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GOCCs’ regulatory, commercial functions may finally be split

The Philippine Ports Authority’s regulatory and commercial functions may soon be separated to avoid conflict of interest. Photo of Manila North Harbor courtesy of operator Manila North Harbour Port, Inc.

The Philippine government will review functions of government-owned and controlled corporations (GOCCs), including the Philippine Ports Authority (PPA), the Civil Aviation Authority of the Philippines (CAAP) and Cebu Port Authority (CPA), to separate their conflicting mandates of being both regulator and commercial operator.

National Economic and Development Authority (NEDA) director-general Ernesto Pernia said the review will define the functions of GOCCs, as these state-owned agencies should not have both regulatory and commercial functions to avoid conflict of interest.

“They have to be defined. If the key purpose of the GOCC is to earn income, then it should be just earning income and not regulation. In other words, just drawing the line between commercial activity or proprietorship and regulation,” Pernia said in a briefing last week.

Stakeholder organizations have long advocated the separation of regulatory and commercial functions of GOCCs to avoid conflict of interest.

In a separate statement, NEDA undersecretary Rosemarie Edillon said this reform is intended to boost market performance as well as correct the dual regulatory and proprietary functions of some state entities.

“If a state entity is an enterprise or operates as a business, then it must compete on equal terms with the private sector and must not have undue advantage. State support in the form of subsidies, tax incentives, and immunity from certain regulations must be reserved only for government-owned and controlled corporations that operate in non-profitable or non-commercially viable markets avoided by private firms,” Edillon said.

She added that regulatory functions and commercial operations should not be mixed because of inherent conflict of interest. This principle, she noted, is clearly stated in Section 2 (g) of Republic Act No. 10149, otherwise known as the GOCC Governance Act of 2011.

“A business aims to earn profit while a regulator sets rules to protect the consumer and the public interest in general, which may negatively affect profits. So if a state entity is a regulator, then it must not be involved in business operations in the sector or market it regulates. If it is a business, then it must not have regulatory powers or influence,” Edillon explained.

“Ultimately, we would like to see more and more high-quality goods and services being made available and affordable to as many consumers as possible. Market competition and effective regulation can make this happen,” Edillon said.

The Philippine Development Plan 2017-2022 calls for a review of the mandate, quality of services, and specific markets of GOCCs to ensure that their proprietary activities do not conflict with their regulatory functions and that procedures are streamlined.

Meanwhile, the Governance Commission for GOCCs (GCG), the oversight body for GOCCs, has already conducted initial steps in reviewing profiles of GOCCs.

National Competition Policy

To integrate these reforms, NEDA, with assistance from the Philippine Competition Commission (PCC), will formulate a National Competition Policy this year. The policy will flesh out competition strategies in the country’s economic blueprint. These pillars are pro-competitive laws and regulations and government interventions, competitive neutrality, and enforcement of the Philippine Competition Act (PCA) and other competition-related laws and issuances.

“While the enactment of the PCA and the good work done by the PCC on implementing the law are steps in the right direction, we believe there is still a lot that needs to be done to deliver a level playing field for businesses and higher bargaining powers for consumers,” Edillon said.

According to the GCG website, there are currently 157 GOCCs under its jurisdiction. Aside from PPA, CAAP and CPA, operating in the transportation industry include the Cebu Port Authority, Clark International Airport Authority, Mactan-Cebu International Airport Authority, Light Rail Transit Administration, Manila International Airport Authority, and Philippine National Railway.

Others are Bases Conversion Development Authority, Subic Bay Metropolitan Authority, Philippine Aerospace Development Corporation, Aurora Special Economic Zone Authority, and Cagayan Economic Zone Authority, among others. – Roumina Pablo

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