Republic of the Philippines

Don Mariano Marcos Memorial State University

Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telfax: 072 7004516 http://www.dmmmsu.edu.ph/gs/

Subject : PUBLIC ENTERPRISE

Professor : DR. SHALIMA NAVALTA

Student : ALTHCELL WISDOM C. TUNGBABAN

EVOLUTION, POLICIES, CONTROL AND ORGANIZATIONAL MANAGEMENT OF

PUBLIC ENTERPRISES

I. CONTROLS
In Public Enterprises, controls serve as mechanisms which would police the
behavior of public enterprises. Unlike private enterprises, the charter of a public
enterprise is created by acts of legislation to serve the people. Laws and legal
orders serve as controls to better regulate and police public enterprises.
Controls therefore have more roles to play in public enterprise than in private
enterprises.

There are three types of control in public enterprises; (1) Legitimate, (2)
Bargaining, and (3) Fiducial control. Legitimate control is bureaucratic. It
means that public enterprises are expected to be impartial, process-driven, has
division of labor and follows rule of law. Of course, private organizations are
bureaucratic but the question is which is more bureaucratic because of less risk
to fall under the whims of privy interests? The answer is obvious.

Under Bargaining, there are two or more organizations and they must be in
conflict with one another because of having adverse interests and they must
come up with an agreement which both accommodates their conflicting
interests within the confines of their independence of one another and consider
superior authority. Why do public enterprises bargain? Conflict. One must
understand that they handle basic functions and social services such as
electricity or social welfare and they require payment of money. If the
consumers did not get the service they were entitled of, there will be disputes
which can be resolved under bargaining. Public and private organizations form
complex networks and linkages. These complex connections sometimes result
to conflicts which can be handled through bargaining. There is fundamental
difference between bargaining and filing a case against a public enterprise. This
will be tackled on the next chapters.

Lastly, under Fiducial control, the needs of the disadvantaged must be met and
that it would not result to overdependence, exploitation, intimidation, and
discrimination. There is a problem in meeting this need however because the
government lacks resources to ensure all needs would be met, there is difficulty
in exerting fiducial control. For instance, the pension given by GSIS takes too
long to process and in many cases, insufficient to meet needs of retirees. It is
too small; many retirees cannot use GSIS alone to sustain their daily needs.
Hence in the Philippines, there is a problem in Fiducial Control.
 Republic of the Philippines
Don Mariano Marcos Memorial State University
Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telfax: 072 7004516 http://www.dmmmsu.edu.ph/gs/

II. EVOLUTION OF PUBLIC ENTERPRISES

Western Europe pioneered the practice of Public Enterprises. During the age of
Western colonialism, nations such as the Great Britain, Holland and Spain
established enterprises to extract and exploit the resources of the natives.
Spain established the Galleon Trade which is exclusively managed by the Crown
through his representatives in the colonies. Great Britain established the Royal
East India Corporation and Holland established the Dutch East Indies
Corporation. The purposes of these ventures is to exploit the natives, ship the
mined or farmed resources back home, create new products and sell them to
the highest bidder. During the age of Western colonialism, the government
which is usually a monarchy only has the right to engage in business. It has
the exclusive right in licensing nobles or commoners in engaging in selling. This
started to change during the American and French Revolutions.

While Western Europe has strong Public Enterprise sector, the United States
have strong private corporations. These private corporations handled services
such as shipping, banking, railways, coal mining, and insurance. The
government at first played a limited role, pursuing the Jeffersonian ideal of a
limited government however because of the trial against Rockefeller, the
government slowly assumed regulatory control over the domain once held by
private enterprises. During the Great Depression, several public works under
the New Deal of President Franklin Roosevelt were initiated. This allowed the
government to have an increased role in enterprise. After the second world
war, Philippines was granted independence by United States. However its
economy and infrastructure were devastated. So, Philippines started to expand
its public enterprise sector.

During 1965, the number of GOCCs increased to 37. However during 1975, it
increased to 120. During 1984, its number increased to 304. Despite of the
claim that establishment of these GOCCs was due to the government’s desire
to play a strategic role in the country’s development, their legacy is
overshadowed by corruption and debt.

During the time of Ferdinand Marcos, a lot of massive infrastructural projects

were created such as the San Juanico Bridge. However the government
incurred a lot of debt and contributed to the economic crisis during the 80s
which led to the eventual downfall of President Marcos. These GOCCs were
also used to launder billions of government money to private hands. That is
why there is only growth and only limited development.

During the Administration of Pres. Cory Aquino, the Public Enterprise sector
underwent reforms. The number of GOCCs was reduced. The grant of equity
contributions was only given to meet start-up capitulation requirements.
Subsidy was restricted to serve maintenance and operating requirements of
non-profit GOCCs. Lastly, tax exemptions were eliminated. Lastly, GOCCs are
required to declare and remit dividends of at least 50% to the national
government.

PUBLIC ENTERPRISE
 Republic of the Philippines
Don Mariano Marcos Memorial State University
Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telfax: 072 7004516 http://www.dmmmsu.edu.ph/gs/

III. ORGANIZATIONAL MANAGEMENT

1. Auditing – COA serves as the auditing agency of GOCCs. Its recommendation is

considered in the operation of the GOCCs.
2. Fund Disbursement – According to AO no. 59 s. 1988, DBM is directed to observe
applicable industry standards in promulgation of budget circulars and regulars.
Likewise, NEDA is directed to formulate policies providing for differential treatment
for infrastructure contracts and major procurement of equipment and the like for
GOCCs.
3. Department Supervision – The departments are responsible to monitor and audit
programs, policies, budget, operations, production, financial and other corporate
targets are met by GOCC where each are attached. For instance, when DOE asked
NAPOCOR to deliver total electrification, NAPOCOR must comply with DOE. The
CEO recommended by the Department Secretary and the Department is
represented in the Board of Directors.
4. Monitoring and Evaluation – GCMCC was given the mandate to monitor and
evaluate performance of GOCCs. It has the responsibility to promote efficient and
accountable resource allocation. It must instill financial discipline and self-
sufficiently. It must encourage streamlining and integration of their plans and
operations. It has a recommendatory power; it can only recommend financial
sanctions and restrictions against GOCCs such as withholding of budgetary release.
It can also recommend dissolution, acquisition and creation of GOCCs.
5. Policy-making- IMF and World Bank can influence the policies on GOCCs because
aside from taxpayers’ money, they also play a part in their financing.

IV. POLICIES
1. AO 59 s. 1988
- This is the AO which established the means to regulate and control
GOCCs. It is created as a reaction to what happened during the Marcos
regime concerning GOCCs.
2. Government Corporate Monitoring and Coordinating Committee or GCMCC
- The composition of GCMCC are the following; (1) Executive Secretary
and (2) Secretaries of DOTC, DOF, DA, DPWH, DENR, and the Director-
General of NEDA.

- Its function is discussed in AO 59 s.1988.

V. REFERENCES
Hope, K. (1982). Improving Public Enterprise Management in Developing
Countries. Retrieved from www.researchgate.net/publication/
284960226.

Monasan, R. (1995). Public Enterprise Reform: The Case of the

Philippines (Discussion Paper Series No. 95-01). Retrieved from
www.pids.gov.ph.

AO 59 s. 1988

PUBLIC ENTERPRISE
 Republic of the Philippines
Don Mariano Marcos Memorial State University
Mid La Union Campus
COLLEGE OF GRADUATE STUDIES
City of San Fernando 2500 La Union Philippines
Telfax: 072 7004516 http://www.dmmmsu.edu.ph/gs/

PUBLIC ENTERPRISE