Nonperforming GOCCs

After 28 unproductive years, the North Luzon Railways Corp. (Northrail), a wholly owned subsidiary of the Bases Conversion and Development Authority (BCDA) will, upon the orders of President Marcos, be abolished.

Northrail was organized in 1995 “to develop, construct, operate and manage a railroad system to serve Metro Manila and Northern Luzon.”

Since its inception, Northrail had not accomplished much that would justify its huge budget and it even got caught in a corruption scandal involving a China-based corporation.

Its abolition had been ordered by the president based on the finding and recommendation of the Governance Commission for Government-Owned or -Controlled Corporations (GCG) that it is “no longer achieving the objectives for which it was designed.”

Although the GCG had recommended Northrail’s deactivation as early as 2019, it was only this year that it received presidential approval. The BCDA had been tasked to liquidate its remaining assets and terminate the employment of its staff.

Northrail is one of many government-owned and -controlled corporations (GOCC) created by law or executive order, with financial support from the government, to manage certain public needs.

The idea was, with that focus and special funding, the purposes for which GOCCs are organized would be promptly and efficiently accomplished.

But as things turned out later, some GOCCs became the dumping ground of the favorites of the appointing power. Worse, their executives took liberties on their coffers to award themselves with scandalous perks and privileges.

They were able to get away with treating their office as their personal piggy bank until Congress enacted the GOCC Governance Act of 2011, which made their continued operation dependent on, among others, their performance record and financial viability.

Those that fail to make the grade may, depending on the nature and scope of their operations, be ordered merged, privatized or abolished as in Northrail’s case.

In other words, GOCCs are no longer entitled to a free lunch at the taxpayers’ expense. They have to earn their keep and more.

Because any of those actions would result in the loss of jobs, high salaries and other employment benefits, the winnowing process of nonperforming GOCCs were often met with stiff resistance from politically influential sectors.

To date, 118 GOCCs are under the GCG’s jurisdiction and they include the Land Bank of the Philippines and the Development Bank of the Philippines, whose proposed merger (despite a lot of earlier hullabaloo) remains on the drawing board.

That oversight authority, however, does not extend to the Bangko Sentral ng Pilipinas, whose mandate has constitutional blessings, and local water districts and research institutions.

According to the GCG website, 10 GOCCs, e.g., the Philippine Amusement and Gaming Corp., are under consideration for privatization, while 25 others, whose identities are under wraps, would be recommended for abolition.

Note that aside from accomplishing the purposes for which they were organized, GOCCs are required under the law to declare and remit at least 50 percent of their annual net earnings, such as cash, stocks or property dividends, to the national government.

The ability of the GOCCs to comply with that obligation—the higher remittance, the better—is considered a critical element for their continued existence. And rightly so, because nonperforming or losing GOCCs constitute an unacceptable drain on the national budget in light of the pressing need for funds by government offices engaged in significant public activities.

This remittance obligation had helped put a restraint on the boards of the GOCCs on their freewheeling use of their funds for purposes other than those cited in their charters.

Hopefully, Northrail’s abolition would presage a thorough review and evaluation of the operation of the remaining GOCCs to ensure their value to the national economy and not be white elephants. INQ

For comments, please send your email to [email protected].