GOCCs post 19% hike in 2021 net profit

MANILA, Philippines —  State-run firms grew their net income to almost P325 billion in 2021, nearing the pre-pandemic level of around P343 billion as they begin to normalize their operations.

In a report, the Department of Finance said   government-owned and controlled corporations (GOCCs) improved their profit before tax by 19 percent to P324.63 billion in 2021 from P273.66 billion in 2020.

Finance Assistant Secretary Soledad Emilia Cruz said last year’s net income   was near   the pre-pandemic level of P342.89 billion in 2019.

However, based on the new standards in accounting practices,  Cruz said that GOCCs incurred a net loss of   P703.59 billion in 2021, double the   P346.54 billion net loss reported a year earlier.

State-owned firms were told by the Department of Finance to adopt the Philippine Financial Reporting Standards (PFRS) 4.

In particular, government insurers began to use the PFRS 4 in computing their finances. Under the PFRS 4, firms are required to create a reserve pool to pay for both actual and future claims of their members.

Prior to adjusting to PFRS 4, state insurers only post a liability when a contributor gets a benefit, recording all premiums and fees collected from members as income.

Cruz said the adoption of PFRS 4 only shows the compliance of GOCCs to global standards in accounting practices in line with the government policy to promote transparency.

Cruz said the 31 largest GOCCs expanded their assets by seven percent to P10 trillion in 2021 from P9.37 trillion in 2020, as they also grew their liabilities by nine percent to P16.22 billion from P14.89 billion.

The finance official attributed the improvement in GOCC performance to operational recoveries in the Power Sector Assets and Liabilities Management Corp., Philippine Charity Sweepstakes Office, Civil Aviation Authority of the Philippines, among others. Government insurers, including the Government Service Insurance System, also shored up their financial output.

On the other hand, Cruz said emergency actions taken in response to the pandemic bloated the liabilities of GOCCs. For instance, the Philippine Health Insurance Corp. and the Social Security System were active in shouldering the hospitalization of members who contracted COVID.

In 2020, the 31 largest GOCCs combined for a total of P9.37 trillion in assets, representing about half of the economy as measured by  gross domestic product.

Moving forward, Cruz said the government expects state-run firms to sustain their contribution in financing not only pandemic measures, but also mitigation programs, such as the fuel subsidies for vulnerable sectors hit by oil price hikes.