Enhancing Good Government Through Public Enterprise (Privatization) and Spatial Information Management ( e-

Government)

Alega – Braza – Gomez – Quintana – Ramos - Ras

The Private Sector

Private sector refers to that part of the economy not controlled by the state but that segment of the economy which is managed and operated by varying individuals or business organizations aiming to gain profit in exchange of goods, use of utilities/amenities and other services they competitively offer in the market place.

The private sector is that part of the economy which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the state.

It is a management organization known for efficiency (least costs with great returns) and effectiveness (attainment of desired outputs).

One acceptable and viable way in dealing with private sector is through privatization of public goods, utilities, and services. By privatization, we mean the transfer of the delivery of public services to the initiative and control of the private sector.

Thrust and Mandates of Privatization

• Whenever a public sector sells out government-owned corporations to the private sector it then becomes public enterprise management.

• Public Enterprise Management is a “form of human activity operated and managed by the state government or any public authority.”

• Privatization is a government policy of transferring the agencies, functions or assets of government into the hands and control of the private sector.

Privatization

• In the Philippines, privatization becomes an area of public administration in the 1980s.

• Involves the sale or lease of government assets like real estates, telecommunications, public utilities, corporations, and the like to the private sector.

Privatization Process

The privatization process can be considered in three stages:

(1) feasibility, (2) preparation and (3) implementation of divestiture.

1. Feasibility

The choice of method will be driven by the objectives to be achieved from privatization – both national objectives and specific objectives for individual enterprises – and a number of factors.

2. Preparation

Involves a legal review both of the enterprise and the regulatory environment in which it operates to identify possible impediments to privatization.

3. Implementation of Divestiture

Involves obtaining final Government approval for the sale, preparation of appropriate contractual documents; and completion of sale.

Various modalities of Privatization

1. Contracting Out service: While the government is still responsible for the service it has someone else like a private contractor who provides the actual service.

2. Public-Private Collaborations: A cooperative agreement between a government and private organization may be formed in which both parties assume some degree of mutual responsibility in operating a program or service.

3. Franchising: A local government granting a garbage collection franchise to contractor for a particular duration in a defined area or jurisdiction.

4. Load or asset shedding: When a government sells out a facility or equipment or simply discontinues the provisions of a public service, load shedding then exist.

5. Volunteerism: A local government in some cases may hand down the provisions to volunteers to operate a particular public service.

Regulatory Functions and Agency

• When a public service has been assigned to business contractors, the function or regulation on the part of the government becomes increasingly necessary.

• Governmental regulations may set operations standard, limits business actions, restrict property tights, and affect incomes.

• “Regulation of certain economic and social activities in the public interest through administrative agencies is a product of 19th century politics”

Privatization Efforts in the Philippines

II. Ramos' Second Wave Yet the Most Powerful Privatization

III. Erap and Gloria's Privatization Strategy: The Third Wave

I. (Marcos and) Aquino's First Wave of Privatization in the Philippines

Privatization Effort’s in the

Philippines

First wave of privatization plan

• Privatization efforts were initiated during the Marcos Era.

• When Cory Aquino assumed presidency in 1986, she declared Proclamation No. 50 – A, which provided the policy framework for privatization. According to Ortille, the Cory Aquino period was the first wave of privatization in the Philippines.

• APT was introduced but was later on replaced by Privatization and Management Office (PMO).

• Cory Aquino declared Proclamation No. 50-A, as amended from Presidential Proclamation No. 50.

1. Improve efficiency and provide better quality services

2. Focus government energies and resources on providing basic

public goods and services

3. Create a favourable investment climate

4. Broaden ownership base and develop the capital market

5. Generate revenues for priority government expenditures

• According to Ortille, the Cory Aquino period was the first wave of privatization in the Philippines.

• The surrendered and sequestered assets from the friends and relatives of deposed President Marcos.

• Asset Privatization Trust (APT) was created.

• In 2001, Privatization and Management Office (PMO).

Second wave of privatization plan

• During the time of President Ramos, the bulk of privatization was implemented under his leadership mantra, Philippines 2000.

• Amendment of the Build-Operate-Transfer law (BOT)

• RA 6957 was passed creating the Philippines Infrastructure Privatization Program (PIPP)

• RA 7718 in 1994

Third wave of privatization plan

• Estrada issued Executive Order 12 (EO 12) which reaffirmed the role of the private sector in economic growth and expanded the scope of privatization.

• In 2001, under the administration of Pres. GMA the Electric Power Industry Reform Act (EPIRA) became a law.

• Privatization of postal services, health, housing, and the like.

Privatization in the Philippines: Some Issues

• Privatization as a term refers to divestiture and non-divestiture options open to the government.

• Its objective is to reduce state or public involvement in the nation's economic activities through transfer of management control to private enterprises.

1. Privatization was linked to job separation.

▫ Many employees are displaced primarily because of the change of management.

▫ This is because the governing body will want to consider whether it wants to stipulate as a condition of contract that current workers will be rehired by the private company or whether indeed it wishes to displace all employees and begin again with new private sector employees.

2. Privatization is concerned with the pricing or utility rates of a service being provided by the business sector.

 ▫ If there is monopoly of public good, pricing in the

market is not anymore dictated by the law of supply and demand.

▫ If competition does not exist for the operation of business, then the benefits of privatization may be minimized.

3. Presence of political pressures

▫ The presence of political pressures could just easily "tend to retain for the public sector functions where privatization would make sense and to privatize tasks that would be better left to government."

• For future privatization efforts of public utilities or government corporations, it is important then that governments conduct through analysis of the services to be contracted out to the private.

• A committee of administrators, citizens, other individuals and employees involved in the service should be formed for such purpose.

Government- Owned & Controlled Corporations (GOCCs)

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

It is a term in the Philippines used to describe government-owned corporations that conduct both commercial and non-commercial activity. 

Ground Rules for GOCC’sAs a rule:

• They should perform and should deliver and they must perform well according to the purpose for which they are created.

• Organized or bought as the case may be

• They should not become onerous to the government to maintain or operate.

• They should preform with efficiency and effectiveness.

Fourfold Objectives

• To reduce the involvement of the state in the nation’s economic activities

• To reduce the financial burden of the government of loss making and inefficient GOCC’s and their assets

• To promote greater efficiency in government operations

• To raise funds from the sale of GOCC’s and their assets

GOCCs’ Technical Reforms/Programs

• Improving Corporate Governance

• Creation of Effective Oversight Body

• Rationalization of GOCC’s Portfolio

• Review of the Performance Evaluation System

Public Private Enterprise andThe emergence of e-Government

e-Government defined

e-Government refers to the adoption of information and communication technology and its application to achieve efficiency.

Services and information are made available online without spending time, energy and money to get it. e-Government helps simplify processes and makes access to government information more easily for public sector agencies.

e-Government• Consumers and producers today transact business in

an open market through the internet, which as we call it, the digital government.

• e-Government has two phases:Internal – refers to operations of the government

itselfExternal – refers to the online services offered to

citizens

Private Sector and e-Government

• The private sector is recognized as a partner in the country’s ICT development efforts.

• It could mean passing off the costs of design, development, maintenance and risks to the implementing firm.

• It helped to simplify the complexities of massive bureaucracies by leveraging the power of contemporary information technologies.

Is it good to privatize?

  PROS CONS

Performance State-run industries tend to be bureaucratic.

 

A democratically elected government is accountable to the people through a

legislature, Congress or Parliament, and is motivated to safeguarding the assets of

the nation. The profit motive may be subordinated to social objectives.

Improvements Conversely, the government may put off improvements due to political sensitivity and special interests—even in cases of companies that are run well and better

serve their customers' needs.

The government is motivated to performance improvements as well run

businesses contribute to the State's revenues.

Corruption A state-monopolized function is prone to corruption; decisions are made primarily for political reasons, personal gain of the

decision-maker, rather than economic ones.

Government ministers and civil servants are bound to uphold the highest ethical standards, and standards of probity are

guaranteed through codes of conduct and declarations of interest.

Accountability Managers of privately owned companies are accountable to their

owners/shareholders and to the consumer and can only exist and thrive where needs

are met.

The public does not have any control or oversight of private companies.

Employment There is more private money available for investments and consumption and more profitable and better-paid jobs will be

created than in the case of a more regulated economy.

Due to the additional financial burden placed on privatized companies to

succeed without any government help, unlike the public companies, jobs could

be lost to keep more money in the company.