PUBLIC ENTERPRISE REFORM: THE

CASE OF THE PHILIPPINES, 1986-

1987"
Rosario G. Manasan
DISPOSITION
PROGRAM
After intensive evaluation and reevaluation, the
government decided to privatize 122 GOCCs. The
other GOCCs will be converted to regular agency,
consolidated or merged, abolished, converted to
private status or retained
Disposition
Program
With the issuance of Proclamation No. 50 in
December 1986 by the President Aquino, the
government launched its privatization program.

Under the program, the government will

divest itself of two types of assets.
The 122 GOCCs recommended to be privatized and
the non-performing assets (NPAs)

These NPAs are corporations that were

acquired by the PNB and DBP when the
respective corporations defaulted on their loans.
Disposition
Program
With the issuance of Proclamation No. 50 in
December 1986 by the President Aquino, the
government launched its privatization program.

Physical form assets are those acquired by the

GFIs through foreclosure and mostly consist of
production facilities.
Financial form assets may take one of the following
forms: promissory notes and other financial claims
against a borrower-enterprise backed by mortgages
on physical assets, guarantees (joint and singular
signatures, surety bonds), and shares of stocks on
debtor enterprises, lease agreements with or without
purchase option, installment sales contract or
restructured loans.
ASSET PRIVATIZATION TRUST
is COPS’s main implementing arm and is primarily charged
to dispose the NPAs.

propose the extent of mode and method of timetable of

privatization of the disposition implementation
assets assigned to it
Guidelines on the disposition of
GOCCs and NPAs
01 02 03 04
expenditure of funds other things being equal,
and rehabilitation of buyers who intend to cash offers are favored Filipino investors are
assets/corporations to rehabilitate the asset for over payments on preferred over foreign
be privatized is productive use within the installment basis ones
discouraged country are preferred

08 07 06 05
an acceptable price is
determined on the basis sale to investors which public offering of shares
of earning capacity of the negotiated sale may be would result in undue and employee stock
asset and generally considered after two concentration of ownership plans for the
accepted valuation failed bids economic power in the purpose of widening of
approaches hands of a few the ownership base of
individuals or groups enterprises should be
should be discouraged considered
Impact in The total gross revenue
In 1994, the proceeds from
privatization that were

Government yield from the privatization

program for 1987-1994 is
P108.2 billion. This amount
remitted to the national
government were
substantial enough to result

Revenues represents 6.7 percent of

total national government
revenues
in an P18.1 billion surplus
in the fiscal position of the
national government

The gross recovery on fully Gross recovery from the

disposed NPAs in 1987- fully disposed NPAs is 46.4
1993 was P31.9 billion percent higher than the
against total government appraised value of the
exposure of P75.1 billion. assets concerned.
Impact on
Efficiency
One of the arguments often used for
privatization is the improvements in
overall economic efficiency that could be
obtained when ownership and control of
the enterprise is transferred from the
government to the private sector.
GASCON 1991
She estimated that total
factor productivity in three
Valdes and Co.
(1992)
GOCCs she analyzed, rose
three-fold while capital
productivity increase four-
Evaluated the experience of
some 20 NPAs wherein 3
did not improve, 8 enjoyed
turnaround, and 2 are not
fold. yet abolished.
Impact on
The disposability of such
Specifically, Section 25 of corporation, to potential
Proclamation No. 50 buyers; and such measures

Employment provides that the APT “may may include personnel

require any one or more of retrenchment plans.”
the trusted corporation to
adopt and implement cost
reduction measures to
Proclamation No. 50 has been enhance the viability.
criticized for its provisions that tend to
cause dislocation of workers

Macapagal and Beltran

(1991) argues that while
Section 27 calls for the some displacement may
automatic termination of occur in the short run, more
employer-employee jobs are created in the long
relations upon the sale of run. This is especially true
the corporation if the corporation is not
operating prior to
privatization.
Impact on Acquisition of Island
Market Cement Corporation (ICC)
by the Solid Cement
Corporation (SCC) in 1988.
Structure
Briones et al. (1988) assert that because of
the thinness of the capital market and the
highly skewed distribution of wealth the
privatization program may result in the
emergence of cartels.
The 1993 law extending the
life of the COP and APT
specifically provides at
least 10 percent of the
shares be offered to small
investors first before they
are offered to large
investors.
Takeover of Lakeview
Industrial Corporation
(LIC) by the Filipinas
Synthetic Fiber
Corporation (Filsyn)
It must be emphasized,
however, that the inability
of the privatization effort to
expand the ownership base
is not a conscious policy
but rather reflects the
relative difficulty of
accessing capital through
the equities market.
Pace of About 300 of the 399 NPAs
transferred from the PNB
Some of the assets were in
poor physical and
and DBP are not physical financial conditions and
Privatization form assets. such are not easily
marketable.

There is a general consensus that the

privatization program proceeded at a
rather slower pace relative to the Government bidding
target completion date. The sluggish procedures tended to
in the implementation of the
privatization program may be delay the process
attributed to a number of factors.
 The overall economic and
Allowing supervising political environment was
departments or parent not particularly suitable to
GOCC to take charge of
the disposition of some
a massive privatization
program.
Pace of
GOCCs
Privatization
Some GOCCs designated
as disposition entities have
deliberately delayed the
privatization process
Government Corporate Sector Reform Program Success

Evolution of the The performance AO 59 appears to be the

GCMCC evaluation system has most transparent and
been successful in lucid articulation of
enhancing the efficiency government policy on the
of the public enterprise role and management of
sector public enterprises to date
 ELEMENTS ON THE SUCCESS OF GOVERNMENT
SECTOR REFORM
01 02 03

elements
COMMITMENT BALANCE INSTITUTIONS
The proper balance
The unstinting commitment The establishment of
between greater autonomy
of the government from the appropriate institutions like
and accountability that a
highest level is essential to the COP and APT are major
performance evaluations
the program’s success. contributory factors to the
system instils is found to
success of the privatization
enhance the efficiency of
program.
GOCCs operations.
 ELEMENTS ON THE SUCCESS OF GOVERNMENT
SECTOR REFORM
01 02 03

elements
REALISTIC DISPOSITION PRIVATIZATION
Allowing the supervising Privatization will not necessarily lead to
One’s expectations of the agencies to take charge of greater competition. One has to be
privatization process should the dispositions of PEs tend sensitive to the existing structure of the
be grounded in the reality to slow the privatization market in which GOCCs operate and one
of the macroeconomic and process as this leads to should be ready to institute remedial
political situation. conflicts of interest. measures so as to forestall the ill effects of
a possible diminution in competition.
 THANKS
FOR LISTENING WITH PATIENCE