PUBLIC ENTERPRISE

REFORM: THE CASE OF THE

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PHILIPPINES, 1986-1987"
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Rosario G. Manasan
Presented by:
GONZALES, GRACE ANN M.
 This study aims to present an overview of the
macroeconomic role, the impact of and the
management framework within which public
enterprises (Pes) operate in the Philippines. It focuses
on the reforms on public enterprises after the term of
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President Ferdinand Marcos. During the Aquino

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administration, the rationalization of the government
corporate sector was set forth. On the whole, the
government corporate sector reform program has
been successful. The financial performance of GOCCs
has improved and the leakage of national government
financial resources to GOCCs has been contained.
 1983- 1983- 1983-
1985 1985 1985

Philippines The proliferation The Aquino

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undergone of GOCCs in this administration re-

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services

economic period leading to assigned the

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crisis due to the crisis was a pivotal role in
the profligate major economic
fiscal policy contributory development to
factor to the the private sector.
fiscal imbalance.
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01 02 03
INSTITUTIONALIZATIO STREAMLINING ENHANCING
Policy and
N legal Existing portfolio of Efficiency
framework GOCC and
Effectiveness
 01 02 03

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services
follow

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ECONOMIC REFORMS LESSONS
CONTRIBUTION
Value-added, Public Sector The reform process and its Lessons that may be drawn
investment, Budgetary accomplishments from the Philippine public
burden, fiscal deficit and enterprise reform program
external borrowing
 PRE-REFORM SITUATION
In 1965, there were only
37 GOCCs
During Marcos years, the
growth of public enterprise
sector accelerated reaching
120 in 1975 then further
increase to 303 in 1984
Some policy analysts
pointed out that the
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creation of government
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corporations was used to
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promote political,
economic and bureaucratic
interests.
As a result of financial crisis,
private enterprises defaulted
on some 399 loan accounts
with two government
financial institutions – PNB
and DBP
ECONOMIC CONTRIBUTION OF PUBLIC ENTERPRISES

Base on the study conducted

by Bureau of Treasury, Similarly, GOCCs
National Statistical accounted for a substantial

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Coordination Board, from chunk of gross domestic

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1975 to 1984, the Pes capital formation.

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contribution to GDP was
quite steady at 2.8% The low Gross Value Added
(GVA) in Pes can be
GOCCs account for a
explained by the low
significant portion of the
productivity of GOCCs
economy’s capital stock.
relative to private sector.
 MEASURES OF PE EFFICIENCY
Through the estimates of factor productivity ratios and financial
profitability ratios, it is confirmed that the public enterprises are
less efficient than the private enterprises.
FISCAL BURDEN OF PEs

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Poor financial performance coupled with the

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unsustainably high levels of capital expenditures led

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PEs to eat up a disproportionately huge portion of the
national government’s resources
PUBLIC SECTOR DEBT
The failure of the public enterprise sector is generally seen
as having been a major contributory factor to country’s
enormous debt overhang in the mid 1980s.
 INSTITUTIONAL ARRANGEMENTS
Lack of well defined role
for Public Enterprises in the
development process
GOCCs should be limited
to areas which are capital
intensive, pioneering and
vital to the national
interest, however due to
political dominance in
Marcos years, the said
limitations are liberally
interpreted.
Some government agencies
used government corporate
form as venue through
which they can escape the
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supervision and control of
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regulatory bodies.
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The unrivaled surge in the
number of Pes resulted in the
duplication of functions of
certain GOCCs.
Anomalous practices
involving government
corporations arose.
 SYSTEM OF SUPERVISION AND CONTROL
Supervision by functional,
sectoral and technical
departments through the so
Apparent absence of a
called system of

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rational system of

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“attachment”.

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This practice gave rise to
conflicts of interest as the
supervisors supervise Some ministries supervised
themselves public enterprises whose
activities lie outside their
sectoral responsibilities .
 SYSTEM OF SUPERVISION AND CONTROL
Each of these agencies
Supra-ministerial or inter-
monitored specific aspects
departmental supervision.
of the operations of
GOCCs but no one had an
Carried out by 11 agencies

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over-all view of the

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including COA, CSC, Central

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operations.

Bank (CB), Metropolitan Manila
Commission (MMC), Ministry of
Budget and Management (MBM),
Ministry of Finance, Ministry of
Justice, NEDA, Philippine
Commission on Government
Reorganization (PCGR),
President Management Staff
(PMS), and Securities and
Exchange Commission.
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Weaken the ability to enforce
corrective measures resulting
to piecemeal assessments of
corporate performance and
absence of macro perspective
on GOCCs.
 SPECIAL PRESIDENTIAL REORGANIZATION
COMMITTEE

The Marcos government early attempt in rationalizing the

government corporate sector.

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1. Limiting the use of the government corporate form to

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certain areas/activities.
2. Institutionalization of effective supervision, coordination
and control of GOCCs.
3. Abolition, Privatization, merger and/or retention of
existing GOCCs.
COMPONENTS OF THE GOVERNMENT CORPORATE
SECTOR REFORM PROGRAM

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INSTITUTIONALIZATIO STREAMLINING ENHANCING
Policy and
N legal Existing portfolio of Efficiency
framework GOCC and
Effectiveness
 POLICY, LEGAL AND INSTITUTIONAL FRAMEWORK

Flexibility and autonomy in operations

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Financial viability

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Limited liability of the national government

Possibility of private sector participation

 ADMINISTRATIVE ORDER NO. 59 of February 1988

Providing principles and standards to be followed in the creation,

management, administration, supervision and liquidation of GOCCs

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Defining the guidelines in determining the areas or activities in

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which the government corporate form may be utilized

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Setting down policy measures to improve the organizational
and functional capabilities of GOCCs
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If the goods and If the private If market
services vital to sector is unable intervention is
the society or unwilling to justified by the need
provide to create a bias in
favor of
disadvantaged
sectors of society
 Strengthened in July Effective inter-
1987 under Executive departmental oversight
Order (EO) 236 mechanism Instilling
Government financial discipline and
Corporate promoting self-sufficiency
Monitoring and
Coordinating
Committee
-reconstituted in May 1986
(GCMCC)
through the issuance of The central
Memorandum Circular No. 10
monitoring,
coordinating and
performance
evaluation unit for all
GOCCs
Instilling financial discipline Delineation of the
and promoting self- operational relationship
sufficiency between the GOCCs and
their supervising
Departments GOCCs
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DOF issued Department Order
which seeks to limit national
government guarantee of GOCC
borrowings to financial viable
projects and within the context of
the government’s overall debt
 Institutionalize
GOVERNANCE Oversee the selection
transparency,
COMMISSION and nomination of accountability, financial
FOR GOCCS directors/trustees and viability and responsiveness
-(GCG)
created under Republic Act No. maintain the quality of in corporate performance
10149 (RA No. 10149), Board Governance by monitoring and
otherwise known as the “GOCC
evaluating GOCCs’
Governance Act of 2011”, as the
central policy-making and performance
regulatory body mandated to
safeguard the State’s ownership
rights and ensure that the Rationalize the Sector through
operations of GOCCs are streamlining, reorganization,
transparent and responsive to the
needs of the public.
merger, as well as recommending
to the President of the Philippines
the privatization or abolition of a
GOCC
 Implemented the Performance
Establish compensation Evaluation for Directors (PED) in
standards to ensure order to monitor and assess the
reasonable and performance of appointive
directors in GOCCs through peer
competitive remuneration
schemes that attract and
review, organizational GOVERNANCE
performance, and Board
retain the right talent. attendance. COMMISSION
FOR GOCCS
(GCG)
The GCG has three (3) appointive
members of the Commission, and
two (2) ex-officio members: the
DOF Secretary and the DBM
Secretary
Strengthening of Retained
GOCCs Standardized computer
A performance evaluation
based corporate planning
system that aims to improve
model to upgrade their
financial position and
planning capabilities and
economic efficiency practices
-the GOCC reform also included
the establishment of mechanisms
to improve the performance of
retained GOCCs

Performance management of Incentive system that will

GOCCs thru setting of criteria effectively enforce a system
for financial, managerial and of rewards for good behavior
physical aspects of their and punishment for a bad
operations one.