Philippine SOEs: Towards Higher Standards of Governance

1. Philippine SOEs: Towards Higher Standards of Governance Presentation to High-Level Meeting of the State-Owned Authorities 5-6 September 2011 Ljubljana, Slovenia

2. 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

3. 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

4. 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 29.5 • Average Dividend Remittances Php10.3

5. Overview of the SOE Sector • Role of GOP as owner of GOCCs is exercised through: • Board of Directors • Supervising Department • Oversight Agencies * • which at times may include Congress • Office of the President • * Oversight Agencies • Department of Finance (DOF) • Department of Budget and Management (DBM) • National Economic Development Authority (NEDA) • BangkoSentralngPilipinas (BSP) • Commission on Audit (COA) GOP – Government of the Philippines

6. 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

7. Key Governance Issues & Challenges • 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

8. Governance Imperatives • Strengthen board governance • Update ownership policy • Further rationalize SOE sector • Enhance transparency and disclosure practices

9. 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

10. 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

11. 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

12. 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.

13. Thank you!