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August 2010
Government-ownedand-controlled
corporations were
initially created as
solutions to market
imperfections. It is
ironic therefore, that
in recent years, they
have come to be seen
as problems that need
to be fixed. With the
tight fiscal situation
of the government,
reforming the countrys
public corporate sector
becomes all the more
necessary .
Introduction
Dividends
5,658 16,251
Guarantee fee
2,218
Interest on Advances
Foreign Exchange Risk Cover
2006
2007
2008
9,159
6,788 13,803
2,103 10,355
2009
Jan
June
a
2010
4,228
3,464
6,698
842
724
917
3,455
381
510
20
1,963
1,515
1,177
1,057
2,209
539
46
590
394
318
425
222
5,227
26.2
17.9
15.3
25.3
21.6
2.5
3.2
3.2
2.0
3.2
1.9
preliminary
Source: Bureau of Treasury
2007
2008
2009
BSP
GOCC/GFI
2005
1,612
2,716
2,763
6,000
LBP
400
1,500
1,000
442
2,000
10
50
100
1,500
664
306
2,195
2,098
1,417
DBP
1,135
6,296
1,000
1,000
PDIC
51
306
373
264
484
PEA
15
10
436
41
217
PPA
992
1,639
1,366
1,182
200
PEZA
188
394
408
346
139
PNOC-EC
PNOC
BCDA
Subsidy
Equity
Net Lending
Total Expenditure
for GOCCs
2006
2007
2008
2009
1,183
910
2,212
2,000
4,000
2,300
1,468
4,744
5,144
3,858
300
1,950
185
220
1,109
570
1,168
500
1,000
501
500
900
172
754
892
183
885
213
225
278
421
586
542
1,588
2,726
955
524
239
243
252
258
2005
2005
2006
2007
2008
2009
12,237
13,810
27,336
21,109
17,439
7,466
NIA-CASECNAN
3,424
3,920
2,608
2,975
4,061
190
3,561
3,729
1,691
1,359
826
NPC-CASECNAN
3,458
1,303
2,779
3,377
3,549
1,707
131
9,750
14,393
5,064
4,558
713
1,188
1,849
2,228
2,597
14,134
17,502
40,815
37,193
23,862
12,850
755
668
580
644
688
189
199
188
263
405
249
194
178
195
211
183
150
152
190
73
34
69
125
(107)
(52)
40
Total Expenditure
942,487
1,044,429
Total GOCC
Exp/Total Exp (%)
1.5
1.7
2.9
1.7
1.6
preliminary
Source: Bureau of Treasury
GOCC
2005
341
2006
2007
2008
2009
2006
2007
2008
2009
TOTAL
SURPLUS+/DEFICIT-
(100.7)
11.0
21.4
30.2
(256.4)
as percent of GDP
-1.8%
0.2%
0.3%
0.4%
-3.3%
(187.0)
(79.1)
47.9
(90.2)
(336.4)
as percent of GDP
-3.4%
-1.3%
0.7%
-1.2%
-4.4%
National Government
(146.8)
(64.8)
(12.4)
(68.1)
(298.5)
CB restructuring
(16.3)
(13.2)
(8.2)
(8.8)
(8.8)
14 Monitored GOCCs
(25.4)
(1.1)
57.9
(27.2)
(25.9)
1.5
(0.0)
10.6
13.8
(3.3)
Other adjustments
0.0
0.0
0.0
0.1
0.0
SSS/GSIS
86.2
90.1
(26.6)
120.4
80.0
BSP
48.9
59.4
34.2
66.7
39.0
GFIs
3.6
0.6
(89.2)
9.4
(0.2)
LGUs
6.6
8.0
5.9
7.5
10.0
23.8
26.7
21.8
34.6
31.3
3.4
(0.7)
0.1
2.2
(0.3)
Timing adjustment of
interest payment to
BSP
Other adjustments
Source: DOF
The NFA Charter has identified six sources of funding: (1) official
development assistance to the Philippine government such as food aid;
(2) payments made by the NG on loans drawn by or for the NFA and National
Green Authority (NGA); (3) subsidy from the NG out of funds appropriated
in the annual budget; (4) funding and organizational provisions intended
for the national food programs including those provided as special
financing program seed fund, cooperative loans, and livelihood projects;
(5) loans from the government and domestic private lending institutions;
and (6) Central Bank of the Philippines (CBP) now the Bangko Sentral ng
Pilipinas (BSP).
8
9
http://www.abernales.com/eo37.htm
Under Executive Order 127, 127-A and 292.
Percentage
5%
5%
15%
35%
40%
10
The categories used were in line with the Organisation for Economic Cooperation and Development (OECD) Guidelines for SOE Governance.
11
These options are not mutually exclusive. That is, they can be used in
combination.
5
6
4. Performance-related Pay. This Performancerelated pay (PRP) regulatory tool ensures that
the required performance targets are aligned
with the interest of management. This means
that corporate profitability is linked to
managerial pay. In private firms, stock options
tie remuneration to corporate performance.
Companies with profit-sharing schemes are
found to be more productive than companies
without (Cable and Wilson. 1989). PRP schemes
provide managers with an incentive to improve
the efficiency and profitability of firms. There
are two critical factors that make PRP schemes
successful: (1) a high level of transparency, which
means that the details of such scheme are made
known not only internally but also to the firms
clients; and (2) incentives of management
aligned with the interest of the firms clients.
The rationale for introducing PRP schemes are
multiple, but essentially focuses on improving
motivation and accountability of public
servants.13 Proponents of this regulatory tool
believe that PRP presents opportunities for
management and organizational changes which
include effective appraisal and goal setting
processes, clarification of mandate/tasks,
acquisition of skills, creation of improved
employee-manager dialogue, and increased
flexibility in work performance.
In managerial economics, setting a hard budget constraint implies that firms must cover their cost of production using revenues generated either
from the sales of their product or from other financial resources.
13
The introduction of performance pay policies occurred in the context of the economic and budgetary difficulties faced by OECD member countries
from the mid-1970s.
References:
Asian Development Bank. (2008). Republic of the Philippines:
Technical Assistance Consultants Report. Policy and Advisory
Technical Assistance: Government Owned and Controlled
Corporations Reform.
Byatt, Sir Ian. (April 2007). Regulating Public Utilities Outputs,
Owners and Incentives. Occasional Lecture 20, Centre for the
Study of Regulated Industries.
Cable, J. and Wilson, N. (June 1989). Profit-sharing and
Productivity: An Analysis of UK Engineering Firms. The
Economic Journal Vol. 99.
Goldeng, E., Grnfeld, L., Benito G. (2004). The Inferior
Performance of State-Owned Enterprises: Is it due to
Ownership or Market Structure? Norwegian Institute of
International Affairs.
This Policy Brief was principally prepared by Kathreena Del Rosario under the supervision of SEPOs Directors and the
overall guidance of its Director General.
The views and opinions expressed are those of SEPO and do not necessarily reflect those of the Senate, of its leadership,
or of its individual members. For comments and suggestions, please e-mail us at sepo@senate.gov.ph.
8
Annex 1.
Table 1. NFAs Net Worth in Recent Years (in billion pesos)
Assets
Current
Cash and Investment
Rest of current assets
Fixed
Equipment, land and related
Rest of assets
2000
19.8
14.7
2.2
12.4
1.5
1.5
3.6
2005
28.4
13.1
1.5
11.6
1.5
1.5
13.8
2006
27.9
14.6
1.6
13.0
1.5
1.5
11.9
2007
26.4
11.8
1.2
10.6
1.7
1.7
12.9
2008
58.2
42.4
2.0
40.4
1.7
1.7
14.1
Liabilities
20.9
56.8
70.6
68.6
133.3
Current
17.3
34.8
52.7
50.9
104.3
Long-Term
2.0
17.9
16.5
16.5
25.1
Rest of liabilities
1.5
4.1
1.4
1.2
3.9
Net worth
-1.1
-28.4
-42.7
-42.2
-75.1
Source: PIDS. Monitoring Expenditure and Agricultural Policies (MEAP) Project as cited in Dr. R.
Claretes presentation Should the Government Abolish the National Food Authority? in SEPOs
Legislative Agenda Setting for the 15th Congress: Briefing and Consultation Forum.
Table 2. Income Statement of the National Food Authority (in billion pesos)
Gross revenue
Operating revenue
Non-operating revenue
2000
22.2
21.7
0.5
2005
28.6
27.4
1.2
2006
28.7
26.6
2.1
2007
36.0
33.0
2.8
2008
41.5
39.1
2.4
Expenses
27.7
46.6
44.5
53.1
78.4
-5.5
-18.0
-15.8
-17.3
-36.8
Subsidies
1.2
12.9
4.8
16.1
39.2
Subsidies from NG
1.2
0.9
0.9
16.1
2.0
Rest of subsidies
12.0
3.9
37.2
Net profit and subsidies
-4.3
-5.1
-11.0
-1.3
2.3
Source: PIDS. Monitoring Expenditure and Agricultural Policies (MEAP) Project as cited in Dr. R.
Claretes presentation Should the Government Abolish the National Food Authority? in SEPOs
Legislative Agenda Setting for the 15th Congress: Briefing and Consultation Forum.