15 GOCCs MAY FACE ABOLITION
MANILA, October 4 , 2004 (STAR) By Marvin Sy - If they fail to solve their financial problems, 15 government-owned and controlled corporations (GOCCs) and government financial institutions (GFIs) face abolition.
The Department of Budget and Management (DBM) and the Department of Finance (DOF) released yesterday a list of 15 GOCCs and GFIs with substantial losses and contingent liability exposures.
On the list are the National Housing Authority (NHA), National Food Authority (NFA), Philippine Coconut Authority (PCA), Light Rail Transit Authority (LRTA), Philippine National Oil Co. (PNOC), Philippine Crop Insurance Corp. (PIC), National Development Corp. (NDC), National Irrigation Administration (NIA), National Home Mortgage Finance Corp. (NHMFC), Philippine Television Network Inc. (PTV-4), National Tobacco Administration (NTA), Human Settlement Development Corp. (HSDC), Technology and Livelihood Resource Center (TLRC), Philippine National Railways (PNR) and the Al-Amanah Islamic Investment Bank of the Philippines.
Budget Secretary Emilia Boncodin said the heavy losses of these government firms were caused by a number of factors, including low collection efficiency, heavy government guarantee exposure, insufficient corporate funds for operations, maintenance of losing subsidiaries, and charters that restrict the firms’ capacity to raise revenues.
The information was presented in a report submitted by Boncodin to President Arroyo as part of the ongoing rationalization of unprofitable GOCCs and GFIs.
Boncodin emphasized that the 15 firms are "facing financial problems" but are not necessarily losing money. She said some of the GOCCs and GFIs are experiencing "temporary strains on their finances."
The PNOC, for example, "is doing okay, but its subsidiaries are not doing well," Boncodin said.
The DBM and DOF were tasked with spearheading the rationalization program intended to cut government losses in maintaining losing GOCCs and GFIs.
The government’s ballooning budget deficit is partly caused by the huge subsidies granted by government to keep these cash-strapped firms alive.
The National Power Corp. (Napocor) alone is receiving P100 billion in government subsidies annually to cover interest payments on its estimated P600 billion debt.
The government has begun privatizing Napocor’s power generation assets to cut the power generation and transmission firm’s losses.
For the 15 GOCCs and GFIs on the DBM and DOF list, Boncodin recommends a solution similar to that applied to the problems of Napocor.
These corporations could privatize some of their assets or, perhaps, consider an increase in fares in the case of the LRTA.
"We need to clean up our books and prune all unnecessary expenses," she said. "Definitely, we cannot afford to subsidize all of our GOCCs."
She also said some corporations may need to transfer their marketing, promotions and regulatory functions to more profitable GOCCs or other relevant agencies of government.
The DBM and DOF will conduct a joint financial and organizational review of the GOCCs and GFIs on their list and submit their final recommendation to the President.
Besides outright abolition, the GOCCs that fail to perform up to par may also be subjected to mergers, deactivation of certain functions and conversion into a regular government agency.
"Special consideration will be given to certain corporations that were set up by government to help specific marginalized communities," Boncodin said, referring to the NFA, which is considered a non-profit firm.
She also allayed fears that the rationalization of these government firms may result in mass layoffs of employees working for these firms. "The welfare of these employees are of major importance to us," she said.
"Any rationalization scheme begs the understanding of all stakeholders. We are doing this for the sake of our country and future generations," she added.
GOCC losses came under fire from the House of Representatives last month in the wake of fears that the huge budget deficit may trigger a fiscal crisis.
One-third of the national budget is allocated for debt servicing, a third goes to the wages of government workers and remaining one-third of the budget is divided among various government agencies.
Only the money allocated for various government agencies can be adjusted by Congress when it crafts and enacts the 2005 General Appropriations Act (GAA), since debt servicing funds are fixed as part of the loan agreement.
Almost all government agencies, particularly the health, education and social welfare departments, are already operating on shoestring budgets that can be cut no further without severely adverse effects on the delivery of vital basic services.
National debt grew due to the depreciation of the peso against the dollar over the past few years. During the time most of the government’s loans for infrastructure projects were made, the exchange rate varied from P26 to P40 to the dollar.
Now, the peso-dollar exchange rate averages at 56 to $1, driving up the amount of money in pesos that must be allocated to service the government’s foreign and local debts.
Since foreign borrowings are computed in dollars, so are the payments for the interest and capital of these debts.
The Arroyo administration and Congress are now focusing on increasing the efficiency of tax and revenue collections, plugging revenue leaks, cutting expenses for and losses of GOCCs and GFIs and a more transparent and less flexible itemized national budget to stave off a fiscal crisis.
The government is also trying to cut costs by offering early retirement plans to government workers in order to cut down the bureaucracy and decrease the amount of money needed to pay government employees’ salaries — a plan that government workers’ unions and organizations have rejected.
Reported by: Sol Jose Vanzi
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