Privatization or Public Enterprise Reform? time and quality of those projects if done under direct administration.

Evolution of Privatization With regard to factors that affected privatization, three major considerations were
derived from
the Honduran case:
Ever since the establishment of the Committee on Privatization during the first 1. The level of competitiveness in the market for the good in question.
Aquino 2. The existing institutional and regulatory framework and its possible effect on
administration, the Philippine government, inspired by the neoliberal wave, actively privatization.
pursued 3. Possible social, political or economic impacts that may arise from privatization.
privatization as a means of addressing its problematic public enterprises, some The first and second points in particular highlight one of the fundamental
might say with a bit too much enthusiasm and not enough critical thinking. Though assumptions of
privatization has slowed down proponents of privatization: that the market is more efficient in delivering goods and
both in the country and globally and the enthusiasm for it has waned, it remains a services than
major strategy for dealing with public enterprises, in spite of real life experiences the state. The arguments for privatization all have the assumption of a competitive
and events that have put the market
economic tenets that support it into question (Quiggin, 2011). In this section we will underlying them (Van Slyke, 2003). But markets are only efficient to the extent that
re-evaluate they are free
the strategy of privatization in light of experience, its limitations and as well as the and competitive.
alternative
strategy of public enterprise reform. In cases where in markets are not sufficiently competitive or where in the industry or
Privatization refers to the process of transferring public assets to private ownership sector is not
and/or control. amicable to competition (e.g. natural monopolies) privatization may yield little to no
In the context of macro-economic government policy, it may come in two forms: sale benefit. In
of assets such cases private ownership/management may matter little, and in fact public
and liberalization. The former involves the straight forward sale of government ownership may
assets to the even be more desirable. Regulations and the institutional structure established by
private sector, while the latter involves both the divestiture of public assets to the the state may
private sector as add further barriers to competition.
well as deregulation and decontrol of the economy in a gradual shift towards a freer The third point highlights the political and social objectives often attached to public
market (Gouri, enterprises.
Sankar, Reddy, & Shams, 1991). Though privatization may improve the economic viability of certain PEs, it does not
Privatization was a primary strategy for dealing with public enterprises in many guarantee that
country cases, those organizations non-proprietary objectives will be met as well as under public
particularly during the height of the reinventing government movement, when the ownership and
intention was to management. It also highlights the displacements that may take place as the state
downsize the public sector to give room the private as well as improve outcomes. It pulls back from
was also often its role as provider, producer and guarantor. This is particularly pertinent to those
undertaken as a means of generating revenues for the government. Underlying this public
strategy was enterprises meant to cater to the needs of indigent groups or sectors (minorities, the
the argument that the private sector would be more efficient in delivering certain poor, etc.).
goods and Gouri, et. al. (1991) made similar findings and reached similar conclusion in a
services than the public sector (Lim & Moore, 1989). However, privatization cross-country study
strategies have had composed of eight countries from the Asia- Pacific region covering Australia, China,
mixed results in different country cases. India, (South)
Key Reasons for Privatization Korea, Malaysia, Philippines, Sri Lanka and Thailand. The authors determined that
In a case study conducted in Honduras which covered several construction projects among the
that were country cases, the benefits accrued from privatization ranged from rather moderate
outsourced to private companies, Lim & Moore (1989) found little in terms of to low. Like
improvement with the findings in the Honduran study, the authors emphasized the significance of the
regard to cost, time and quality of the privatized projects as compared to estimates conditions and
as to the cost,
structure of the market, as well as the potential social, political or economic impacts possibly easier coordination. Thus there appears to be a trade-off between the two
of cases of public service monopoly. Granted, the existence of NGOs dependent on
privatization. The report similarly prescribed reforms and development of market public funding seem to limit the
structures, as effectiveness of transferring responsibility to private actors in terms reducing public
well as the need for safety nets to deal with social tensions that may arise. fiscal burden.
Additionally, the authors All in all, cross-country analysis of past experience indicates that more often than
emphasized the need for countries to have a clear understanding of the rationale, not, successful
objectives and privatization requires much in terms of government effort. This brings to question
methods to be had should they pursue privatization. the
In the case study of the privatization of social services in New York state, another attractiveness of privatization as a strategy for addressing public enterprises, which
key factor that brings us to
was cited as being necessary for the success of privatization was that of public the alternative strategy: public enterprise reform.
management In contrast to privatization, public enterprise reform has no widely accepted
capacity (Van Slyke, 2003). Public management capacity is defined as the definition. Indeed, the
possession of skilled term “reform” while implying change, betrays nothing about the type of change
personnel with “contract managing expertise, negotiation, bargaining, and mediation meant to be
skills, undertaken except that it is definitely meant to be for the better. Nevertheless, we do
oversight and program audit capabilities, and the necessary communication and have some
political skills to guidance as to what reform can mean based on the GOCC Governance Act which
manage programs with third parties in a complex political environment. (Van Slyke, besides
pp. 296-297)”. privatization lists the available options for dealing with public enterprises:
The study linked the need for such in the public sector due to the necessity of reorganization, merging,
ensuring the streamlining, or abolition. Here we will take the term 8public enterprise reform9 to
existence of a competitive market structure as well as necessary monitoring and imply the use
evaluation of any of these in a macro-economic context referring to the public enterprise sector
measures. In addition, the study also reassessed the role of non-profit NGOs in the as a whole.
delivery of With these options on the table, it is now up to the GCG to study the cases of
social services. individual GOCCs
While it is conventional wisdom is that the participation of civic groups in and to subsequently recommend what course of action to take as to implement that
shouldering the burden course of
is a good thing, Van Slyke (2003) identified that, while NGOs offer specialized action.
expertise their Obviously, determining the specific modality of public enterprise reform to be
actions often restricted competition into the service markets that they operated in. In applied in any
particular, particular case necessitates careful and deliberate consideration of the various
the networks by which NGOs often use to connect with public officials to maximize GOCCs now
the interests under the jurisdiction of the GCG. The issues, problems and challenges of each
of those NGOs. Van Slyke cited the push for legislation requiring certification GOCC need to
standards to be be considered along with their mandates and objectives. Indeed, some GOCCs fulfill
applied to suppliers of specific services. In such cases the proponent NGOs would some of the
be the most goals of their mandate merely by existing (Jones, 1987).
qualified to meet those standards, while the need for certification doubles as a That said, many unsuccessful or underperforming public enterprises can be made
barrier to the entry successful with
of other players. the proper reforms. As such, the government, particularly the GCG, should endeavor
In effect, such cases presented a change from a public monopoly to a private to determine
(non-profit) what reforms are needed and to implement them. It is beyond the scope of this paper
monopoly. The pros and cons between which are up for debate, thought it seems as well as
that the non�profits offer specialized expertise and flexibility in addressing of practicability to recommend more than this.
particular issue-areas (Van Slyke, In their conclusion Gouri, et. al. (1991) contended that the pursuit of privatization is a
2003), while government monopoly would probably allow for more generalized matter of
coverage and
ideology and therefore of political choice. As it is, the economic debate on the pros to intervene would allow for a large degree of flexibility in dealing with the myriad of
and cons of public
public and private firms remains unresolved (Quiggin, 2011) offering no definitive enterprise issues found, in particular, in developing countries.
answer for Without a clear meta policy or a desire to adhere to it, there is the risk of confusion
policymakers. Should societies and their governments feel that their economy need and
to be more inconsistency in the application of either privatization or public enterprise reform.
market-oriented then they will likely pursue privatization policies. Other Summary
governments and Reform of the Philippine public enterprise sector will require much in terms
societies may be more inclined towards government participation in the economy deliberation,
and may prefer coordination and technical knowledge. It will require rethinking of the conventional
to retain public enterprises. However, privatization and public enterprise reform need wisdom on the
not be part of policymakers as much as it will require much political will to enact. The
mutually exclusive. current
Key Issues of Public Enterprise: The Need to Improve administration, with its anti-corruption mandate has launched the most extensive
While countries may opt to go for an extensive privatization campaign or for an overhaul of the
extensive public sector in years. However, in spite of the zeal by which the current administration has
enterprise reform campaign, they may also apply both on a macro- and micro-level. pursued this
In the same effort, there are noticeable weaknesses in its reform efforts, particularly in the
way that there are different instruments for privatization, a general reform of the contents of its
public sector may centerpiece legislation, the GOCC Governance Act possibly owing to the rushed
utilize different approaches for different public enterprises and sectors. Some manner in which
sectors or individual this law was passed or to a lack of understanding or deliberation on the issues faced
PEs may be deemed as needing privatization, while others may be retained by the by the public
government. enterprise sector, or very likely both.
It would makes sense to privatize enterprises that have become superfluous due to There has been much written about public enterprises and public enterprise reform.
changing Unfortunately, legislation has not taken much if any of the lessons learned on public
government objectives, or when they are unprofitable due to public constraints and enterprises
this might be and reforming them, owing largely to a lack of expertise and awareness among
better off under private ownership where they would be free of these constraints. In current legislators
the case of the latter, it is important to consider if the constraints to are truly tied to and government officials. This situation is not helped by the lack of local interest in
public ownership (Quiggin, the academic
2011). On the other hand, if public enterprises have goals and mandates that are field of public enterprise studies. It therefore rests upon the few the academe who
considered have studied
important to national policy, if their operations contribute significant revenues to public enterprises, as well as those who work in public enterprises themselves, to
government champion the
coffers or if market conditions are such that there is a lack of competition such that because of public enterprise reform.
the chance of
potential benefits from privatization are relatively low, it would make sense to retain ACTIVITY:
public Provide and discuss several factors which lead to privatization of public enterprise?
enterprises. Discuss the
Decisions on what is to be done must be anchored in the state ideology, and the advantages of privatizing the public enterprise
specific
circumstances of the PEs and sectors in question (nature of market, financial status, Privatization happens when the government sells its businesses or assets to private
potential companies or individuals. This can make these services work better and more
social and economic displacements, vulnerability to foreign firms and interests, efficiently. Private companies often bring in new technology and better methods,
etc.). A mixed which can save money and improve services for people. The government can also
strategy using both privatization and public enterprise reform, if properly backed up earn money from these sales, which can be used for other public needs.
by a clear and
unambiguous demarcation between the public and private spheres and of when the
state ought
However, privatization can have downsides. Private companies aim to make a profit, automatically accrued for the next
which can lead to higher prices for consumers. People might have to pay more for calendar year..
services that used to be cheaper. Access to important services like water, electricity, Other Kinds of Appropriation are the following:
or healthcare might be reduced for some people, especially those who can't afford 1. Tariff Bill. It is a bill that imposes revenues or customs duties for specific purposes.
higher prices. This can lead to more inequality, where richer people get better 2. Bill which facilitates the government to issue bonds and other forms of indebted which will
services and poorer people get left out. be
chargeable from future public funds.
Governments might choose to privatize because they need money or think private General Rules of Appropriation (Art VI, Sec.25)
companies can do a better job. Sometimes, government services are slow and The following are the general rules of appropriation
inefficient due to too much paperwork and not enough accountability. Private 1. Congress may not increase the appropriation recommended by the President for the
companies can bring competition, which can improve performance. operations
of the government.
But privatization needs careful planning. Without strong rules, private companies 2. No provision or enactment shall be embraced in the general appropriations bill unless it
might take advantage of their power. It's important to have regulations that protect relates
consumers and ensure fair prices. The government must also think about how specifically to some
privatization affects people with low incomes or those living in remote areas. particular of the appropriation
3. Appropriation procedures for congress shall follow the appropriation procedures for other
departments and agencies.
In summary, while privatization can bring benefits like better efficiency and more
4. A special Appropriation bill must specify the purpose for which it is intended
funds for the government, it also has risks like higher prices and reduced access to
5. No law shall be passed authorizing any transfer of appropriation unless otherwise provided
services. Careful planning and strong regulations are needed to balance these pros
by
and cons, ensuring privatization helps everyone and does not harm the most
law.
vulnerable.
6. Discretionary funds appropriated for particular offices/officers shall be disbursed only for
public use.
7. If the end of the fiscal year, congress failed to pass the general appropriation bill, the GAA
for
MODULE 7 the preceding year is
EXPENDITURES, DISBURSEMENTS ACCOUNTING AND deemed re- enacted
ACCOUNTABILITY IN THE NATIONAL The following are the other rules of appropriation (Sec.29)
1. Only through an appropriation made by law can money paid out of the national treasury
GOVERNMENT 2. No public funds or property can be appropriation in favor of any church or religious sect
APPROPRIATION POWER OF CONGRESS 3. All the revenues generated for special purposes shall be treated special funds and shall be
paid
Congressional Appropriation Powers only for such purposes.
Under Art. VI. Sec.24 of the 1987 Philippine Constitution, the following bills shall originate Steps in the Approval of a Bill which is Applicable also for a General Appropriations Bill.
exclusively from the house of
Representatives: 1. First reading
1. Appropriation bills 2. Second reading
2. Revenue or Tariff Bills 3. Floor Debates
3. Bills authorizing increase of public debt 4. Printing and Distribution
A general Appropriation is an annual budget which Congress set aside to appropriate the 5. Third Reading
expense 6. Transmittal to the other house
for the general operation of the 7. Submission to Joint Bicameral Committee
government. A special appropriation is a supplemental appropriation not included in the 8. Approval of consolidated bill by both houses
budget. 9. Submission to the President
A specific appropriation, on the 10. Veto Power of the President
other hand is an appropriation that sets aside a fixed amount of money to pay a certain How a Bill Becomes a Law
program a Action on Bill
continuing appropriation refers
to the named amount of money which if not appropriated at the end of the fiscal year will be
MODULE 8 4. To promulgate, accounting and auditing rules and regulations, those that pertain to the
THE COMMISSION ON AUDIT (COA) prevention, as well as disallowances of
irregular, unnecessary, excessive, extravagant or unconscionable expenditures or use of
government funds and property.
Introduction
5. To submit an annual financial report and economic measures. Section 4 provides that the
Under Article IX Section 1 of the 1987 Constitution, there is hereby created three (3)
Commission shall submit to the
Constitutional Commissions, one of which is
President and Congress, within the time fixed by law, an annual report covering the financial
the Commission on Audit (COA)
conditions and operations of the
In order to ensure the independence of the COA, the members and a Commission will have a
Government, its subdivisions, agencies and instrumentalities, including government-owned or
fixed term of office and a fixed
controlled corporations, and non government entities subject to its audit and recommend
salary which will be fixed by law. The Commission also has the right to appoint its employees.
measures necessary to improve their effectiveness and efficiency. It shall
At the same time, the Commission also enjoys fiscal autonomy. As such, their approved annual
submit its reports as may be required by law.
appropriations shall be
6. To perform other duties specified by law. This include the authority to adjust and enforce
automatically and regularly released.
the
Composition, Qualifications, Term of Office and Appointment
obligation of just account
The COA shall be composed of a Chairman and two Commissioners who shall be natural form
subsisting between agencies of the government; to assist in the collection and enforcement of
citizens of the Philippines and at the
all
time of time of their appointment, at least thirty-five years of age, Certified Public Accountants
just claims and debts; and the
with not less than ten years of
restitution of all funds or the replacement or payment at a reasonable price of property, found
auditing experience or members of the Philippine Bar who have been engaged in the practice
to
of
be due the government or any of
law for at least ten years, and must
its instrumentalities, to release any claims of liability to any government agency not exceeding
not have been candidates for any elective position in the elections immediately preceding their
P10,000; to examine and audit the
appointments. At the same time, all
books, record, and accounts of public utilities in connection with the fixing rates of every
members of the Commission must not belong to the same profession.
nature
The members of the COA have a fixed term of seven (7) years.
(Art IX-A, Sec.8 and P.D 1445 Sec.
Functions, Power and Authority of the Commission on Audit (COA)
34-36 and 38)
1. Examine, audit and settle all accounts pertaining to:
Reportorial Requirements from the COA
a. The revenue and receipts of the government or any of its subdivisions, agencies, including
Aside from the reports on the financial conditions and operations of the government to be
government-owned or controlled corporations (GOCCs) and the post-auditing.
submitted to the President and
b. Under Presidential Decree 1445, all expenditures of funds and property owned or held in
Congress, the Commission in compliance with the provisions of RA 7226 promulgated on
trust
March
or pertaining to:
12, 1992 must submit to Congress
i. Constitutional bodies
reports relative to the following:
ii. Autonomous colleges and universities
a. Amounts obligated, warrants issued and expenditures made in each municipality, province
iii. Other GOCCs and their subsidiaries and
and
city by the National
iv. Such no-government entities receiving subsidy or equity from the government either
Government Agencies and instrumentalities including GOCCs.
directly
b. All entities of the government of its subsidiaries with investments of public funds any law
or indirectly.
exempting from the jurisdiction of
2. Adopt other necessary or appropriate measures to correct deficiencies in the internal control
the COA any such entity or subsidiary in any guise whatever or any investments of public
of the audited agencies The
funds
Commission, as national accounting office of the government, keeps the general accounts and
will be unconstitutional and void.
expenditures of the same.
3. To define the scope of its audit and examination and establish the techniques and methods
required for it. This is the exclusive
Joseph Cantilleps Bpa-3A
function of the COA and Congress cannot around non possess the authority to legislate law on
the
matter of concern. This aims to
standardize or promote efficiency of the techniques and procedures of public sector auditing.