Carlos G. Dominguez
Secretary of Finance
Chairman Samuel Dagpin, Jr. of the GCG or the Governance Commission for Government-owned or -controlled Corporations; men and women of the GCG; fellow workers in government: good morning.
First of all, I congratulate the GCG on its 10th anniversary.
Since the creation of the GCG in 2011, we have brought order into what was once a largely unregulated sector in the government. Ten years ago, the GOCC sector was a mess. The functions and mandates of many public corporations were unclear or overlapped. They were, after all, defined by the politics of the day when they were created.
In the earlier period, corporate governance was not yet the essential principle as it is today. Many public enterprises were sinkholes for taxpayers’ money. They were badly managed and, most of the time, constantly operated at a loss. There was also no mechanism for accrediting officials and no means to keep them accountable.
This is why the GCG’s role is very crucial. Its primary mandate is to safeguard the government’s ownership rights and ensure that the operations of GOCCs are transparent and responsive to the needs of the Filipino people.
The government corporate sector is an important tool for economic growth and development. GOCCs are expected to perform government and business functions, and fulfill their mandate to provide essential services to the Filipino people.
The government likewise collects a substantial amount of dividends from GOCCs to help fund priority programs and projects.
The Duterte administration’s policy of instilling fiscal discipline among our GOCCs allowed us to collect an average of 57 billion pesos in remittance annually from these firms. This is more than double the average annual collection of the past administration.
Their contributions proved to be very useful when we needed more money to fund the additional expenses to fight the pandemic.
For GOCCs to remain relevant, they must meet the highest standards of corporate governance. They must be sustainable business units. They must be prudent in the use of the taxpayers’ money and efficient in the deployment of their assets.
The past five years of the Duterte administration have shown what improved governance and financial discipline can do to an economy and the whole country.
After a year of battling the pandemic, the Philippines continues to maintain its financial balance. Due to the successive tax and structural reforms implemented since 2016, our fiscal fundamentals remained solid. We did not suffer the kind of fiscal downturn that typically accompanies an economic crisis.
These sound policies of fiscal discipline and good governance are what we want the GCG to instill in the government corporations.
I commend the GCG for introducing valuable governance reforms in the GOCC sector over the past years. Through its conscientious efforts, the GCG has identified and recommended for abolition a total of 29 GOCCs since 2011. The Office of the President acted on its recommendations and abolished these redundant state-owned firms.
The most visible aspect of the GCG’s oversight is the Corporate Governance Scorecard that assesses state enterprises. The GCG also institutionalized the Performance Evaluation System to enable GOCCs to become performance-driven corporations anchored on good corporate governance.
Over time, the strengthened monitoring and evaluation of our state enterprises will transform them as exemplars of corporate governance that private firms can learn from.
While great strides have been achieved, there is always room for improvement. Let me cite one very important policy change that the GCG must adopt.
We have government corporations that are also evaluated by their regulatory agencies. As Secretary of Finance, I happen to be the ex-officio Chairman of eight government corporations and director of 20 state corporations. Some of these GOCCs are regulated by agencies attached to the Department of Finance. I have, therefore, noticed the incongruence between the evaluation made by the GCG against those made by regulatory agencies. This should not be the case.
Take the Insurance Commission as an example. It is mandated to review businesses engaged in insurance, whether private or government owned. The Insurance Commission recently assessed some government insurance corporations.
Surprisingly, the evaluation by the Insurance Commission contrasts sharply with that of the GCG. The discrepancies could cause confusion among the regulated and reviewed state enterprises. More seriously, they could bring forth errors in policies for the government.
I therefore call on my colleagues in the Commission to work towards correcting this irregularity. We should refine the evaluation methods and factor in the findings of the regulators in assessing and rating GOCCs.
The GCG should also make its review methodologies relevant to the industry sectors. This will help the GCG identify factors peculiar to each GOCC and, ultimately, come up with a scorecard that accurately measures the achievement of the vision, mission, and mandates of GOCCs.
Another thing I would like to mention is that, it seems that the GCG is not very sharp in analyzing financial statements of GOCCs. I’ll give you an example, you have actually rated some of the government insurance companies very highly when in fact they do not adhere to international standards of accounting and reporting. This, I think, is a failure not only of COA but also of the GCG. So, I urge you to strengthen your ability to analyze the financial statements of each and every GOCC.
In its 10th year, I congratulate the GCG for the work it has done. I look forward to a higher level of vigilance and quality of oversight in the coming years.
The Department of Finance stands ready to assist the GCG to achieve our shared goal of transforming our GOCCs into performance-oriented enterprises and significant contributors to our economic growth.
Thank you.
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