PUBLIC ENTERPRISE

LOCAL FISCAL ADMINISTRATION

LOCAL ECONOMIC ENTERPRISE
Meldgyrie Mae M. Andales
 What is Public Enterprise?
“Public Enterprises are 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 proprietary
functions which are socio-economic in nature.” –
Commission on Reorganization (Integrated
Reorganization Plan, 1972)

“Public Enterprises is a publicly owned and/or controlled

enterprises. These are incorporated public corporations or large
unincorporated units (government enterprises) that sell most of
the goods they produce to the public.” – United Nations
Department of Economics and Special Affairs (A System of National
Account, 1968)
 What is Public Enterprise?
“Public Enterprises as a government-owned and/or
controlled industrial units of financial institutions which
either sell goods and services to the public on a
large scale, accept demand, time or saving deposit
or both incur liabilities and acquire financial assets
in the market.” – International Monetary Fund (A
Manual on Government Finance Statistics, 1974)

2 Defining government-owned and controlled

Characteristics: engaged in business activities
Government Owned and
Controlled Corporation
 What are Government Owned and
Controlled Corporations?
Presidential Decree No. 2029, series of 1986 defined GOCCs as,

Section 2. Definition. A government-owned or controlled corporation is a stock or a

non-stock corporation, whether performing governmental or proprietary
functions, which is directly chartered by a special law or if organized under the
general corporation law is owned or controlled by the government directly
through a parent corporation or subsidiary corporation, to the extent of at least a
majority of its outstanding capital stock or of its outstanding voting capital stock.

Executive Order No. 64 of 1993 expanded the definition,

… a corporation by a special law or incorporated and organized under the Corporate

Code and in which government, directly or indirect, has ownership of majority
of the capital stock
 What law created the GOCCs?

In the 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 or just
compensation, transfer to public ownership utilities and other
private enterprises to be operated by the government

In the 1987 Constitution,

…GOCCs may be created or established by special charters in
the interest of the common good and subject to the test of
economic viability -(Art. XII, Sec. 16)
 Why are they created?

GOCCs are created on the idea that market failures

do exist and government needs to intervene to
protect public interest. Nevertheless, the most
intrusive intervention by even well-meaning states in
the market takes the form of state ownership of
enterprises or GOCCs
 How do GOCCs operate?
1. In cases where private sector is unwilling or unable 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 the society in a free market
operation such as distribution of staples like rice and sugar
3. To spur the development pf strategic activities with wide-
ranging economic impact
4. When there exist natural monopolies which government
wants to control to protect the consuming public
How GOCCs develop over the
years?

Economic
Martial
Crisis
Commo Law and
nwealth 1980s
Post-
Before Period war
American
Political Period World Period
Indepen War II
dence
 How do GOCCs’ performance
impact in government income?
• GOCCs are important sources of income for the national
government
• All GOCCS are required to declare and remit at least 50
per cent of their annual net earnings as cash, stock or
property dividends to the national government
• Aside from dividends, GOCCs remit to the national
treasury collections from guarantee fees, foreign
exchange risk cover and interest on National
Government advances to GOCC loans
 How do GOCCs’ performance
impact in government income?
• In 2009, the National Government collected a total of
PhP35.7 billion from GOCCs, accounting for more than a
quarter (25.3%) of total non-tax revenues
• Bangko Sentral ng Pilipinas (BSP) and the LandBank of
the Philippines (LBP) are the top remitters of dividends
in 2009 with PhP6.0 billion and PhP2 billion respectively
• However, even though GOCCs contribute to expand
government income, their operation also constitutes
expenditures for the government.
What are the issues and problems
faced by GOCCs?

 Problem of Definition

 Accountability and Differential Treatment

 Privatization

 Conflicting Objectives
What is Local Fiscal
Administration?
 What is Local Economic
Enterprise?
• Local Economic Enterprise are ventures wholly or
partially owned by the LGUs that generate revenue or
income through sale of services and goals to meet a
perceived constituency demand.
• Local economic enterprises (LEEs) may include public
markets, slaughter houses, hospitals, public cemeteries,
parking areas, sports, recreational and cultural facilities,
public utilities such as water and power supply and
distribution and telecommunications, garbage collection
and disposal, and public transport and terminal services,
among others.
What are the roles of LEE in LGU
Development?
 Provide wider access to good and services with pricing
that is affordable to a larger segment of the LGU
population;
 Be a means to augment LGU revenues
 Attract investors by providing key services not
provided by the private sector