public enterprise in the philippines

1. PUBLIC ENTERPRISE
AND ECONOMIC
DEVELOPMENT
ADMINISTRATION
Presented by April Kaye M. Medes

2. PUBLIC ENTERPRISE
• A pubic enterprise may be defined as any commercial or industrial undertaking
owned and managed by the government with a view to maximize social welfare and
uphold the public interest.
• a business organization wholly or partly owned by the state and controlled through
a public authority. Some public enterprises are placed under public ownership
because, for social reasons, it is thought the service or product should be provided
by a state monopoly. Utilities (gas, electricity, etc.), broadcasting,
telecommunications, and certain forms of transport are examples of this kind of
public enterprise. (https://www.britannica.com)

3. CHARACTERISTICS OF PUBLIC
ENTERPRISES
(a) Government Ownership and Management: The public enterprises are owned
and managed by the central or state government, or by the local authority. The
government may either wholly own the public enterprises or the ownership may partly
be with the government and partly with the private industrialists and the public. In any
case the control, management and ownership remains primarily with the government.
(b) Financed from Government Funds: The public enterprises get their capital from
Government Funds and the government has to make provision for their capital in its
budget.
(c) Public Welfare: Public enterprises are not guided by profit motive. Their major focus
is on providing the service or commodity at reasonable prices.

4. CHARACTERISTICS OF PUBLIC
ENTERPRISES
(d) Public Utility Services: Public sector enterprises concentrate on providing public
utility services like transport, electricity, telecommunication etc.
(e) Public Accountability: Public enterprises are governed by public policies formulated by
the government and are accountable to the legislature.
(f) Excessive Formalities: The government rules and regulations force the public
enterprises to observe excessive formalities in their operations. This makes the task of
management very sensitive and cumbersome

5. REASONS FOR HAVING PUBLIC
ENTERPRISE
• The industry is in the pioneering stage or is in a crucial area where the private sector
would not be compromising to venture into.
• There are certain factors of economy which cannot be left to the private sector
• The need to lay down the economic foundations to accelerate the pace of economic
development
• To prevent/ avoid exploitation of natural resources by foreign nationals
• National defense and security
Art 12 of 1987 Constitution-
• To generate employment

6. REASONS FOR HAVING PUBLIC
ENTERPRISE
• To prevent public exploitation- benefits be given to government
consumers
• To ensure reasonable pricing
• To prevent foreign ownership and allow only minority participation
• Issue of commercial profitability versus social benefit

7. SIGNIFICANCE OF PUBLIC ENTERPRISES
IN DEVELOPING COUNTRIES
• It can correct market failure resulting from monopoly and
cartelization which restricts competition and inevitably increase prices
• Lower prices through government cross subsidy
• Facilitates centralized long-term planning
• Ensure government command of the economy

8. ORGANIZATION MODELS FOR
PUBLIC ENTERPRISE
1) Departmentally-managed Enterprise
-railways, communications, ports and harbors and other infrastructure
2) Public Corporation
-established under special law, has legal personality, sells its goods
3) State Company
-created under law
4) Operating Contract
-contracts for garbage collection, drainage, cleaning

9. PRIVATIZATION
• The transfer of the delivery of public services to the initiative and control of the private
sector
• Transfer of management of an enterprise from the public to private sector.
• Whenever a public sector sells out government-owned corporation to the private sector,
it then becomes a public enterprise management or a management of innovations.
• Public Enterprise Management is “a form of human activity operated and managed by
the state government or any public authority. It is an undertaking where the investment
is owned and controlled by any government organization whether national or local

10. REASONS OF PRIVATIZATION
• Rising costs of doing business
• Field or area of expertise to operate a service
• A privately contracted company may deliver a service more efficiently
• The private sector has better human resource management approach
• Reduce government involvement in commercially viable activities
• Increase efficiency in the delivery of programs
• Provide competition
• Address government’s limited absorptive capacity

11. MODES OF PRIVATIZATION
1) Contracting Out Services - while the government is still responsible for the
service it has someone else (contractor) who provides the actual service
-Garbage collection and disposal, drainage and sewage
maintenance
2) Public-Private Collaboration - a cooperative agreement between a government
and a private organization may be formed in which both parties assume some
degree of mutual responsibility in operating a program or a service like the Build-
operate-Transfer (BOT) scheme where one party builds an infrastructure like roads
or markets, and the other entity operates.

12. MODES OF PRIVATIZATION
3) Franchising- the right of the government sector to grant a program or service on
an exclusive basis to private individuals or groups in the locality
4) Load or Asset Shedding - when a government sells out a facility or equipment or
simply discontinues the provision of a public service
5) Volunteerism - a local government may hand down the provision of a service to
volunteers to operate a particular public service such as public safety services and
recreational services

13. PRIVATIZATION ISSUES IN THE
PHILIPPINES
1) Job separation - The “re-engineering the bureaucracy” program of the Ramos
resulted to massive reorganization which in turn resulted to mass lay-off of
government employees
2) Pricing or utility rates of a service provided by a business sector - Monopoly
pricing may be liberally condoned because there exists no competition of said
service like electric and water supply hence minimizing the benefits of privatization
3) Presence of political pressure - “tend to retain for the public sector functions
where privatization would make sense and to privatize tasks that would be better
left to government” - privatization leads to corruption because of its susceptibility to
political influence

14. PRIVATIZED COMPANIES
IN THE PHILIPPINES

15. PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY (PLDT)
• Established on November 28, 1928
• December 1967,Ramon Cojuangco took control of PLDT after buying its shares
• During the 1970s, PLDT was nationalized by the government of then President
Marcos and in 1981becoming the country's telephone monopoly.
• President Marcos was overthrown in 1986, the company was re-privatized
• Ramos extended licenses to other telcom companies and ordered to interconnect
• Deregulation brought new players and into the market and driving prices down

16. METROPOLITAN WATERWORKS
AND SEWERAGE SYSTEM (MWSS)
• June 1971, Republic Act 6234 was enacted. It dissolved the NAWASA
• In 1997, the Legislature passed into law Republic Act 8041, also known as “The
Water Crisis Act.” The Act, which paved the way for the privatization of MWSS
• Prior to privatization, was able to supply water to only 69% of its service area,
highest non-revenue water (NRW) in asia.
• Prior to privatization, procurement procedures always tended to be very rigid and
involved many sequential processes.
• International Finance Corporation (IFC) as an adviser to design of the privatization
program

17. PETRON CORPORATION
• Started by Standard Vacuum Oil Company or Stanvac.in 1933.
• Stanvac partnership in 1962 gave birth to Esso Philippines.
• 1973 , President Marcos created the GOCC Philippine National Oil Company
(PNOC)
• PNOC acquired Esso Philippines at the height of the first oil crisis and renamed it
Petrophil Corporation and later renamed Petron Corporation.
• Petron Corporation was established in 1973 as a marketing arm of PNOC
• In 1993, Petron’s partial privatization started when 40% of its total equity was sold
to the Arabian American Oil Company (ARAMCO).
• 20% of Petron’s equity was sold to the private sector through an initial public
offering (IPO).
• 1998, the Ramos approved RA 8479, the second law on downstream oil
deregulation

18. ADVANTAGES OF
PRIVATIZATION
• IMPROVED PERFORMANCE
• LESS PRONE TO
CORRUPTION
• CLEAR ACCOUNTABILITY
• REMOVAL OF POLITICAL
GOALS
• ACCESS TO CAPITAL
• IMPROVED DISCIPLINE
DISADVANTAGES OF
PRIVATIZATION
• ABANDONMENT OF
SOCIAL OBLIGATION
• INABILITY OF PUBLIC
CONTROL

19. THANK YOU