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Review of GOCC mandates long overdue

IN a brief but welcome announcement this week, the Duterte administration said it was conducting a thorough review of the roles and operations of 12 government-owned or -controlled corporations (GOCCs). The review is being carried out by the Governance Commission for GOCCs (GCG), with inputs from the trade and justice departments, the Philippine Competition Commission, and the National Economic and Development Authority (NEDA).

GOCCs are government agencies whose activities potentially generate large amounts of revenue, and are ostensibly organized in the same fashion as private sector corporations rather than departments in the public sector bureaucracy. They are sometimes referred to as state-owned enterprises, although the terms are not actually synonymous. GOCCs comprise activities that could otherwise be fully funded government services, and in fact often begin life this way, while state-owned enterprises are a broader group, including any sort of business in which the government owns a controlling interest.

GOCCs are a common feature of most modern governments, and the Philippines is no exception. As of the middle of this month, according to a listing provided by GCG, there are 129 active GOCCs in the Philippines under its jurisdiction. Three more are in the process of full privatization, and 44 others are in the process of being abolished, while another 22 are excluded from GCG oversight by the terms of RA 10149, or the GOCC Governance Act of 2011. Many of the GOCCs, such as the Metropolitan Waterworks and Sewerage System (MWSS), were once government agencies that were failing miserably at their jobs, and were reconfigured in the hope that operating in a market environment would improve their performance.

Every administration at some point declares its intentions to examine the country’s GOCCs, but until now a clear, comprehensive, objective assessment program has not been carried out, despite its being required by RA 10149.

Such a review is critically needed for a couple of important reasons. First, while it may be prudent for political or strategic reasons for the government to hold a monopoly or other market advantages in some sectors – water supply systems under the aforementioned MWSS or its counterpart the Local Water Utilities Authority (LWUA) is probably a good example – it is not necessary and may even be harmful in other sectors. Second, there are some GOCCs that fill the contradictory dual roles of regulator and service provider in their sectors. Finance Secretary Carlos Dominguez 3rd highlighted the Philippine Amusement and Gaming Corp. (Pagcor) as one significant example of this – it both regulates the casino industry and operates its own casinos – and there are others as well, such as the Philippine Ports Authority and the MWSS.

Third, every GOCC must have a good business case: Regardless of its sector, it must provide products or services for which there is public market demand, with an acceptable level of performance and pricing, while meeting or at least making significant tangible progress toward its mandate to be financially self-sustaining and contributing to government revenues. Some GOCCs are performing admirably in this regard, but others undoubtedly are not.

Even though this is not the first administration to announce a review of GOCCs, it is still a welcome announcement, and the Duterte administration’s record so far of being proactive toward key economic areas – such as tax reform – is an encouraging sign that the initiative can achieve substantial positive changes. In anticipation of that progress, we support the administration’s plans for the review, and strongly urge the government to follow through with it.

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