Non-performing gocc

If there is one government-owned and controlled corporation (GOCC) that needs to be abolished, then it should be the Home Guaranty Corporation (HGC).

Reason: It is one of the worst performing GOCCs causing hemorrhage to the national coffer due to its massive losses.

The cash-strapped and graft-ridden agency tasked with guaranteeing mass housing projects has not been doing its job and is bleeding the government dry as reported by the Commission on Audit (COA).

COA has reported that HGC has incurred P13 billion in accumulated losses in the past years which the taxpayers end up paying. It should not be allowed to inflict more burden to Filipino taxpayers.

HGC has become redundant given that its functions are already performed by other government agencies and the private sector.

The primary role of the HGC is to provide risk coverage or guarantees to banks and financial institutions or investors granting housing development loan, credits and home financing, and this is where it failed.

There is now a move in Congress to investigate HGC  and to abolish it and transfer its functions to housing agencies such as the Home Development Mutual (Pag-Ibig) Fund and National Home Mortgage Finance Corp.

It has been pointed out by the COA itself that HGC’s years of mismanagement has put a strain in its finances that there is now serious doubt if it could still perform its functions.

In its 2012 report, the COA disclosed that HGC’s current liabilities of P16.86 billion exceeded its current assets of P3.43 billion or a working capital deficiency of P13.425 billion resulting in its inability to meet current maturing obligations to include, among others the redemption and settlement of guaranty calls on Zero Coupon Bonds floated from CY 2002 to CY 2006.

HGC officials should not have engaged in bond flotation in the first place to address its financial woes because aside from the risks it entailed, it was not authorized to engage in such endeavor.

I don’t think a government owned corporation engaged in guarantee coverage should engage in bond flotation because that would be putting government money in speculative activities which is wrong.

A resolution has been filed calling for the abolition of the HGC together with 19 other GOCCs which are either losing money or have redundant functions with other agencies, especially those that have been linked to the multibillion-peso pork barrel fund scam.

The Governance Commission on GOCCs (GCG) also disclosed recently that in the last quarter of 2013, President Aquino had approved the abolition of the National Agribusiness Corp. (NABCOR), Zamboanga del Norte Rubber Estate Corp. and Philippine Forest Corp., which were linked to the alleged misuse of the pork barrel or Priority Development Assistance Fund (PDAF), Human Settlements Development Corp. and Cottage Industry Technology Center.

The GCG has also recommended the abolition or privatization of another seven out of the 19 GOCCs cited in the Rodriguez bill. These are the Marawi Resort Hotel Inc., Philippine Aerospace Dev’t Corp., NDC-Philippine Infrastructure Corp., Batangas Land Co., Kamayan Realty Corp., GY Real Estate Inc. and Pinagkaisa Realty Corp.

The GCG has also recommended for abolition or privatization of five more GOCCs: the Alabang Sto. Tomas Development Inc., Tierra Factors Corp., Traffic Control Products Corp., DISC Contractors, and CDCP Farms Corp.

The other six GOCCs in the Rodriguez bill – Banaue Hotel and Youth Hostel, BCDA Management and Holdings Inc., Masaganang Sakahan Inc., Northern Foods Corp., Tourism Promotions Board (also called the Philippine Convention and Visitors Corp.) and Trade and Investment Development Corp. (now PhilEXIM) – are part of the GCG’s regular sector-wide evaluation of GOCCs.

Senate President Franklin Drilon said that there is no need for any congressional action to abolish non-performing GOCCs because there are already mechanisms in place to accomplish this. He said that the GCG is tasked to go over the performance of the state-owned corporations and to take appropriate action against those that are not performing well or are no longer relevant.

Still no Cat 1

According to the US Federal Aviation Administration’s International Aviation Safety Assessment (IASA) Program report dated March 7, 2014, the Philippines is still under Category 2, which means that it still does not meet standards of the International Civil Aviation Organization (ICAO). Other countries on Category 2 are Bangladesh, Barbados, Curacao, Ghana, India, Indonesia, Nicaragua, Serbia, Sint Maarten, and Uruguay.

This is bad news for our country’s air carriers, who for six years now, have been waiting eagerly for the promised upgrade back to Category 1 and have been promised by our government authorities that the upgrade is forthcoming.

Philippine Airlines (PAL) has been flying to the US but would like to fly to other routes including those from Manila to the East Coast. Cebu Pacific, which does not have flights to the US yet, has already ordered new planes that are ready to fly to the US as soon as the Philippines gets the upgrade.

The US FAA downgraded the Philippine civil aviation authority’s safety rating in 2008 upon the recommendation of the ICAO which found significant concerns over the ability of then Air Transportation Office (now CAAP) to meet international safety standards.

Under Category 2, Philippine air carriers cannot mount additional flights or launch new routes to the United States.

Last year, the ICAO gave the Philippines a thumbs up, which resulted in the European Union lifting its ban on Philippine carriers.

However, CAAP sources said that a recent audit conducted by the FAA showed that the CAAP still failed to pass all eight critical elements being monitored. The CAAP only needs to fail in one of the eight to retain on Category 2 status. The FAA review was conducted from January 20 to 24, 2014.

There are reports that the FAA will be back this month to do another audit of the CAAP.

According to our sources, the problem is still in the area of training of CAAP inspectors. Unfortunately, this needs funds which the CAAP does not have. And even if it has at this time, it cannot be sustained without the CAAP cutting corners somewhere, including closing down some provincial airports that it operates.

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