Press Release
May 17, 2011


Senator Franklin Drilon has stressed the Philippine's commitment for an improved corporate governance in the public sector at an Asian forum, following the passage of a major legislation aimed at curbing the abuses at government-owned or controlled corporations (GOCCs).

Drilon, principal author of Senate Bill 2640 or the GOCC Governance Act of 2011, presented a paper on Tuesday, May 17, at the 6th Meeting of the Asia Network on Corporate Governance of State-Owned Enterprises in Seoul, South Korea.

The conference was organized by the Organization for Economic Cooperation and Development (OECD) and attended by several Asian lawmakers. The organization invited Drilon due to his role in instituting reforms in the public corporate sector so that other countries can learn from the Philippine experience.

Drilon said the Philippines passed a landmark legislation following President Benigno C. Aquino III's pledge during his State of the Nation Address last year to institute reforms in state-owned enterprises.

"Previous attempts to monitor and coordinate the activities and functions of the GOCCs were done through executive issuances which tend to change along with changes in government. This is the first time that we have legislated policies to institute long-term reforms in the public corporate sector," said Drilon in his presentation.

While several sectors initially doubted that the legislature, with Drilon initiating the bill's drafting and filing, would pass such a complicated bill, Drilon said they were able to prod lawmakers on the measure's urgency. Overall, the bill was able to pass the legislative mill after just 10 weeks of parliamentary debates. The President even certified the bill as an urgent administration measure.

"First, we created a favorable environment for the passage of this law by exposing the abuses and anomalies in the GOCCs. Second, we acquired mastery of the subject by reading all materials within our reach so that we were able to articulately respond to questions during parliamentary debates, thereby convincing our colleagues of the urgency of and necessity for the law."

"Third, we ensured that the bill was included in the President's Agenda as a priority reform measure and had it certified as an urgent government bill. Fourth, we sought the personal support of key leaders of Congress and the private sector. Finally, we consulted other stakeholders (such as unions of GOCC employees) who may have apprehensions on job and compensation issues for the ordinary employees," he said.

In 2009, Drilon said, total expenditures of GOCCs are equivalent to 28% of the total expenditures of the national government. GOCC assets, which stood at $125 billion in 2009, also exceed national government assets at $65 billion.

The role of government as an owner of the GOCCs is not explicitly defined in statutes or regulations, Drilon said, thus, the measure's passage.

"The challenge is to clarify and put in place management principles consistent with the role of the national government as the owner of the GOCCs such as the power to enter into and sever, within a period not longer than one year, agency relationships with the directors and executive officers of GOCCs, an unequivocal policy that such directors and officers are trustees of the state, with no appropriating power over GOCC assets, unrestricted access to GOCC books of accounts and the right to exact strict compliance with accounting and financial disclosure standards, the power to privatize, abolish or otherwise restructure GOCCs without need for legislative action and the power to set standards of performance, compensation and other matters incidental to the conduct of GOCC affairs.

"We are confident that with this measure, the inefficiencies, mismanagement, excesses and abuses we saw in the operation of the GOCCs will all be a thing of the past," he said.

The measure creates a Governance Commission for GOCCs composed of five members--chairman with the rank of Cabinet secretary and two members with the rank of undersecretary to be appointed by the President--and the Budget and Finance secretaries as ex-officio members. The commission shall develop a compensation system that will apply to all officers and employees of GOCCs, whether covered by the Salary Standardization Law or exempt from it.

The law covers all GOCCs, government instrumentalities with corporate powers, government corporate entities and government financial institutions including their subsidiaries, but excluding the Bangko Sentral ng Pilipinas, state universities and colleges, cooperatives, local water districts and research institutions.

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