Shylie Jied A.

Laredo November 27,2018

BPA 4-FSIN Prof Niῆo Verzosa

Public Enterprise Administrative Arrangement and its Implication on Efficiency

Incentives based on reasonable arrangement indicate fairness rather than

weakness. Looking back in the history, whereby Public Enterprises in the country were
administrations has freedom on their own to provide their self an incentives not being
under the regulation of Commission of Audit and other financial watchdogs, conspiracy
among administrators were practiced leading to billions of unliquidated incentives that
were given to them.

The Memorandum of Agreement in 2011 barred this freedom as performance

and quota has become the basis of additional incentives of administrators as well as the
employees. Indeed it is, however, factors such as political economy, political change,
and paradigm shifting affects these understanding and the relationship between the
government and private side. For an instance, upon reaching the quota, these
incentives are in the discretion of the President whereas can be manipulated and can
be taken advantage of. Hypothetically, if PAGCOR revenues achieved more than what
must be expected as it directly affects the social fund of the President, the president in
return with no hesitation gives incentives more than what they also deserve. In
argument, GOCCs must maintain their level of performance in order to receive good
number of incentives. It is both from the principle of the good governance, must function
beyond actual responsibilities, and private sector which must be rewarded based on
reasonable level of good performance under certain circumstances.

Meanwhile, existing GOCCs that proves that their efficiency and contribution in
the economic development is deteriorating leaves the government but to save them
regardless of financial instability. Technically, inefficiency in Public Enterprises were not
solely from the factor of the inefficiency of the administrators per se as it can be affected
from other factors rather than the ownership. Government doesn’t abolished GOCCs for
the reason of incompetent leaders but rather the incompetency in regulating the
efficiency of general mechanisms in the agency such as supply and productivity that
determines the competition in the market between private and public enterprise. In this
regard, government instead of abolishing them will invest more on giving aid on these
public enterprises for the reason that lost enterprises would cost more on the
government side. One good application is the state of Social Security System in the
issue of additional amount-up to PHP 2,200-increase on pensions. Based on the
reports, if the institution approved the petition, massive deficit in the GOCC will occur by
the year 2026. The agency said that they can only implement the additional payout if
there’s an increase in contribution rate or an adjustment in the minimum and maximum
monthly salary credits in SSS, since this pension hike is one of the promises of current
administration if they’re going to pursue this ideal reform then the GOCC would depend
on subsidies and aids from the government itself that can lead to foreign debts. Since
SSS is a development and social corporation, it directly could affect economic growth
and development objectives of the administration. The Philippine development plan
objectives is focused on economic growth, equal distribution of development fruits and
total human development in particular to common people that comprises those who are
under poverty line and marginalized sector. If SSS, hypothetically, became inefficient
and will be abolished, its effect will trickle down to the development plans and
beneficiaries that will create a great lost in the government.

The use of pragmatic approach is most probably being considered in the case of
the Philippines. At the end of the day, the government has no choice but to protect and
maintain the stability of each public enterprise to maintain as well the direction of
development initiatives of the government administration and as well as own political
interests of some-particularly the involved elite.