philippines, P2.08 billion; 5) PPA, PP1.95
billion; 6) BSP, P1.84 billion; 7) National Power Corporation, P1.39 billion; 8)
PAGCOR, P1.18 billion; 9) Subic Bay Metropolitan Authority, P923 million;
and 10) Philippine Economic Zone Authority, P622.9 million.

The AFR for Government Corporations for 2017 presented the combined
financial statements of 604 government corporations examined by the
Government Accountancy Sector of COA.
Of the 604 state-owned firms, 83 regular GCs and 477 water districts
were classified as government business enterprises, while 44 regular
GCs were classified non-GBEs.

“This 2017 AFR for GCs is prepared to sustain the policy of the
government on transparency and accountability,” COA explained.
In terms of Finances, GOCCs receive from the government "subsidies"
and "program funds". Subsidies cover the day-to-day operations of the
GOCCs when revenues are insufficient while program funds are given to
profitable GOCCs to pay for a specific program or project.
The GOCC Governance Act mandates the interests of the public as the
foremost objective of public corporate governance, and the only
“stockholder’s interests” that the Government preserves for itself is
that in serving the public interests, GOCC assets and resources are
utilized judiciously and without unduly undermining government
financial status. The Government as equity-holder of all GOCCs has no
“profit maximization” objective.
 GOCCs’ unregulated proliferation is one of the
contributing elements to the fiscal imbalance of the
economy.
According to the World Bank (1995), GOCCs’ poor performance is
attributable to:

1) Lack of clarity in the government’s role as owner.

2) Multiple conflicting objectives of many state-owned enterprises

3) Easy access to subsidies, transfers, and guaranteed loans create a

moral hazard problem such that there is no incentive to be efficient
since there is no threat of bankruptcy.
CLASSIFICATIONS OF GOCC (SECTORS)
Government Financial Institutions
Social Services and Housing
Land and Water Resources
Power
Support Services
Commercial, Trade and Tourism
Transport, Infra and Communications
 GROUPS OF GOCC

Cluster A - Financial Institutions

Cluster B - Public Utilities, Industrial, Area Development,

Agricultural, Trading, Promotional

Cluster C - Social, Cultural, Scientific

How do GOCCs’ performance impact the government?

1. Section 3 of R.A. 7656 require all GOCC to remit 50% of

annual net earning in cash, stock or property dividends to
national government.
2. GOCCs’ constitutes expenditures, they deemed to be
entitled to financial support in form of subsidies, equity
infusion, and lending.
 REPUBLIC ACT 10149
“GOCC Governance Act of 2011”
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
 Under the GOCC Governance Act (Republic Act 10149;
Government Owned and Controlled Corporations (GOCC) Governance
Act of 2011), GOCCs are overseen by the Governance Commission for
Government-Owned or Controlled Corporations (GCG). The
Governance Commission is the "government’s central advisory and
oversight body over the public corporate sector" according to the
Official Gazette of the Philippine government.
 Republic Act 10149
State must ensure:
1. Judicious use of corporate form
2. GOCC operations are rationalized and centrally monitored
- resources used efficiently
- liabilities incurred prudently
3. Transparent, professional and effective corporate governance
4. Governing Boards are fully accountable as fiduciaries.
 The GCG has the power and function to ascertain whether a
GOCC should be:

(a)Reorganized;
(b)Merged;
(c)Streamlined;
(d)Abolished; or
(e)Privatized
 Exempted of the coverage of R.A. 10149:

1. Bangko Sentral ng Pilipinas

2. State Universities and Colleges
3. Cooperatives
4. Local Water Districts
5. Economic Zone Authorities
6. Research Institutions
 CONCLUSION

The GOCC Act of 2011 establishes the framework

for reforms in the public corporate sector. It is designed
to reform the government corporate sector, improve
corporate governance of GOCCs, and exact from them
efficient and effective public service.