CPBRD POLICY B RIEF

CONGRESSIONAL POLICY AND BUDGET RESEARCH DEPARTMENT

JULY 2011

NO. 2011-6

FINANCIAL EVALUATION
OF GOVERNMENT CORPORATIONS*
Stocktaking of financial performance by the public sector has become more relevant in the light
of recent controversies involving Government-Owned and Controlled Corporations (GOCCs).
Reports of unconscionable expenses, extravagant compensation package for executives/staff,
and large subsidies to losing corporations have drawn much flak especially at a time when the
national government is back on the deficit track.1 Under the new administration where prudence
and operational efficiency are critical in achieving optimal spending2, GOCCs are very much
challenged to prove their worth and existence.
The recently approved GOCC Governance Act (RA 10149) seeks to strengthen the role of the
State in promoting financial viability and fiscal discipline among GOCCs and in making them
more responsive to the needs of the people. Under the law, the newly-created Governance
Commission for GOCCs or GCG, among other things, is tasked to conduct periodic study,
evaluation and assessment of the performance of GOCCs and require reports on their
operations and management including, but not limited to asset and finance management
functions which aim to determine their relevance. Further, GOCC officers are required to apply
sound business principles to ensure the financial soundness of the corporation.
Performance assessment among GOCCs is a daunting task as it requires not only substantial
time/ resources but also a certain level of expertise to generate a comprehensive and objective
report on their accomplishments (or non-accomplishments). The size of the sector is another
factor that renders the performance evaluation of all existing GOCCs in the country difficult. As
of December 2009, there are 659 GOCCs, 485 or 73.6% of which are local water districts. Thus,
fiscal performance monitoring in the past has been confined to 14 major corporations whose
financial position would have significant impact on public sector borrowing requirement. 3

Prepared by Shimz R. Manaois-Battung in consultation with Director Dina de Jesus-Pasagui and CPBRD OIC Director General
Romulo Emmanuel Miral, Jr. The views, opinions, and interpretations in this report do not necessarily reflect the views of the House of
Representatives as an institution or its individual members.

1 In 2007, the government almost balanced the budget primarily due to revenue gains from the RVAT. The ensuing years saw
deterioration in governments tax effort resulting from tax policies whose main intentions were to grant tax relief to individuals and
corporations to further encourage productivity. Moreover, there are existing measures that have yet to be corrected such as redundant
fiscal incentives and non-indexation of excise taxes to inflation. Governments efforts to pump-prime the economy and provide social
safety nets following the financial crisis in 2008 also weighed down on the fiscal position.
2
By convention optimal spending would mean benefiting as much people as possible at least costs and minimal losses/wastage.
3
The 14 monitored GOCCs include the Home Guaranty Corporation, Light Rail Transit Authority, Local Water Utilities
Administration, Metropolitan Waterworks and Sewerage System, National Development Company, National Electrification
Administration, National Food Authority, National Housing Authority, National Irrigation Administration, National Power
Corporation, Philippine Economic Zone Authority, Philippine National Oil Company, Philippine National Railways, and Ports
Authority.

This paper, which focuses on the financial performance of GOCCs, is organized as follows: the
first part discusses the nature of GOCCs and the rationale for performance assessment; the second
part describes commonly-used financial ratios while the third part presents a comparative analysis
of GOCC financial performance across time. For the analysis portion, financial data of
corporations belonging to public utilities, area development and regulatory sector (Cluster B)
covering the period 2007 to 2009 as presented in the Annual Financial Report of the
Commission on Audit (COA) were used.

NATURE OF GOCCS
State-owned enterprises (SOEs) around the world are mostly resource-constrained, financially
and physically, yet they are called upon by their governments to deliver better services to more
people at lower prices [ADB 2007]. Likewise in the Philippines, government-owned-andcontrolled corporations (GOCCs) face a dual burden i.e. that of providing goods and services
at reasonable price, while raising their own revenues to finance operating expenses and leave a
reasonable income/profit, if possible.
In general, government corporations exist for the following reasons:

Natural monopolies. Goods and services that are considered natural monopolies e.g. water
services, electricity, mass transportation require very huge capital that competition among
different players may not be possible. And when there is only one provider of
good/service, chances are that prices would be uncontrollably high. Moreover,
monopoly breeds inefficiency since the incentives to improve, innovate, diversify and
economize are absent. GOCCs are a means by which the government can intervene
when the market fails.

Protection of the disadvantaged, vulnerable and poor. The poor cannot compete fairly in a free
market due to resource constraints, thus GOCCs are created to provide certain
goods/services at socially optimal prices (e.g. rice, housing, healthcare services, etc.).

Socio-economic growth and development. Due to their profit-maximizing nature, private firms
cannot be relied upon to engage in projects (e.g. irrigation, road network, education, etc.)
which have widespread externalities or socio-economic impact. GOCCs are therefore
necessary to fill in the gaps left by the private sector. They help stabilize the economy
through the exercise of their supervisory, regulatory and police functions.

However, the existence of too many GOCCs has several drawbacks. One, GOCCs tend to crowd
out private enterprises since the former are given preferential access to credit because of
government guarantees. GOCCs can also under-price their services, unlike private corporations
which are mostly profit-oriented. Two, GOCCs provide low returns on investments, especially
those with social mandates. Lesser pressure is also placed on these corporations since the
national government subsidizes a large part of GOCC operations and capital investments. And
three, they create opportunity cost i.e. foregone resources in terms of tax exemptions and
government subsidies to losing corporations could have been channelled to high-yield
investments instead.

ASSESSING GOCC PERFORMANCE

Existing literature provide substantial resources / references for performance evaluation of stateowned corporations. Measures of performance may vary by country and by income, depending
on the availability of or access to data / information. Typical measures would include financial
ratios, economic returns and social impact. A more comprehensive evaluation of performance
requires a combination of all measures, including a review of corporate structure, systems and
processes, internal control measures, etc.
Given the dual nature of GOCCs - public service and profit-maximization using just one type
of performance measure would naturally result to biases. But due to the number of corporations
involved and the complexity/diversity of their operations, it would be difficult to undertake an
holistic much less regular performance review of the entire public corporate sector. Thus, this
paper will only focus on the business/financial side of GOCCs, i.e. temporarily setting aside the
socio-economic impact. Since GOCCs are designed to be operationally independent, their
financial condition is crucial for the following reasons: (a) it determines the viability and
eventually capacity of GOCCs to respond to their societal goals, (b) it affects operating
performance and the quality of their services and most importantly, (c) it impacts on the fiscal
position of the national government. On the positive side, earning GOCCs are required to pay
dividends4 while losing corporations are a drain to state resources in terms of subsidy, advances,
additional equity infusion and at times even bail-out or debt absorption.
FINANCIAL RATIOS
There are conventional financial analysis techniques/tools that may be used to measure
performance. In particular, the balance sheet and income statement 5 present a picture of
GOCC profitability and stability. Basic information that may be derived from the balance sheet
includes the size and growth of assets, liabilities and capital while the income statement gives an idea
on the sources of income, cost-efficiency and profitability of an organization.
Financial ratios or mathematical relationships among assets, liabilities, income and equity - may be used to
benchmark GOCC operations. The financial ratios that are most relevant to GOCCs are the
current ratio, return on assets (ROA), return on investment (ROI), debt-worth ratio, debt-toasset ratio and personal services expenditures-to-income ratio.
The current ratio derived by dividing total current assets by total current liabilities measures
a corporations liquidity or financial strength (see Table 1). It provides information on whether
the current assets of a corporation will be able to pay its current liabilities as scheduled with a
margin of safety. Hence, the number of times current assets exceed current liabilities is a valuable
expression of a business or a corporations fund adequacy or solvency. For instance, a
corporation with a current ratio of two (2) means that for every thousand liabilities it owes, its
assets are capable of paying these liabilities two times without putting its daily operations at
financial risk. Too high current ratios however are also not desirable as this could mean that a
corporation does not utilize its cash optimally. Optimal use of cash could mean investment in
activities with potential high yields (e.g. purchase of equipment, land properties, etc.). As a rule
of thumb, current ratio should be equal to 2 or better.
4

Under RA 7656, GOCCs are obliged to remit at least 50% of their annual earnings as cash, stock or property dividends to the
national government. Exempted from this rule are those that are in the business of administering real or personal properties or funds
held in trust for the use/benefit of their members e.g. GSIS, HDMF, ECC, OWWA, PMCC.
The balance sheet shows the state of a going concern as of a certain period while the income statement shows the financial operation
during a specific timeframe.

Return on assets (ROA) is derived by dividing net income by total assets. It determines a
companys level of efficiency in resource management as well as asset strength. A high ROA
suggests efficient management of assets while a low ROA suggests inefficient management.
Box 1. Financial Statement Accounts
Assets are items of commercial values which are owned by a particular GOCC. They are
generally classified into current, long-term and other assets. Current assets are those that
are easily convertible into cash within one operating cycle - normally one year. They are
usually listed in the order of their liquidity, e.g. cash, receivables, inventories, prepayments,
and short-term investments.
Long-term assets are those that are not easily convertible to cash, e.g. plant, property and
equipment, land and land improvements, buildings and structures, etc. Other assets may
consist of patents, other intangibles, deferred charges and capitalized losses6.
Liabilities represent the claim of creditors over the assets of the GOCC. Current liabilities
are obligations that are payable within the year, e.g. due from regular suppliers, payroll
liabilities, unpaid taxes, unpaid utilities, etc. Conversely, long-term liabilities are those
whose settlement extends beyond the year of operation e.g. notes payable, mortgage,
bonds and loans.
Equity is the owners share in the assets of the GOCC; it is also referred to as the net
worth or the value of its assets less its liabilities. If GOCC assets are greater than its
liabilities (A>L), the GOCC is said to have a positive equity. But when liabilities exceed
assets (A<L), the GOCC has a negative equity. Variables like share capital, retained
earnings, donated capital and surplus reserves are among the variables that affect
government equity.
GOCC income consists of business and service income, gains and premiums, proceeds from
the sale of assets and other income. Like other government agencies, GOCCs engage in
the provision of public goods/ services except that the latter charge user fees usually at
subsidized cost. The ability of a GOCC to put a price on goods/services determines its
capacity to generate revenues, pay for maintenance costs and service its debts.

ROAs differ by industry. Some corporations may require higher assets (asset-intensive) resulting
in lower ROAs while corporations engaged in industries that require lower assets (asset-light)
may have relatively higher ROAs. Various accounting textbooks apply the general rule that
anything below 5% is more asset-intensive (e.g. infrastructure businesses like railroads and
telecommunications, or manufacturing industry that requires specialized and expensive machineries and equipment)
and anything above 20% is less asset-intensive (software companies, advertising firms or industries that do
not heavily rely on expensive equipment). In terms of interpretation, a corporation with a 20% ROA
means that it could generate 0.20 centavos of profits for every P1 worth of asset.
Owing to their dual role of societal obligation and profit maximization, GOCCs have to recover
cost without jeopardizing public welfare. Intuitively, GOCCs that impose fees and charges
should post high ROA while those in the socio-civic activities or those with missionary
functions/mandates would have lower returns. While academic literature does not suggest any
6

These are losses which are not charged against current income/revenue. In the 1990s, heavy losses in operations by the old Central
Bank were capitalized i.e. temporarily parked under asset section and to be credited against future incomes. Later, these capitalized
losses (assets) were transferred to the national government in exchange for equity infusion (capital) to the new Bangko Sentral ng
Pilipinas (BSP).

standard or ideal ratio for bad or good ROA, this measure can be used to compare similar
industries.

Return on investment (ROI) is considered one of the best measures of a companys

profitability. ROI is derived by getting the ratio of net income to owners equity/net worth. This
ratio is an indication of the worthiness of the investments put into the company or business. A
very low ROI suggests either poor management performance or a highly conservative business
approach. A very high ROI on the other hand indicates that the company either manages the
business well or is undercapitalized. A rule of thumb is that around 10% to 14% of ROI is
needed in order to fund future growth.
TABLE 1
DEFINITIONS AND USES OF FINANCIAL RATIOS

Ratio

Derivation

Purpose

Rule of Thumb

Current Ratio

Total Current Assets

divided by
Total Current Liabilities

Measures liquidity or
financial strength

Return on Assets
(ROA)

Net Income
divided by
Total Assets

Measures level of
efficiency in resource
management

no ideal/standard ratio but

can be used to compare
similar industries/GOCCs

Return on
Investment (ROI)

Net Income
divided by
Owners equity/Net Worth

Measures profitability

10% to 14% is needed to

fund future growth

Debt/Worth Ratio

Total Liabilities
divided by
Owners Equity/Net Worth

Measures solvency

0.5 - 0.8
i.e. debt should be
between 50% to 80% of
equity.

Debt Ratio

Total Assets
divided by
Total Liabilities

Measures the extent of

reliance on debt

no standard ratio but 1

indicates bankruptcy

The debt/worth ratio (or leverage ratio) measures a corporations solvency, i.e. how dependent
a business is on debt financing (or borrowings) vis--vis owner's equity. This ratio is computed
by dividing total liabilities by net worth/equity. It indicates how much of a corporations
business is owned and how much is borrowed (a debt/worth ratio of 2 means that for every peso of
shareholders funds, the corporation owes two pesos to its creditors). This ratio focuses on a corporations
ability to meet its long-term debt obligations such as bonds.
For instance, if the liabilities of the corporation exceed its equity or net worth, then its creditors
have more stake in the business than the shareowners. In other words, the higher the ratio, the
greater the risks a corporations creditors assume while the lower the ratio, the greater the longterm financial safety for the corporation. In addition, corporations with low debt/worth ratio are
more likely to have greater borrowing flexibility in the future while corporations with high
debt/worth ratio are more likely to experience business/economic risk and have a greater
propensity to default on their debt. A rule of thumb is that debt/worth ratio should be between
0.5 and 0.8, i.e. debt should be between 50% and 80% of equity for a corporation to be
considered solvent.
Another measure of financial leverage is the debt-to- asset ratio (or simply debt ratio) which
indicates the extent of GOCC reliance on debt. Expressed as debt divided by asset, this ratio
measures how much of a corporations capital is financed by borrowing. A debt ratio greater
than one (1) means that its equity or net worth is negative, indicating bankruptcy.

Given that all GOCCs are required to submit financial statements to the Commission on Audit,
these documents (as audited by the resident auditor and published in the Annual Financial
Report) may be used to test the performance of major GOCCs over time, i.e. three to five years.
FINANCIAL PERFORMANCE (GOCCS IN CLUSTER B)
GOCCs are grouped according to their functions and activities. Cluster A GOCCs are those
responsible for the formulation and implementation of policies in the areas of money, banking
and credit towards the promotion of balanced and sustainable economic growth. Cluster B mainly
consists of public utilities corporations and those in charge of industrial and area development
and other regulatory functions. These GOCCs are responsible for ensuring adequate and
affordable supply of oil, energy, water, housing as well as efficient transportation and postal
services, among others. Cluster C GOCCs are those that are accountable for the promotion and
development of policies and implementation of projects related to agriculture, trade, science and
socio-cultural and civic activities.
On average, total assets of GOCCs belonging to Cluster B make up about 8% of the countrys
gross domestic product from 2007 to 2009. In terms of impact on national government
resources, GOCCs under Cluster B received the largest subsidy totalling P18.49 billion during
the same period. This amount is three times higher than the subsidy given to Cluster A
(banking, finance and insurance) and 60% higher than that extended to Cluster C (agriculture,
trade, science, socio-cultural and civic activities). Further, Cluster B GOCCs that ran deficits in
all these years recorded a total of P34.5 billion, more than thrice lower than the total deficit
posted by Cluster A GOCCs and 34% lower than that recorded by Cluster C GOCCs.

Asset Accumulation.

Out of 44 to 56 corporations which submitted audited financial

statements, the BCDA, PPA, MWSS, LRTA, Water Districts, SBMA, NHA, PRA, MIAA and
NEA have consistently been at the top ten (10) in terms of total assets (see Table 2). Almost all
except NEA and MWSS registered increases in assets ranging from P520 million to P16.7 billion
between 2007 and 2009.
TABLE 2
TOP TEN [CLUSTER B] GOCCS BY TOTAL ASSETS
(IN MILLION PESOS)
GOCCs

2007

2008

2009

Amount

Rank

Amount

Rank

Amount

Rank

BCDA

98,669.36

102,587.40

115,420.20

PPA

90,694.38

91,958.88

93,652.95

MWSS

60,447.48

57,832.32

56,119.97

LRTA

46,349.30

51,176.35

53,299.01

Water Dist

30,824.45

36,336.69

40,398.10

SBMA

29,557.13

29,289.06

30,393.18

NHA

29,454.28

33,859.60

37,221.84

PRA

29,030.44

29,744.06

30,740.14

MIAA

26,406.94

26,997.04

26,926.63

NEA

18,008.52

10

19,456.70

10

17,698.71

10

Source of Basic Data: COA Annual Financial Report (AFR) for GOCCs, various years

As shown in Table 3, the bottom ten GOCCs by total assets vary due to late submission or nonsubmission of financial reports to COA.7 Consistently listed among asset-light corporations are
7

2008 and 2009 figures are based on the 2009 COA AFR whereas 2007 figures are derived from the 2008 COA AFR.

NSLC, GYREI, TABASCO, PRC, NSW, NTFC and PMPC. The other GOCCs that went to
the bottom 10 in 2007 are NPCTI, KRC and PDMC. Meanwhile, IIGSI, FCIEI and LINSI
were among the GOCCs that had the lowest asset values in 2008 and 2009.
Of all the GOCCs whose asset data are comparable across time, only three NSLC, TABASCO,
PMPC- posted increases, albeit minimally, of less than one percent to three percent. In nominal
terms, asset growth ranged from P37,000 to P392 million. The rest of the GOCCs registered
decreases in assets of between P75,000 to P300 million.
TABLE 3
BOTTOM TEN [CLUSTER B] GOCCS
BY TOTAL ASSETS, IN MILLION PESOS
GOCC

2007

2008

2009

NSLC

13.00

13.21

13.39

GYREI

9.65

9.70

9.69

TABASCO

8.21

8.29

8.39

NSW

2.82

2.77

2.72

PRC

2.85

2.64

2.62

NTFC

2.29

2.15

1.99

PMPC

0.66

0.68

0.70

PDMC

0.66

KRC

11.85

NPCTI

18.38

IIGSI

17.41

14.70

FCIEI

13.33

13.22

LINSI

2.37

2.29

Source of Basic Data: COA AFR for GOCCs, various years

Accumulation of Liabilities. The LRTA, BCDA, MWSS, NEA, Water Districts, PRA, PPA,

LWUA and SBMA were found to have the largest amount of indebtedness during the period
2007-2009 (see Table 4). The liabilities of these GOCCs have grown from P172.7 billion in 2007
to P226.5 billion in 2009 or approximately an increase of 30%. On average, the total liabilities of
these GOCCs alone comprise around 78% of total liabilities of all GOCCs in Cluster B.
TABLE 4
TOP TEN [CLUSTER B] GOCCS BY TOTAL LIABILITIES
(IN MILLION PESOS)
GOCCs

2007

2008

2009

Amount

Rank

Amount

Rank

Amount

Rank

LRTA

44,141.15

60,827.36

64,422.25

BCDA

24,889.07

36,716.35

42,503.24

MWSS

20,772.66

23,873.74

21,884.73

NEA

17,971.83

18,666.78

16,527.95

Water Dist

16,476.22

19,899.66

21,423.19

PRA

14,967.49

14,574.35

17,863.13

PPA

11,695.84

15,144.13

16,087.50

LWUA

11,654.87

11,207.50

10

11,809.44

10

SBMA

10,149.79

12,519.33

13,934.54

MIAA

8,437.76

10
12,969.24

14,671.06

NORTHRAIL

Source of Basic Data: COA AFR for GOCCs, various years

Northrail was included among the top ten GOCCs with large amount of liabilities - at P13 billion
and P14.7 billion in 2008 and 2009, respectively. MIAA which placed 10th in 2007 moved down
to 11th slot the following year. From 2007 to 2009 the Authority's total debt rose by P1.2 billion
increased by about 15%.
The GOCCs with least financial liabilities from 2007 to 2009 include NSW, PMPC, TABASCO,
PRC, GYREI and ASADI (see Table 5). On average, the combined liabilities of these six (6)
corporations amounted to P4 million which is a very meager share (0.002%) in total GOCC
liabilities of the entire sector. Further comparison with other GOCCs posting small amounts of
liabilities (MRHI, PDMC, PEATC, BLCI, NPIC, PDGCC and MGC) cannot be made due to
limited data/non-submission of financial statements.
TABLE 5
BOTTOM TEN [CLUSTER B] GOCCS
BY TOTAL LIABILITIES, IN MILLION PESOS
GOCC

2007

2008

2009

NSW

2.43

2.44

2.46

PMPC

1.53

1.55

1.56

TABASCO

0.12

0.14

0.15

PRC

0.08

0.14

0.07

GYREI

0.07

0.05

0.05

ASADI

0.01

0.36

0.12

Source of Basic Data: COA AFR for GOCCs, various years

Equity Accumulation. Table 6 presents the equity of top ten corporations which on average,

constitute 92% of total equity of all GOCCs belonging to Cluster B. This could either mean:
(a) NG subscription or capital payments to these GOCCs are high, or (b) they have significant
retained earnings or accumulated profits from prior years operations.

TABLE 6
TOP TEN [CLUSTER B] GOCCS BY EQUITY
(IN MILLION PESOS)
2007
GOCC

2008

2009

Amount

Rank

Amount

Rank

Amount

Rank

PPA

78,998.55

76,814.74

77,565.45

BCDA

73,780.29

65,871.09

72,916.98

MWSS

39,674.83

33,958.59

34,235.24

NHA

22,125.36

26,403.78

28,377.01

SBMA

19,407.34

16,769.73

16,458.63

MIAA

17,969.18

17,044.80

17,261.30

Water Districts

14,348.24

16,437.03

18,974.90

PRA

14,062.96

15,169.71

12,877.01

PNOC-EC

6,748.20

9,802.24

10,003.39

LWUA

5,332.48

10

5,567.91

10

5,809.62

10

Source of Basic Data: COA Annual Financial Report for GOCCs, various years

On the other hand, there are about nine (9) GOCCs that posted negative equity during the
period 2007-2009 (see Table 7). From P601 million in 2007, equity deficiencies of these GOCCs
8

worsened to almost a billion in 2009. Equity goes down or decreases when assets decrease
assuming that liabilities remain constant or unchanged. If the value of assets is unchanged and
liabilities increase/exceed assets, then equity likewise goes down/turns negative. A number of
circumstances may cause equity to decrease or turn negative including but not limited to
operational losses, decrease in assets and increased borrowing.
TABLE 7
[CLUSTER B] GOCCS WITH EQUITY DEFICIENCIES
(IN MILLION PESOS)
GOCC

2007

2008

2009

PDA

-354.12

-387.16

-593.95

BTPI

-143.44

-223.17

-298.88

NPCTI

-57.79

-57.41

-56.97

NSLC

-12.17

-4.59

-4.39

NTFC

-32.74

-32.89

-33.04

PMPC

-0.86

-0.87

-0.86

PDMC

-0.86

IIGSI

-56.76

-59.15

LINSI

-9.85

-9.96

Source of Basic Data: COA AFR for GOCCs, various years

Current Ratio. Most of the GOCCs that underwent COA review from 2007 to 2009 obtained

a current ratio of two or better i.e. 24 out of 44 GOCCs (54.6%) in 2007; 39 out of 56 (69.6%)
in 2008; and 36 out of 54 (66.7%) in 2009. Thus, it may be construed that more than half of the
corporations involved in public utilities can meet their near-term operating needs sufficiently. A
caveat, however, is that this measure should not be taken as the single determinant of financial
performance as some GOCCs with high current ratios failed to generate net income before
subsidy (see Table 8).
While these corporations may be able to pay their short-term obligations on time, they could also
face the risk of not growing the business that is, assets are not translated into long-term
revenue or income. For instance, ASDI, NSW, NTFC, PEATC, ZCSEZA have consistently
reported high current ratios while incurring net loss of about P100,000 to as much as P66
million. By contrast, some GOCCs posted surpluses despite low current ratio - as in the case of
PHILSUCOR, PPMC, NDC and PPA.

Return on Assets.

Listed in the upper portion of Table 9 are the GOCCs which are
considered asset-intensive or those that require high assets resulting in low ROAs (less than 5%).
In 2007, 23 out of 44 GOCCs or 52.3% posted net income after tax and before subsidy of
between P1,000 to P2.7 billion even as their assets ranged from P700 million to P93.7 billion. A
lesser proportion of GOCCs 19 out of 56 or 33.9% - registered low ROAs in 2008 only
because some corporations were not included in COA AFR for the year specifically (BCDA,
CEZA, LRTA, MWSS MIAA, PPA, etc.). For 2009, 25 out of 54 (46.3%) earned income of
P2,000 to about P1 billion but posted ROAs of less than 5%.
Among the GOCCs with ROAs greater than 5%, the NSLC and PNOC-EC stand out with
57.4% and 22.8% return on assets, respectively in 2008. This suggests that PNOC-EC was
better at converting its investments in 2008 than in 2007 and 2009. On the other hand, NSLC
while posting a high ROA of 57.4% in 2008, its record in 2007 and 2009 were actually below 5%.
In the case of water districts, the ROA during the period averaged 4.7%. This means that for
every P100 worth of asset, water districts are only able to generate around P5 profit.

Unfortunately, a large number of GOCCs under this cluster registered negative income during
the period. In 2007, 15 corporations representing 34% of total were in the red while 50% (28)
and 39% (21) of Cluster B GOCCs similarly posted revenue losses in 2008 and 2009,
respectively.
TABLE 8
CURRENT RATIOS AND NET INCOME (LOSS) BEFORE SUBSIDY OF CLUSTER B GOCCS
(IN MILLION PESOS)
2007
GOCC

Current Ratio

2008
Net Income
Before
Subsidy

Losing GOCCs with current ratio greater than two (2)

ASDI
3,960.80
-2.66

Current
Ratio

2009

Net Income
Before
Subsidy

Current
Ratio

Net Income
Before
Subsidy

2,300.39

-1.63

104.99

-1.95

BCDA

2.85

-6,692.94

CEZA

8.92

-118.59

CIAC

4.60

-52.53

FCIEI

3.37

-0.12

JHMC
LINSI

26.31

-0.11

MRHI
MWSS
NHA

2.77
5.24

NORTHRAIL

3.38

-0.10

2.32

-14.23

21.84

-0.11

3.17

-2.15

-3,553.49

-803.77
10.02

-819.81

NPIC

2.72

-4.78

23.92

-6.78

NSW

94.10

-0.01

61.51

-0.07

45.35

-0.07

NTFC

43.92

-0.32

41.10

-0.15

43.16

-0.15

PADC

2.42

-5.08

2.60

-4.49

40.36

-15.07

PAFC
PEATC

68.99

-1.59

2.72

0.00

SPDA

32.12

-58.31

27.19

-54.80

6.88

-68.66

10.28

-52.10

0.81

184.84

6.48

-1.43

-13.78
-149.33

PRC
ZCSEZA

65.26

2.48
68.14

-66.42

Earning GOCCs with current ratio of less than one (1)

CPA
0.94
203.51
LLDA

0.94

LRTA

0.95

29.89
35.83

NDC

0.55

417.27

0.80

209.76

PHILSUCOR

0.28

185.04

0.28

32.10

PPA
PPMC

0.51

5.62

0.13

PSTC

0.35

0.28

219.54

0.97

2,082.70

0.10

2.36

0.95

18.44

Source of Basic Data: COA Annual Financial Report for GOCCs, various years

Return on Investment. Government corporations with ROI ranging between 10% and 14%

are considered good performers and are assured of future growth. From 2007 to 2009, PEZA,
PNOC-EC and PRA have constantly posted ROIs within the ideal range, albeit at a decelerating
rate (see Table 10). Others that registered good return on investment are KRC, PDGCC and
Philsucor (for 2008-2009), FSC and JHMC (2008) and NDC (2007). GOCCs that were
considered profitable during the period, i.e. high ROIs with positive earned a profit averaging
P6.2 billion.

Debt/Worth Ratio. As explained earlier, corporations whose debt-to-net worth ratio is within

50% to 80% are considered financially viable. Based on COA report, at least 70% of all GOCCs
had positive net income with debt ratio/worth ratios falling below 80% (see Table 11). Those that
10

were not found to be in good standing - i.e. debt/worth exceeding 80% - include LRTA, LWUA,
NDC, Northrail, PNOC-EC and Water Districts.
TABLE 9
RETURN ON ASSETS OF CLUSTER B GOCCS
(IN PERCENT)
2007

2008

2009

Asset-Intensive GOCCs, with net income>0 and ROA<5%

BCDA

1.58

BLCI

0.24

0.76

1.04

BMHI

1.24

2.36

0.59

CDC

2.07

4.35

1.83

CEZA

2.51

CPA

2.80

2.43

GYREI

1.71

0.75

JHMC

1.72

LLDA

0.77

2.37

LRTA

0.05

LWUA

0.73

2.20

MCIAA

4.81

4.43

MGC

1.86

MIAA

4.69

MRHI

4.91

MWSS

3.47

NDC

4.07

0.71
2.01
0.14
1.06
2.15

NPIC
NSLC

0.87
2.75

NORTHRAIL
2.24

0.39

1.66

NHA
NPCTI

0.65

0.04
2.38
1.80

4.52

1.53

PAFC

0.06

PDMC
PHILSUCOR

3.80

PMPC

0.15

PNL

2.91

2.73

0.64

4.06
0.29

3.86

3.20

PPA

2.98

1.64

PPMC

1.15

0.19

PRC

2.46

PSTC
TABASCO

1.43

Water Districts

2.44
1.66

1.38

0.86

1.00

3.68

4.89

GOCCs with net income>0and ROA>5%

JHMC

16.45

KRC
LLDA

5.68
5.81

13.75
6.91

MCIAA

5.63

NSLC

57.39

PDGCC

11.00

9.97

PEZA

14.19

6.39

6.95

PNOC-EC

13.70

22.79

13.32

PRA

5.98

9.10

5.03

Water Districts

5.38

Source of Basic Data: COA AFR for GOCCs, various years

11

TABLE 10
GOCCS WITH POSITIVE (>) NET INCOME AND EQUITY
BY ROI, IN PERCENT
GOCC

2007

2008

BCDA

2.12

0.85

BLCI

0.25

BMHI

1.84

3.31

0.85

CDC

3.07

7.81

3.33

CEZA

2.95

CPA

2.99

FSC

2009

1.08

0.82
2.58
22.74

GYREI

1.72

0.76

JHMC

2.19

20.74

KRC

0.65

16.01

19.24

3.04

8.20

2.31

6.62

1.20

5.04

4.68

5.88

1.87

0.87

LLDA

8.45

LRTA

1.10

LWUA
MCIAA
MGC
MIAA

6.90

MRHI

5.40

MWSS

5.29

NDC

19.47

NHA

4.30
1.79
1.17
7.97
0.18

NORTHRAIL

0.05
73.71

NPIC

1.87

PDGCC

12.27

PDMC

10.74

3.94

3.68

10.21

11.45

PHILSUCOR

23.89

61.70

PNL

4.11

3.39

31.16

17.98

PEZA

23.15

PNOC-EC

26.21

PPA

3.43

1.98

PPMC

6.76

1.93

PRA

12.34

PRC

2.53

PSTC

17.84

12.01
2.51

7.03

5.44

TABASCO

1.45

0.87

1.02

Water district

11.57

8.13

10.42

PAFC

0.08

Source of Basic Data: COA AFR for GOCCs, various years

Table 11 also presents that at least four GOCCs, while posting positive net income, also incurred
negative debt/worth ratio during the period because their liabilities exceeded their assets. The
net earnings of NSLC during the period ranged from P200,000 to P7.6 million while PMPC and
NPCTI net income averaged P100,000 and P500,000, respectively. Philsucor had negative
debt/worth ratio due to equity deficiency in 2007 but its debt/worth remained extremely high in
the next two years. Recurring negative net worth accompanied by weakening profits over the
years could be a sign of concern for these GOCCs.
What is more worrisome, however, is that there are losing GOCCs (net income<0) which have
exceptionally high debt/worth ratio, i.e. more than 80%. Based on COA reports, the NEA and
NSW had constantly topped the list of GOCCs with high debt / worth ratios and negative net
12

TABLE 11
DEBT/WORTH RATIO OF EARNING [CLUSTER B] GOCCS (IN PERCENT)
2007

2008

2009

GOCCs with net income>0 and debt/worth ratio<80%

BCDA

33.73

BLCI

3.46

12.08

3.78

BMHI

48.52

40.30

45.13

CDC

48.44

79.74

CEZA

17.65

CPA

6.86

EXPOCORP

6.45
5.92
12.39

12.39

GYREI

0.72

0.51

0.56

JHMC

27.01

26.09

LLDA

45.41

27.97

18.70

MCIAA

4.93

5.71

4.33

0.50

0.46

KRC

39.95

MGC
MIAA

46.96

MRHI

9.99

MWSS

52.36

NHA

55.99
8.17
63.92
28.24

NPIC

31.17
4.28

PAFC

20.00

PDGCC

11.48

7.73

PDMC

35.63

34.79

59.94

64.76

6.40

6.20

36.73

34.97

PEZA

63.11

PNL
PNOC-EC
PPA

14.81

PRC

3.04

TABASCO

1.48

20.74
2.78
1.66

1.82

GOCC with net income>0 and debt/worth ratio > 80%

CDC

82.15

FSC

125.68

KRC

181.71

LRTA

1999.01

LWUA

218.56

201.29

NDC

378.60

296.27

NORTHRAIL

6832.81

PHILSUCOR

3626.25

PNOC-EC
PPMC

91.27
486.22

PRA

106.43

PSTC
Water Districts

205.31

114.83

1419.82
921.69

96.08

138.72

324.30

294.37

121.07

112.90

GOCC with net income>0 and negative debt/worth ratio (<0)

PMPC

-176.71

NSLC

-206.83

-387.50

-180.65
-405.08

NPCTI

-131.80

-132.69

-133.69

PHILSUCOR

-35143.89

Source of Basic Data: COA Annual Financial Report for GOCCs, various years

earnings (see Table 12). During the period, NEAs losses ranged from P171 million to P2.4 billion
while that of NSW was around P5,000 to P66,000. On the other hand, reported liabilities for
NEA and NSW averaged P17.7 billion and P2.4 billion, respectively.
13

The twin problem of negative net worth and negative equity could be a serious concern as this
indicates near bankruptcy for these GOCCs. This scenario likewise suggests that assets lose their
values, hence, losing their capacity to be transformed into profits.
Around eight (8) struggling GOCCs had exceedingly high negative debt worth ratios during the
period. In particular, LRTAs negative debt/worth ratio average was -604.7 while its losses
ranged from P1.1 million to P12.4 million. The CIAC debt/worth ratio averaged -473.3 while
that of PDA was at -253.5. In terms of profitability, CIAC posted net losses of between P53.1
million to P126.7 million while PDA lost from a range of P22.8 million to P48.4 million
TABLE 12
LOSING [CLUSTER B] GOCCS
WITH HIGH AND/OR NEGATIVE DEBT/WORTH RATIO
2007

2008

2009

2363.10

1411.72

GOCC with net income<0 and debt/worth ratio > 80%

FSC

141.68

KRC

164.97

NDC

430.31

NEA

51809.93

NORTHRAIL
NSW

22976.37
609.30

PPMC

746.48

942.53

1041.46

SBMA

84.66

GOCC with net income<0 and negative debt/worth ratio

LRTA

-630.27

-579.17

CIAC

-561.03

-385.53

PDA
BTPI

-254.69

-174.55

-142.04

PDA

-274.82

-291.66

-194.07

NTFC

-107.00

-106.53

-106.03

LINSI

-124.05

-123.02

IIGSI

-130.67

-124.85

PMPC

-178.61

Source of Basic Data: COA Annual Financial Report for GOCCs, various years

Debt-to-Asset Ratio
Simply called debt ratio, this indicator measures the extent of reliance on debt such that a
percentage higher than one (1) indicates negative equity or possible bankruptcy. Table 13 lists the
six (6) GOCCs which may be considered as technically bankrupt (i.e. BTPI, NPCTI, NSLC,
NTFC, PDA, and PMPC) and yet they continue to operate. From 2007 to 2009, the combined
equity of these GOCCs worsened from -P601million to -P988 million.
Among the highly-indebted government corporations, two agencies relied heavily on national
government subsidy. The LRTA received P783.7 million while PDA got P47.5 million in total
assistance during the period.

14

TABLE 13
[CLUSTER B] GOCCS BY DEBT RATIO, 2007-2009
GOCC

2007

2008

2009

BTPI

1.65

2.34

3.38

NPCTI

4.14

4.06

3.97

NSLC

1.94

1.35

1.33

NTFC

15.29

16.32

17.58

PDA

1.57

1.52

2.06

PMPC

2.30

2.27

2.24

PDMC

2.30

PHILSUCOR

1.00

CIAC

1.22

1.35

IIGSI

4.26

5.02

LINSI

5.16

5.34

LRTA

1.19

1.21

Source of Basic Data: COA AFR for GOCCs, various years

In addition to the 12 GOCCs listed above, about 20% of the remaining GOCCs have average
debt ratios greater than 0.6. This means that many GOCCs are still at risk and that their
continued operation could mean any of the following: (a) equity infusion; (b) outright financial
assistance or subsidy; (c) advances; and (d) bail-out. Obviously, all of these options put a strain
on NG position.
SUMMARY
Government corporations have dual roles: (1) they are mandated to fulfill societal goals through
the provision of public goods and services including policy formulation, project implementation
and missionary functions, and (2) they are expected to be financially-viable and self-reliant, i.e.
finance their internal operations, produce income surplus and remit dividends to the national
government.
A holistic study on GOCCs would normally cover financial analysis, socio-economic impact
evaluation and organizational/systems review. Due to time and resource limitation, this paper
focused on the financial aspects of public corporations belonging to Cluster B or those involved
in transportation, telecommunications, power/electrification, area development, etc. The paper
provides a glimpse on their liquidity, solvency, profitability, efficiency in resource management
and reliance on debt. This method of analysis could be used to analyze GOCCs Cluster A
(financial) and Cluster C (agriculture, trade, socio-cultural activities, etc). Better yet, combined
quantitative (financial and economic returns) and qualitative (governance factors) could be
undertaken to obtain a more comprehensive or complete picture of GOCC performance.
The financial position of each GOCC is crucial in gauging its financial viability a necessary
condition for continued operation and quality of public service delivery. In a country like the
Philippines which is characterized by shallow capital markets and very modest market
competition, the role of GOCCs will continuosly be important. Hence, there is a need to ensure
that the resources being spent on state enterprises will not undermine the governments overall
fiscal condition.
To improve GOCC performance, it is essential that oversight agencies, i.e. Congress, COA,
DBM and the newly-created Governance Commission for GOCCs (RA 10149) maintain a close
watch on these corporations.
15

LIST OF ACRONYMS

BMHI

Alabang-Sto. Tomas Development,

Incorporated
Bases Conversion Development
Authority
Batangas Land Company, Incorporated
BCDA Management and Holdings,
Incorporated

BTPI
CDC

Bataan Technology Park, Inc.

Clark Development Corporation

NSLC
NSW

CEZA

Cagayan Economic Zone Authority

NTFC

CIAC
CPA

PADC
PAFC

EXPOCORP

Clark International Airport Corporation

Cebu Port Authority
Philippine Centennial Expo 98'
Corporation

FCIEI

First Cavite Industrial Estate Inc.

PDGCC

FSC
GYREI
IIGSI
JHMC

Freeport Services Corporation

GY Realty Estate, Inc.
Inter-Island Gas Services, Inc.
John Hay Management Corporation

PDMC
PEATC
PEZA
PHILSUCOR

KRC
LINSI
LLDA
LRTA
LWUA

PMPC
PNL
PNOC-EC
PPA
PRA

MCIAA

Kamayan Realty Corporation

Luzon Integrated Services, Inc.
Laguna Lake Development Authority
Light Rail Tansit Authority
Local Water Utilities Administration
Mactan Cebu International Airport
Authority

MGC

Manila Gas Corporation

PSTC

MIAA
MRHI

SPDA
SRA

MWSS

Manila International Airport Authority

Marawi Resort Hotels, Inc.
Metropolitan Waterworks and Sewerage
System

NDC

National Development Company

TABASCO
Water
Districts

NEA
NHA

National Electrification Administration

National Housing Authority

ZCSEZA
PPMC

ASDI
BCDA
BLCI

NORTHRAIL

North Luzon Railway Corporation

NPC
NPCTI

National Power Corporation

National Precision Cutting Tools, Inc.
NDC-Philippine Infrastructure
Corporation
National Stevedoring and Lighterage
Corporation
National Slipways Corporation
National Trucking and Forwarding
Corporation
Philippine Aerospace Development
Corporation
PNOC Alternative Fuels Corporation

NPIC

PDA

PRC

Partido Development Administration

Palacio del Gobernador Condominium
Corporation
PNOC Development and Management
Corporation
PEA Tollway Corporation
Philippine Economic Zone Authority
Philippine Sugar Corporation
PNOC Malampaya Production
Corporation
Philippine National Lines
PNOC Exploration Corporation
Philippine Ports Authority
Philippine Reclamation Authority
Pinagkaisa Realty Corporation
PNOC Shipping and Transport
Corporation
Southern Philippines Development
Authority
Sugar Regulatory Administration
Tacoma Bay Shipping Corporation
Water Districts
Zamboanga City Special Economic Zone
Authority
Poro Point Management Corporation

16