Philippine SOEs: Towards Higher Standards of Governance

Presentation to High-Level Meeting of the

State-Owned Authorities5-6 September 2011Ljubljana, Slovenia

Outline of Presentation

Introduction Overview of SOE Sector Key Governance Issues and

Challenges Governance Imperatives Program of Reforms in SOE

Sector: Key Accomplishments On-Going Initiatives Future Directions Conclusion

Overview of the SOE Sector

Locally termed as Government Owned and/or Controlled Corporations (GOCCs) - at least 51% government ownership.

Mandated to provide social services while generating profits to support its operations

About 157 GOCCs in key sectors- banking, pension, transport, power, agriculture, housing

Overview of the SOE Sector

Current Status as of 2009 (in Trillion pesos)

Total Assets - Php 7.19 Total Liabilities - Php 5.11 Total Revenues - Php 0.13 Contributions to Fiscal

Consolidation Program (2005 –

2009)(in Billion

Pesos)

Average Total Collections Php 29.5Average Dividend Remittances Php 10.3

Overview of the SOE Sector

Role of GOP as owner of GOCCs is exercised through:

Board of DirectorsSupervising DepartmentOversight Agencies * which at times may include CongressOffice of the President

* Oversight AgenciesDepartment of Finance (DOF)Department of Budget and Management (DBM)National Economic Development Authority

(NEDA)Bangko Sentral ng Pilipinas (BSP)Commission on Audit (COA)

GOP – Government of the Philippines

Key Governance Issues & Challenges

Lack of clear ownership policy of the State Conflicting mandates and multiple levels of

oversight Need to strengthen Board governance Need to strengthen transparency and

disclosure standards Sustainability of financial and operational

performance as well as service delivery Political interference in tariff setting

Need to rationalize SOE Sector

Need to instill fiscal discipline among SOEs

Need to rationalize compensation structure of Board Directors

Removal of Charter provisions on automatic government guarantees

Poor compliance to reportorial requirements

Key Governance Issues & Challenges

Governance Imperatives

Strengthen board governance

Update ownership policy

Further rationalize SOE sector

Enhance transparency and disclosure practices

Program of Reforms in SOE Sector: Key Accomplishments

Privatized GOCCs that have attracted significant number of foreign and domestic investors:

Philippine National Oil Company – Energy Development Corporation (PNOC-EDC)

Petron Corporation Philippine Airlines Philippine National Bank

Philippine SOEs: Corporate Governance On-Going Initiatives

Pursue corporate governance (CG) and continue improvement in CG Scorecard

CG Scorecard benchmarking

Deepen CG reform by moving beyond compliance

Institutional and financial reforms geared towards operational and financial efficiency

Future Direction

GOCC Governance Act of 2011 Governance Commission for GOCCs or GCG Review and update of government ownership

policies Strengthen Board Governance Pursue further rationalization of GOCCs. Strategic partnerships with development partners,

private sector, NGOs and other non-state actors. Pursue performance contracting system. Strengthen Contingency Liability Management

Conclusion

Much work still needed in strengthening CG reforms in the Philippine SOE sector.

SOEs must deliver public services in most efficient and effective way.

We remain steadfast in pushing for higher CG standards to our SOEs

CG Reform forms part of the broader governance reform program of government.

Thank you!Thank you!