Forum#2 Quimbo GE311263

From the lessons on Global history, what will be the effects (positive and negative) of
privatizing Government Own and Controlled Corporation (GOCC) to our economy?

So what is GOCC? A government-owned and controlled corporation, also known as GOCC, is
a state-owned enterprise that conducts both commercial and non-commercial activity. It was
developed because it is predicated on the notion that there is market failure, necessitating
government intervention through the use of corporate entities known to be effective ways to mobilize
government resources. GOCC's primary characteristic is that the government both owns and
manages it. This indicates that the corporate decision-making procedures, policies, and strategic
direction are significantly influenced by the government, typically through a designated agency or
department. Depending on each GOCC's unique legal system and governance structure, the degree
of governmental influence may differ. In many economies, GOCCs have a big impact on how public
services are delivered, how the economy develops, and how much money the government makes.
However, they may not always perform or function effectively, and problems like political sabotage,
inefficiencies, and a lack of transparency may appear, necessitating continual examination and
governance improvements.
According to Alejo (2019), Philippines is one of the developing countries that utilizes
Government-owned and controlled corporations (GOCCs) to perform not only vital governmental
functions but also purely commercial activities for profit, since the investment environment is not
favorable to private sector participation’. Through GOCCs, the government can deliver basic goods
and services to the public or engage in the business of public utilities or financing services and other
profit-oriented undertakings. The numerous tasks given to the GOCCs by the government show the
important role being played by these enterprises in the growth and development of the country.
GOCCs are an important source of revenue for the national government in the Philippines.
Section 3 of Republic Act 7656 requires all GOCCs to remit at least 50 percent of their annual income
to the national government but it should be noted that not all GOCCs are taxable, as some entities
such as GSIS , SSS , PHIC, HDMF and LWD are exceptions These exempted entities, which include
the Government Employment Insurance System, the Social Security System, the Philippine Health
Insurance Corporation, the Home Development Mutual Fund, and local water districts, provide
essential services and benefits to the public They life insurance, pension plans, disability benefits and
other types of financial assistance. The purpose of these agencies is to help individuals obtain
financial assistance from the government, enabling them to achieve or maintain a minimum standard
of living Although these companies are exempt from certain taxes, it is important to recognize that
they play an important role in providing social security and welfare services to the public. Their
primary goal is to ensure that people have access to essential benefits and financial assistance when
they need it, and to promote the well-being and stability of individuals and families. In summary,
Philippine GOCCs contribute to national government revenues, requiring them to remit a portion of
revenues as dividends Although some GOCCs are exempt from taxation, agencies such as GSIS,
SSS, PHIC, HDMF and LWD provide essential benefits and services to the community it helps to
maintain.
According to Aggarwal and Harper (2001) he privatization link with poverty reduction stems
from the relative ineffectiveness of public ownership to fulfill economic growth needs. Under private
ownership, consumer demand from the poorest members of society is met sooner, while lower
government expenditure on PSEs in terms of subsidies and capital investment provides governments
with an opportunity to increase expenditure on poverty-reducing social services.
Privatization occurs when a government-owned business, operation, or property becomes
owned by a private, non-government party. Privatization may also describe a transition that takes a
company from being publicly trade to becoming privately held. This is referred to as corporate
privatization. Privatization of specific government operations happens in a number of ways, though
generally, the government transfers ownership of specific facilities or business processes to a private,
for-profit company. Privatization generally helps governments save money and increase efficiency.
Privatization proponents contend that because privately owned businesses are profit-motivated to cut
excessive spending, they operate more cheaply and efficiently. Additionally, private organizations are
exempt from the bureaucratic hassles that sometimes befall governmental organizations. Conversely,
opponents of privatization contend that needs like water, power, and schools shouldn't be subject to
market pressures or motivated by profit. Liquor stores and other non-essential companies are run by
the public sector as revenue-generating enterprises in some states and municipalities.
In my own opinion, privatization is essential for our economy because privatization often brings
increased efficiency and effectiveness to previously publicly-run enterprises. Private companies are
typically driven by market competition and profit incentives, which can lead to a greater emphasis on
productivity, cost-effectiveness, and innovation. The introduction of private sector management
practices and expertise can result in streamline operations, better resource allocation, and improved
service quality. Privatization can also ease the financial strain on taxpayers and government budgets.
Budget shortfalls, bureaucratic red tape, and ineffective public enterprises are frequently linked.
Governments can relieve themselves of the cost of maintaining and operating these enterprises by
handing them over to the private sector. This enables governments to reallocate funds to higher
priorities, including social welfare initiatives or building public infrastructure.
In conclusion, the privatization of the GOCC has both positive and negative effects on the
government and the people. The benefits include life insurance, retirement benefits, illness benefits,
funeral loans, and salary loans after you join one of the GOCC agencies, however you must make
monthly contributions to the fund. The privatization of GOCC can also be used to reconstruct roads
and other forms of infrastructure. The drawback is that poverty prevents all Filipinos from making a
monthly contribution. Economic progress and development have been hampered by poverty for many
years. Although privatization has the ability to raise productivity, spur investment, and foster market
competition, worries about job losses, rising costs, and potential monopolistic tendencies must be
addressed. Striking a balance between the advantages of privatization and preserving the public
interest requires effective regulation and control. To guarantee that privatization has a positive impact
on the economy and society as a whole, policymakers should carefully analyze the context,
objectives, and dangers that may be involved.
References
Alejo, A. (2019). A big boost to the Philippine economy. The Manila Times.
https://www.manilatimes.net/2019/06/28/supplements/a-big-boost-to-philippine-economy/575901
Aggarwal and Harper (2001). Privatization and Business Valuation in Transition Economies.
https://www.adb.org/sites/default/files/evaluation-document/35461/files/ses-public-sector.pd

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From the lessons on Global history, what will be the effects (positive and negative) of

privatizing Government Own and Controlled Corporation (GOCC) to our economy?

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