FIFTEENTH CONGRESS OF THE 
REPUBLIC OF THE PHILIPPINES 
First Regular Session 
) 
) 
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SENATE 
1375 
S.B. No. ___ _ 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
This bill seeks to institutionalize the 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. 
GOCC 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." 
E.O. No. 64 of 1993 expanded the definition to include "a corporation created by 
special law or incorporated an4 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 133 GOCCs 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 reveals that the poor financial condition of GOCCs studied 
arises from operational factors and inconsistent policy objectives of government. 
Most of the 14 GOCCs are mandated to provide services with social objectives, 
which result in losses. In these cases, government is obliged to subsidize their 
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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. 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 over 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 to which they are attached. 
This bill mandates all 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 
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 . 
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In view of the benefits that will be gained by the efficient operations of 
GOCCs, immediate passage of this bill is earnestly requested. 
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FIFTEENTH CONGRESS OF TUE 
) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATE 
1375 
S.B. No. ___ _ 
Introduced by Senator Loren Legarda 
AN ACT 
PROVIDING FOR A SYSTEMATIC AND PERIODIC REVIEW OF THE 
ECONOMY, EFFICIENCY AND VIABILITY OF GOVERNMENT-OWNED OR 
CONTROLLED CORPORATIONS AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in 
Congress assembled: 
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SECTION 1. Title. - This Act shall be known as the "Philippine Sunset Act of 
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2010." 
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SEC. 2. Declaration of Policy. - It is hereby declared the policy of the State to 
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promote economy and efficiency-of government-owned or controlled corporations 
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shall be subjected to the interest of the common good and the test of economic 
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viability. 
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Toward this end, the State, in order to promote private sector initiative, shall 
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only engage in business areas where private sector is not in participation, or when 
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the public good so requires. 
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SEC. 3. Definition of Terms. - For purposes of this Act: 
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a. "Sunset Review" shall refer to the systematic evaluation by Committees of the 
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Senate and the House of Representatives having legislative jurisdiction over 
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government-owned or controlled corporations to determine if the said 
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corporations merit continued government participation and/ or subsidy; 
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b. "Government-owned or Controlled Corporation" or subsequently referred to 
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as "GOCCs", shall refer to a stock or non-stock corporation, performing 
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governmental or proprietary functions directly chartered by special law or if 
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otherwise formed, is owr;ed 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 iI\ 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 as 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. 
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c." Acquire Asset Corporation" shall refer to a corporation which is: 
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1. Under private ownership, with at least the majority of its outstanding 
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capital stock: 
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(a) Conveyed 
to 
the 
government, 
or any 
of its 
agencies 
or 
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instrumentalities 
including 
government-owned 
or 
controlled 
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corporations, in satisfaction of debts whether by foreclosure or 
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otherwise; or 
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(b) Duly acqUired by the government through final judgment In 
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sequestration proceeding; or 
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2. 
Subsidiary of a gover,nment-owned or controlled corporation iormed 
exclusively to own and manage, or lease, or operate speCific physical 
assets acquired by a government financial institution in satisfaction of 
debts incurred therewith. 
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SEC. 4. Conduct of Review. - GOCCs shall be regularly subjected to a sunset 
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review by both the Committee~ of the Senate and the House of Representatives 
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having legislative jurisdiction over the said corporations, the interval between each 
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review to be not more than a period of five (5) years. 
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SEC. 5. Scope of Review. - The concerned committees of the Senate and of the 
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House of Representatives shall review the economy, efficiency and the need to 
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maintain the GOCCs using the following: 
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a. Their efficient allocation and use of investment resources made available to 
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them by the government; 
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b. Instances where there is needless duplication or overlap of functions with 
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other GOCCs; 
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c. Accomplishment of set goals for the GOCCs in case their charter provides for 
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such; 
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d. Financial and social investment returns and productivity; 
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e. Existence of private sector participation in the field of operation or industry; 
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and 
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f. 
The interest of the common good. 
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SEC. 6. Consolidated Recommendation. - The concerned committees of the 
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Senate and the House of Representatives, at the termination of their respective 
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sunset reviews, shall submit a consolidated recommendation to the Senate Finance 
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Committee and the House of Corpmittee on Appropriations for appropriate action. 
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SEC. 7. Possible Actions or Recommendation. - the concerned committees of 
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the Senate and the House of Representatives may recommend: 
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a. The continued existence of and the corresponding budgetary allocation for 
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the subject GOCC; 
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b. The termination of the existence of, or budget allocations for, the GOCC by 
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either privatizing the said subject GOCC or dissolving the said GOCC; and 
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c. Such other recommendation or course of action they may deem as necessary. 
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SEC. 8. DUty of Disclose. - GOCCs under sunset review shall be duty-bound 
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to disclose all pertinent information and make available all relevant documents to 
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the reviewing committees of Congress. 
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The officers and directors of the GOCC shall be primarily tasked to perform 
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all the necessary acts under this Section. Failure on their part to disclose all the 
pertinent iniormation required by the reviewing congressional committees, or any 
intentional attempt 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 any provision of this Act is declared invalid, 
the remainder of this Act or any provision not affected thereby shall remain in force 
and effect. 
SEC. 10. Repealing Clause. - All laws, presidential decrees, executive orders 
and their implementing rules, inconsistent with the provisions of this act are hereby 
repealed, amended 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 (15) days after its 
publication in at least two (2) newspapers of general circulation. 
Approved, 
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