Good morning everyone, Sen. Villar, Chair Villanueva and the other commissioners of the GCG, Sec. Abad, CSC Chair Bala, Chair Herbosa and our other colleagues in the government as well as our friends from the private sector, good morning.
The last 5 years of the Philippines has been an example of what better governance can do to a country, to a company and to an economy. Before President Aquino came to office the Philippines was rated below investment grade. In fact, 9 years before that we were downgraded 13 times, if I’m not mistaken. But with his agenda of better governance, practically overnight, the perception of our country became favorable. And as a result, during that 5 years, we’ve been upgraded 22 times, if I’m not mistaken. In fact, if you look at how much it cost the country to borrow, it is much cheaper than higher rated sovereigns and this is measured by the credit default swap that lenders charge us for borrowing from them. Our credit default swap is tighter than that, say, of Thailand and Malaysia.
And the answer, the simple answer to that is the perception of the markets that governance in the country has improved. And whenever I’m asked to give examples of improvements in governance, of course I cite the many initiatives that my colleague, Sec. Abad, has initiated at the Department of Budget and Management. Despite the fact that he is the favorite whipping boy of the press, if you look at the facts, he initiated a lot of improvements in the budget process. The zero-based budgeting, bottom-up budgeting, the performance based budgeting, putting transparency into the process by uploading the budget on the internet so that an ordinary filipino can find out how much is being spent on his particular barangay and so that he can be the eyes of the people in his particular barangay so that he could link it to improvements that his community is having. But the other improvement that I’ve always cited is the law that created the GOCC.
If you look at the history of the Philippines, and we have former Finance Secretary de Ocampo with us today, at certain times in our history, we’ve had to rescue a GOCC. And some of them ended up in a lot of debt that the government had to absorb. And that is why the GOCC law is quite important because it sent a positive signal to everyone that we are serious about our talk of better governance. And when they saw the President appoint Chair Villanueva and the other commissioners who serve full time in this commission, they saw that the President appointed people of competence and not because of their political background. And we’ve seen it in the past four years, in the way they’ve pushed GOCCs to come up with budgets, targets, performance measures. And they’re not actually popular, they’re probably a little bit better ahead of Secretary Abad but when you talk about GOCCs, Chair Villanueva, Angel and Ranier is a nightmare of GOCCs.
Last weekend, some of them were complaining to the President about them withholding the bonus of the certification, I think, the staff of certain GOCCs and the directors because they have not submitted the required documents to prove that they did comply with their performance commitment, and I think this is something we should emulate across the government. We still have a long way to go. Earlier, I was trying to look at the rate of return on equity of GOCCs, unfortunately we don’t have an average, but most of them actually improved.
The people, as represented by the government, are the GOCC stakeholders and we must make sure we optimize the return on the equity and assets that’s deployed by the government in the sector. The last time I saw the number, the total assets of the sector is in excess of 5 trillion pesos, which is quite substantial. So just imagine if we improve the dividend rate to 10% of those assets, that’s 500 billion pesos a year. We’ve improved it already, but last year we were at 27 billion pesos. So the rate is still not at par with some of the listed companies in the country.
The other challenge for the commission is to put the GOCCs into 3 buckets, and this is an advocacy that is close to my heart. The first bucket are GOCCs that are commercial in nature and are functioning as and competing with commercial enterprises, these GOCCs must be privatized.
The second bucket are those that serve government functions, these GOCCs must be re-absorbed back into national government because there is really no reason for a GOCC to do a function that currently belongs to the national government and we have several of those: we have GOCCs that actually regulate sectors of the Philippines (CAAP, PAGCOR, PPA and all these entities).
Those in the third bucket are missionary entities that lie in the middle. We need to decide whether we close them, invest in them, or nurture them, so that we can push them into either one of the two buckets, which is what we have been doing. I think that if we count the number of companies we propose to close and actually close, this is the most ever in an administration. And that requires political will because the board, the employees all have their political support and they’re all going up to their friends to stop the effort of rationalizing and restructuring these entities. So, I would like to congratulate Chair Villanueva and his team for four great years of work, but we still have eight months and we must make the most out of these eight months. Congratulations and thank you for the great work you’ve done in the past four years.