FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
S E N A T E  
{\\:r(;f;l$/EU “r‘ : . 
S . B . N o . 1 0 8 6  
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
This bill seeks to institutionalize a systematic review and evaluation of 
government-owned-and-controlled corporations (GOCCs) to oversee their financial 
condition and ensure that they contribute to the progress of the country. 
GOCCs, as defined under Presidential Decree No. 2029, is “a stock or a non-stock 
corporation, whether performing governmental or proprietary functions, which is 
directly chartered by special law or, if organized under the general corporation law, is 
owned or controlled by the government directly or indirectly through a parent 
corporation or subsidiary corporation, the extent of at least a majority of its outstanding 
capital stock or of its outstanding voting capital stock.” EO No. 64 of 1993 expanded the 
definition as follows: ” ... a corporation created by special law or incorporated and 
organized under the Corporation Code and in which government, directly or indirectly, 
has ownership of the majority of the capital stock. 
In a paper done by the Senate Economic Planning Office (SEPO) on the profile of 
selected Philippine GOCCs released in 2006, there were a total of 133 GOCC as of June 
2004. Its consolidated total assets amounted to P4.5 trillion, which grew by 0.24 percent 
from the previous year while its total liabilities declined by 4.97 percent to P3.7 trillion 
during the same year from the P3.9 trillion balance in 2003. According to SEPO, studies 
have shown that public corporations generally perform poorly compared to private 
corporations. A World Bank (1995) study identified three reasons why GOCCs or state- 
owned enterprises (SOEs) perform poorly: 1.) No one has a clear stake in generating 
positive returns because there is no single identifiable owner since government can be 
the ministries, or parliament or the general public; 2.) Many SOEs have multiple or 
conflicting objectives. Government creates a corporation to address social objectives 
such as lowering the price of a socially-sensitive good, yet the corporation is expected to 
maximize returns; and 3. Access to subsidies, transfers and guaranteed loans create a 
moral hazard such that there is no incentive to be efficient since there is no threat of 
bankruptcy, 
The same paper satc! that the poor financial condition of the GOCCs studied 
arises from operational factors and inconsistent policy objectives of government. Most 
of the 14 GOCCs are mandateds to provide services with social objectives, which result 
in losses. In these cases, government is obliged to subsidize their operations. Likewise, 
some of the GOCCs’ operations require huge capital investments which government 
cannot afford given its budgetary constraints. The consequence is that there is heavy 
reliance on debt particularly on foreign loans. The high foreign debt exposure, in turn, 
makes these GOCCs vulnerable to foreign exchange and interest rate risks. Another 


factor is the moral hazard problem in the operations of GOCCs and their 
conduits/end). Many of the GOCCs have less incentive to perform efficiently because 
government guarantees their debt. In some instances, there is little restraint in 
spending. Finally, there is no single entity that exercises the ownership function of the 
state on the GOCCs. The rights and functions of the state as an owner are largely 
exercised through the department to which they are attached. The monitoring of the 
overall performance of GOCCs is also dispersed among the various departments in 
which they are attached. 
This bill mandates ail GOCCs to submit regularly to a sunset review by both the 
Committees of the Senate and the House of Representatives having legislative 
jurisdiction over the said corporations, the interval between each review to be not more 
than a period of five (5) years. Under this proposed measure, sunset review Aall refer 
to the systematic evaluation by Committees of the Senate and the House of 
Representatives having legislative jurisdiction over government-owned or controlled 
corporations to determine if the said corporations merit continued government 
participation and/or subsidy. 
In view of the benefits that will be gained for the efficient operations of GOCCs, 
immediate passage of this bill is earnestly requested. 
Senator 


FOURTEENTH CONGRESS OF THE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
Introduced by Senator Loren Legarda 
AN ACT 
PROVIDING FOR A SYSTEMATIC AND PERIODIC REVIEW OF THE ECONOMY, 
CORPORATIONS AND FOR OTHER PURPOSES 
EFFICIENCY AND VIABILITY OF GOVERNMENT-OWNED OR CONTROLLED 
Be it enacted by the Senate and House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Short Title. - This Act shall be known as the "Philippine Sunset Act 
of 2007". 
SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
promote economy and efficiency of government-owned or controlled corporations shall 
be subjected to the interest of the common good and the test of economic viability. 
Toward this end, the State, in order to promote private sector initiative, shall 
only engage in business areas where private sector is not in participation, or when the 
public good so requires. 
SEC. 3. Definition of Terms. - For purposes of this Act: 
(a) 
"Sunset Review" shall refer to the systematic evaluation by Committees of 
the Senate and the House of Representatives having legislative jurisdiction 
over government-owned or controlled corporations to determine if the 
said corporations merit continued government participation and/or 
subsidy; 
(b) 
"Government-owned or Controlled Corporation" or subsequently 
referred to as "GOCCs", shall refer to a stock or non-stock corporation, 
performing governmental or proprietary functions directly chartered by 
special law or if otherwise formed, is owned or controlled by 
the 
government directly or indirectly, through a parent corporation or 
subsidiary corporation to the extend of at least majority of its outstanding 
capital stock in the case of a stock corporation, or by being represented by 
at least the majority of its voting members, in the case of a non-stock 
corporation: Provided, that an acquired asset corporation cz defined 
hereunder shall not be considered a government -owned or controlled 
corporation. 


For purposes of this Act, a corporation created by special law and 
explicate intended for ultimate transfer to private ownership under certain 
specified conditions shall be considered a government -owned or 
controlled corporation until it is transferred to private ownership. 
For purposes of this Act, a corporation created by special law and 
explicate intended for ultimate transfer to private ownership under certain 
specified conditions shall be considered a government-owned or 
controlled corporation until it is transferred to private ownership. 
(c) ”Acquire Asset Corporation’’ shall refer to a corporation which is: 
(1) 
outstanding capital stock 
Under private ownership, with at least the majority of its 
(a) 
Conveyed to the government, or any of its agencies or 
instrumentalities including government-owned or controlled 
corporations, in satisfaction of debts whether by foreclosure or 
otherwise; or 
(b) 
sequestration proceeding; or 
(2) 
A Subsidiary of a government-owned or controlled corporation 
formed exclusively to own and manage, or lease, or operate specific 
physical assets acquired by a government financial institution in 
satisfaction of debts incurred therewith. 
Duly acquired by the government through final judgment in 
SEC. 4. Conduct of Review. - GOCCs shall be regularly subjected to a sunset 
review by both the Commitfees of the Senate and the House of RepresentatiT7,ps having 
legislative jurisdiction over the said corporations, the interval between each review to 
be not more than a period of five (5) years. 
SEC. 5. Scope of Review. - The concerned committees of the Senate and of the 
House of Representatives shall review the economy, efficiency and the need to maintain 
the GOCCs using the following: 
(a) Their efficient allocation and use of investment resources made available to 
them by the government; 
Instances where there is needless duplication or overlap of functions with 
other GOCCs; 
(c) Accomplishment of set goals for the GOCCs in case their charter provides for 
such; 
(d) Financial and social investment returns and productivity; 
(e) Existence of private sector participation in the field of operation or industry; 
(f) The interest of the common good. 
and 
SEC. 6. Consolidated Recommendation. - The concerned committees of the 
Senate and the House of Representatives, at the termination of their respective sunset 
reviews, shall submit a consolidated recommendation to the Senate Finance Committee 
and the House of Committee on Appropriations for appropriate action. 


SEC. 7. Possible Actions or Recommendation. - the concerned committees of the 
Senate and the House of Representatives may recommend: 
(a) The continued existence of and the corresponding budgetary allocation for 
the subject GOCC; 
(b) The termination of the existence of, or budget allocations for, the GOCC by 
either privatizing the said subject GOCC or dissolving the said GOCC; and 
(c) Such other recommendation or course of action they may deem as necessary. 
SEC. 8. Duty of Disclose. - GOCCs under sunset review shall be duty-bound to 
disclose all pertinent information and make available all relevant documents to the 
reviewing committees of Congress. 
The officers and directors of the GOCC shall be primarily tasked to perform all 
the necessary acts under this Section. Failure on their part to disclose all the pertinent 
information required by the reviewing congressional cammittees, or any international 
attenpt to delay the proceedings, for what ever purpose, shall subject such officers and 
directors to administrative, civil and criminal sanctions under existing laws. 
SEC. 9. Separability Clause. - if for any reason, any section or provision of this 
Act, or any portion thereof, is declared invalid or unconstitutional such parts not 
affected thereby shall remain in full force and effect. 
SEC. 10. Repealing Clause. - All laws, decrees, executive orders, rules and 
regulations that are inconsistent with this Act are hereby repealed or modified 
accordingly. 
For purposes of this Act, the Government Corporate Monitoring and 
Coordinating Committee, created under Executive Order No. 936 dated 26 February 
1984, reconstituted under Memorandum Circular No. 10 dated 19 may 1986, and 
strengthened under Executive Order No. 236 dated 22 July 1987, shall continue to 
exercise its powers and functions, and shall complement the congressional review 
mechanism created under this Act. 
SEC. 11. Effectivity. - This Act shall take effect fifteen (14) days after its 
publication in at least two (2) newspapers of general circulation. 
Approved,