WHY ESTABLISH SOCIO-ECONOMIC ENTERPRISES?
The establishment of socio-economic enterprises is governed by a policy outlined under sections 15 and 22 of the Local Government Code (LGC) “the need to exercise the authority and power of Local Government Unit (LGU) as a corporation to achieve its goals.”
However, before any government division/department can be converted into a socio-economic enterprise unit, a well-researched feasibility study shall be conducted. The well-documented study shall be submitted to the City Council and adequate and thorough study shall be done before passing and ratifying an Ordinance of the conversion. Naturally, several public hearings shall be convened with the attendance of all stakeholders to deliberate on the study
The proposed enterprise unit must have a clear vision, mission, goals and objectives formulated in short and long-term strategic management plans.
After ascertaining the viability of the department as an economic enterprise, short-term and long-term operating plans should be formulated to include the following objectives;
- An implementing form to support the long term LGU sustainable development plans supported by national and local policies.
- Management structure and practices according to well researched business plan using a performance based approach
- Ensure less subsidy from the LGU and generate profit from its operations to contribute to LGU revenue generation
- Guarantee equitable delivery of products and services will increase the access of marginalized groups to local services such as utilities, markets
- Play a major role in the LGU economic development and promotion of Local Small and Medium Enterprises
- The present structure and practices of socio-economic enterprises need to be re-engineered by shifting strategic operations from the supply-driven to demand-driven approach.
In order to be efficient, it becomes necessary to unfasten the SEEU’s from the LGU’s mainstream bureaucracy. Simply put, SEEUs should have its own accounting, auditing and administrative system since to remain in the LGU bureaucracy restricts and impedes the capacity and capability of the SEEU’s as “drivers” of economic growth and development. Correspondingly, the City/Municipal Council should ensure that the revenues generated shall accrue to the SEEUs without passing through the general fund.
It is worthwhile mentioning that aside from the bona fide SEEUs there exists “pseudo-economic enterprises” in most LGU’s – those that are partly subsidized by the LGU budget where most generate revenues on a break-even basis.
The idea behind the establishment of local socio-economic enterprises is not specifically about "running the government like a private business." Rather, it is about applying business-like management perspectives, principles, and practices in the government sector. It is a generally accepted fact that operations management in private enterprises spur effectiveness in the attainment of its corporate goals, that is maximizing profits. For this reason, it becomes imperative for the government bureaucracy to embrace the synergy in a hybrid management system, albeit for a different motive which is to improve efficiency in public services.
The basic consideration in formulating major operating policies is the conduct of SEEU’s as financial investments rather than regular public services and as such should be operated as engines and drivers of economic development rather than just political obligation and administrative responsibility.
A public economic enterprise should be "managed" exactly like a private enterprise, however while a private commercial enterprise aims at profit maximization, a public economic enterprise aims at boosting efficiency of public services with full cost recovery and satisfactory profit. Unlike in private enterprises where profits are distributed to stockholders, public economic enterprises utilize profits to respond adequately to the demand of the community. After this, excess profits then are reverted to the LGU’s general revenue to help in funding for other basic public services.
Public economic enterprises shall be managed by competent and responsible individuals with strong leadership and proven managerial skills and experience. This requirement has become a problem in most LGU’s in the Philippines because of the prevalent government organizational culture based on the “Padrino“ system. Most observers believed that many, if not most, of the LGU’s staff are less qualified and less capable as a result of the practice of “political accommodation” in the employment of permanent government employees, most notably in the LGU’s.
Establishment of socio-economic enterprises in LGU’s may not be considered as a panacea to the bureaucratic intricacies of a political government, but if properly managed, they can adequately improve the overall efficiency of the delivery of basic public services, a mandate of public governance.