Public Sector Business

Organization
Florinda C. Bernardino
Public Sector
Organizations
⊚ In the public sector, businesses and
other organizations are owned and run
on behalf of the public, either by the
Government itself, or by organizations
who are funded by and report to
Government.
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Public Sector Organizations
Ownership Primary Purpose Industry Focus
Owned and managed by Providing the basic Mostly operate in
Government/ public services to the industries such as Water,
Ministries/State common public at a Electricity, Education,
Govt./Govt. Bodies reasonable cost in their Oil & Gas, Mining,
respective industries by Defense, Banking,
being also self- Insurance, and
sustainable and Agriculture, etc.
profitable. However,
profitability is not the
primary motive.

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Public Sector Organizations
Financial Support from Profitability Government
Government Companies in Public Interference
Companies in Public Sector are relatively less Since Public Sector
Sector get all possible profitable because of companies are owned by
financial support for their primary purpose of Government, therefore
Government even in not being profitability they are subject to the
adverse circumstances driven. uncertainties related to
wherein the financial unfavorable Government
health of the companies decisions and larger
is not good. Government
interference.

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Public Sector Organizations
Ease of doing business Funding Work Culture of
Public Sector companies Better placed to raise employees
find it relatively easy to funds from the market Relatively relaxed work
operate in a country because of backup by culture with higher job
because of its proximity Government irrespective security. However, pay
to the Government of the company’s and perks may not be
financial health. that attractive in
comparison to private
sector companies.

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 Public Sector

General Government

Central Government Public Corporations

State Government

Local Government

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Government Owned and Control
Corporations
GOCC is defined in Presidential Decree (P.D.) 2029
(Defining Government-Owned or Controlled Corporations
and Identifying their Role in National Development) as a
stock or a non-stock corporation, whether performing
governmental or proprietary functions, which is directly
chartered by special law or, if organized under the general
corporation law, is owned or controlled by the government
directly or indirectly through a parent corporation or
subsidiary corporation, the extent of at least a majority of its
outstanding capital stock or of its outstanding voting capital 7
⊚ GOCCs were created and operated because of actual or
presumed weakness of failures of the market. They
operate to provide certain activities which are, in those
times, considered “pioneering” in nature.

⊚ Clusters/Grouping of GOCCs:
1. Financial – BSP, LBP, DBP, GSIS, SSS, NHMFC
2. Public Utilities – NPC, NEA, MWSS, PNR, LRTA
3. Industrial and Area Development – LLDA, CDC,
PEZA, SBMA

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Why GOCCs are created?
⊚ Grounded on the idea that market failures do exist and
government needs to intervene to protect public interest.

⊚ The use of corporate vehicle recognized as efficient

means to mobilized government assets.

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Conditions in where GOCC operate
⊚ In cases where private sector is unwilling or unable to provide goods and
services vital to the society such construction of large infrastructure i.e.
roads & ports;

⊚ When there is a need to create bias in favor of disadvantage sector of the

society in a free market such as distribution of staples and sugar;

⊚ To spur the development of strategic activities with wide ranging economic

impact; and

⊚ When there exist natural monopolies which government want to control to

protect the consuming public.
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How do GOCC’s performance impact the
government?
⊚ Section 3 of R.A. 7656 require all GOCC to remit 50% of annual
net earning in cash, stock or property dividends to national
government.

⊚ GOCC’s constitutes expenditures, they deemed to be entitled to

financial support in form of subsidies, equity infusion & lending.

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PROBLEMS/CHALLENGES FACING GOCCs
TODAY: According to the World Bank (1995)
1) There is lack of clarity in the government’s role as owner. That is,
no one has a clear stake in generating positive returns because there
is no single identifiable owner and thus, GOCCs are made to feel
like they are answerable to no one. Lack of Transparency and
accountability.

2) Many state-owned enterprises (SOEs) have multiple or conflicting

objectives. Government creates a corporation to address social
objectives such as lowering the price of a socially-sensitive good,
yet the corporation is expected to maximize returns.

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3) Access to subsidies, transfers, and guaranteed loans create a moral
hazard problem such that there is no incentive to be efficient since there
is no threat of bankruptcy.

4) Directors and other officers of many of the GOCCs had been

privileging themselves, as if the sky was the limit, with fat checks for
almost every imaginable perk—extra bonuses ridiculously labeled as
“productivity,” “anniversary,” “grocery,” even “privatization,” to name
a few—on top of excessive salaries and extravagant allowances. One
GOCC is said to have rewarded its officers and employees with at least
25 bonuses in one year, a number of which were of exactly the same
nature, albeit differently named.

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Aside from these, these are the additional
problems, issues and challenges facing GOCCs:
⊚ Rampant Corruption, mismanagement and
inefficiency;
⊚ Inadequate overall monitoring and control system;
and
⊚ Poor corporate performance because of poor
oversight and lax financial control.

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Thanks!

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