Philippine SOEs: Towards Higher Standards of Governance Presentation to High-Level Meeting of the State-Owned Authorities 5-6 September 2011 Ljubljana, Slovenia

Outline of Presentation  Introduction  Overview of SOE Sector  Key Governance Issues and Challenges  Governance Imperatives  Program of Reforms in SOE Sector:  Key Accomplishments  On-Going Initiatives  Future Directions  Conclusion

Overview of the SOE Sector  Locally termed as Government Owned and/or Controlled Corporations (GOCCs) - at least 51% government ownership.  Mandated to provide social services while generating profits to support its operations  About 157 GOCCs in key sectors- banking, pension, transport, power, agriculture, housing

Overview of the SOE Sector  Current Status as of 2009 (in Trillion pesos)  Total Assets - Php 7.19  Total Liabilities - Php 5.11  Total Revenues - Php 0.13  Contributions to Fiscal Consolidation Program (2005 – 2009) (in Billion Pesos) Average Total Collections Php 29.5 Average Dividend Remittances Php 10.3

Overview of the SOE Sector  Role of GOP as owner of GOCCs is exercised through: Board of Directors Supervising Department Oversight Agencies * which at times may include Congress Office of the President * Oversight Agencies Department of Finance (DOF) Department of Budget and Management (DBM) National Economic Development Authority (NEDA) Bangko Sentral ng Pilipinas (BSP) Commission on Audit (COA) GOP – Government of the Philippines

Key Governance Issues & Challenges  Lack of clear ownership policy of the State  Conflicting mandates and multiple levels of oversight  Need to strengthen Board governance  Need to strengthen transparency and disclosure standards  Sustainability of financial and operational performance as well as service delivery  Political interference in tariff setting

 Need to rationalize SOE Sector  Need to instill fiscal discipline among SOEs  Need to rationalize compensation structure of Board Directors  Removal of Charter provisions on automatic government guarantees  Poor compliance to reportorial requirements Key Governance Issues & Challenges

Governance Imperatives  Strengthen board governance  Update ownership policy  Further rationalize SOE sector  Enhance transparency and disclosure practices

Program of Reforms in SOE Sector: Key Accomplishments  Privatized GOCCs that have attracted significant number of foreign and domestic investors:  Philippine National Oil Company – Energy Development Corporation (PNOC-EDC)  Petron Corporation  Philippine Airlines  Philippine National Bank

Philippine SOEs: Corporate Governance On-Going Initiatives  Pursue corporate governance (CG) and continue improvement in CG Scorecard  CG Scorecard benchmarking  Deepen CG reform by moving beyond compliance  Institutional and financial reforms geared towards operational and financial efficiency

Future Direction  GOCC Governance Act of 2011  Governance Commission for GOCCs or GCG  Review and update of government ownership policies  Strengthen Board Governance  Pursue further rationalization of GOCCs.  Strategic partnerships with development partners, private sector, NGOs and other non-state actors.  Pursue performance contracting system.  Strengthen Contingency Liability Management

Conclusion  Much work still needed in strengthening CG reforms in the Philippine SOE sector.  SOEs must deliver public services in most efficient and effective way.  We remain steadfast in pushing for higher CG standards to our SOEs  CG Reform forms part of the broader governance reform program of government.

Thank you!