How does the Philippines monitor hundreds of state corporations?

It’s hard not to spend money with the Philippines Government. You could borrow money from the United Coconut Planters Bank, purchase crop insurance, stay in the Marawi resort hotel and visit the Duty Free Philippines Corporation - all without giving a penny to the private sector.

State-owned companies are a big chunk of the economy, but are overseen by a fairly small agency - the GCG. Tech plays a key role in helping this team monitor performance, clamp down on corruption, and track salary costs.

GovInsider caught up with Roy Mordeno, Head of ICT group of the GCG, to find out more.

Using data to track performance

When GCG started in 2011 there were 158 state-owned companies, Mordeno says, but there were only 20 officials monitoring them.

Gradually, the agency hired more staff and built IT systems, but it still faced a crucial challenge: changing the culture of state-owned companies. These companies have existed before GCG was formed, “so they practically have their own cultures”, he says.

Being a “new oversight body, it’s really hard to influence them with regards to organisational traditions or how they do things”.

The agency set up a central monitoring system to start tracking their performance. “These [companies] come to our office and they target what they intend to do for the coming year”. GCG’s corporate governance officers also conduct regular audit checks on these companies, measuring their targets on submitted reports.

If state businesses, like the massive monopoly sugar corporation, fail to meet their performance targets, “they will not be eligible for performance bonuses”, Mordeno says. “We have a reward system going on”.

This holds for both staff members and its board of directors. His agency also has the power to recommend under-performing entities to shut down operations.

In three years, the country has abolished more than 20 state-owned firms, saving the government around P1.3 billion (US$ 28 million), Business Inquirer reports.

What’s next?

The Philippine government still plans to cut down its corporations to a number of 90 by 2017, according to PhilStar. As of April this year there are currently 108 state-owned companies.

Besides performance, the central government also shuts down state-backed businesses for other factors. Some organisations are set up to serve a role within a limited timeframe, and once time elapses, they will have to cease their operations, Mordeno says.

Also, “if our corporate governance officers see that their operations are no longer relevant or no longer operating the way that they were mandated to, they will be recommended to the President for abolition”, he adds.

Government-owned businesses primarily play a commercial function in the country’s economy. However, some firms regulate the industry and conduct businesses at the same time.

“You cannot really have a regulatory and a commercial function because you cannot actually regulate yourself”, Mordeno explains, pointing out that, “there’s something wrong with the way it will operate”. His agency is now setting out to privatise these companies.

The regulatory power “will be taken over by another national government agency which has a related function to it”, he says.

Offering higher wages

GCG must also ensure competitive salaries for staff working in goverment-backed enterprises to attract and retain more talent.

“We hope to replicate the Singapore model where the best and the brightest opt to work in state-owned corporations”, said Cesar L. Villanueva, Chairman of GCG last year.

The agency set out a standard compensation framework to ensure transparency, preventing extra bonuses from being issued.

GCG worked with a private company to gather “comprehensive” data on salary matches compared to the private sector and neighbouring countries, Mordeno says.

Now that they have this benchmark, these companies can “improve their performance” and exceed their set expectations, he adds.

Whistle-blowing for the greater good

Since 2008, Philippines has seen an overall decline in corruption. It ranked 95th out of 186 countries in 2015 in a corruption index ran by Transparency International, 10 ranks lower than the year before.

To plug all gaps and boost transparency further, GCG set up a whistle-blowing portal to gather feedback from everyone: citizens, state-owned companies’ employees and government agencies.

People can submit reports on fraud, corruption and unusual transactions with attached evidence to the channel. Mordeno highlights that this can serve two functions.

First, the agency can check if the firms are carrying out their mandate, and employees are “doing their jobs with proper accountability”.

Secondly, “it is one way of checking whether there is conflict of interest in how they deal with their own businesses”. To ensure the confidentiality of complaints, only a specially-trained unit within the agency can read these complaints, Mordeno says.

All these files have a period of storage, and will be deleted once they are resolved, he adds.

Making sense of pooled data

Mordeno hopes that his agency can conduct Big Data analysis on data related to state-owned enterprises. He believes that such findings can be shared to the public so they can have a greater appreciation of the firms’ contribution to the economy.

To that extent, his team built a portal that pools information on business operations, finances and management. Findings on the site show that total assets of government-backed businesses increased from P5.2 trillion (US$112 billion) in 2012 to P5.7 trillion (US$123 Billion) in 2013.

Meanwhile, total liabilities rose by 13.6% from P2.8 trillion (US$ 60 billion) in 2012 to P3.2 trillion (US$ 69 billion) in the following year.

The number of state-owned companies is slowly shrinking, but big challenges remain. Mordeno continues using tech to track problems, monitor performance, and tackle everything in between. Image by Brian Evans, licensed under CC BY-ND 2.0