Political Law and Public International Law > XV. Law on Local Governments > A. Public Corporations > 1. Concept; Distinguished from Government-Owned or Controlled Corporations
I. Concept of Public Corporations
A public corporation refers to an entity created by law to perform a governmental function, typically within a specific local jurisdiction. The primary purpose of public corporations is to administer local affairs in a specific territory. They are vested with a measure of self-government, allowing them to handle local matters more efficiently than the national government.
In the Philippine setting, public corporations include local government units (LGUs) such as provinces, cities, municipalities, and barangays. These entities are established under the 1987 Constitution and the Local Government Code of 1991 (Republic Act No. 7160). They are considered public corporate bodies or municipal corporations as they carry out public functions, exercising delegated governmental powers.
Key characteristics of public corporations include:
Creation by Statute: Public corporations, especially LGUs, are created by legislative enactments, such as national laws or ordinances issued by competent legislative bodies (e.g., Congress or Sanggunians). Their existence depends on law, and their powers are clearly defined by law.
Territoriality: Public corporations have a clearly defined geographical territory where they exercise jurisdiction. LGUs, for example, have the authority to regulate, manage, and administer services within their respective territorial limits.
Autonomy: While still subject to national oversight, public corporations are granted local autonomy under Article X of the 1987 Constitution. They enjoy legislative, executive, and fiscal powers over their local affairs.
Public Service Orientation: Public corporations exist to serve public interests, particularly in the delivery of basic services such as education, health, infrastructure, and public safety. Unlike private corporations, their purpose is not profit generation.
II. Distinction from Government-Owned or Controlled Corporations (GOCCs)
A Government-Owned or Controlled Corporation (GOCC) refers to a corporation created by special law or organized under the general corporation law in which the government has either full or partial ownership. The primary purpose of GOCCs is typically commercial or business-oriented, although some may also perform public service functions.
While both public corporations and GOCCs are governmental entities, there are significant differences between the two:
1. Creation and Basis of Existence
- Public Corporations (LGUs) are created directly by law (Constitution, Local Government Code, or special legislation). They are created as territorial subdivisions of the State to provide localized governmental services.
- GOCCs may be created by a special charter (e.g., Philippine Amusement and Gaming Corporation [PAGCOR] or the Government Service Insurance System [GSIS]) or incorporated under general corporate law (e.g., Philippine National Oil Company [PNOC]). Their establishment is primarily driven by economic or business needs.
2. Nature of Functions
- Public Corporations primarily perform governmental or public functions, such as the regulation of land use, provision of local services, and enforcement of local laws. Their focus is the public welfare within their territorial jurisdiction.
- GOCCs, on the other hand, are often created to engage in commercial or business activities, such as providing utilities (e.g., National Power Corporation [NPC]), conducting insurance services (e.g., GSIS), or engaging in strategic industries (e.g., PNOC). Some GOCCs also perform proprietary functions, where profit-making is a primary goal, although they may be subject to certain public service mandates.
3. Autonomy and Supervision
Public Corporations are granted local autonomy under the Constitution and the Local Government Code. This means they have the power to legislate local laws (ordinances), levy taxes, and control their local affairs with minimal interference from the national government, subject to general supervision. For instance, the Department of the Interior and Local Government (DILG) exercises general oversight but cannot intervene in purely local matters unless there is a violation of law.
GOCCs are subject to the direct control or supervision of the national government. Many GOCCs report to a line department (e.g., National Electrification Administration [NEA] under the Department of Energy) or to a regulatory body (e.g., Governance Commission for GOCCs or GCG). The national government exerts greater control over the operations of GOCCs than it does over LGUs.
4. Revenue and Funding
Public Corporations generally derive their revenues from local taxes, fees, and charges (e.g., real property taxes, business taxes), as well as their share of the Internal Revenue Allotment (IRA) from the national government. Public corporations do not operate to generate profit but to provide essential public services.
GOCCs generate revenue through the sale of goods and services or by engaging in business activities. GOCCs are expected to be self-sustaining or profit-oriented, and many of them remit a portion of their earnings to the national treasury, depending on their profitability.
5. Legal Personality
Public Corporations (LGUs) possess a dual character as governmental and corporate entities. In their governmental capacity, they enact ordinances, impose taxes, and maintain public order. In their corporate capacity, they may engage in proprietary functions, such as operating markets or water utilities, but these are incidental to their primary role as local governments.
GOCCs have a purely corporate identity, even though they may serve public interests. They are governed by corporate laws (e.g., Corporation Code or their own charters) and can enter into contracts, acquire properties, sue, and be sued, much like private corporations.
6. Examples of Public Corporations vs. GOCCs
- Public Corporations: Province of Cebu, City of Manila, Municipality of Kalibo, Barangay Ayala Alabang.
- GOCCs: Philippine National Railways (PNR), Social Security System (SSS), Land Bank of the Philippines, Philippine Postal Corporation (PHLPost).
III. Summary of Key Differences
| Aspect | Public Corporations (LGUs) | GOCCs |
|---|---|---|
| Creation | Created by law (Constitution, Local Government Code) | Created by special law or under general corporate law |
| Purpose | Perform governmental functions in a defined territory | Engage in business activities for profit or public service |
| Function | Primarily public service-oriented (local governance) | Primarily proprietary or commercial functions |
| Autonomy | Granted local autonomy, subject to general supervision | Under direct control or supervision of the national government |
| Revenue Source | Local taxes, fees, Internal Revenue Allotment (IRA) | Income from commercial activities |
| Examples | Provinces, Cities, Municipalities, Barangays | PAGCOR, GSIS, NPC, Landbank, SSS |
IV. Constitutional and Legal Framework
Constitutional Provisions: The 1987 Philippine Constitution provides the basis for the existence and governance of both public corporations and GOCCs. Notably, Article X of the Constitution grants local autonomy to public corporations, emphasizing the decentralization of governance. Article XII discusses the regulation of GOCCs, particularly in areas of economic activity and public service.
Local Government Code of 1991 (Republic Act No. 7160): This law is the primary legal framework governing public corporations (LGUs). It outlines the powers, functions, and responsibilities of LGUs, including their ability to legislate ordinances, levy taxes, and manage local resources.
Governing Laws for GOCCs: GOCCs are regulated by various statutes, including their individual charters and Republic Act No. 10149, the GOCC Governance Act of 2011, which establishes the Governance Commission for GOCCs (GCG) as the central oversight body for all GOCCs. This ensures that GOCCs adhere to good governance practices, are efficient in delivering services, and contribute to national development goals.
V. Conclusion
The distinction between public corporations and GOCCs is rooted in their creation, function, and the degree of autonomy they enjoy. Public corporations are primarily tasked with providing public services within a defined territory, while GOCCs operate under a business model, often serving proprietary functions. Understanding these differences is crucial for navigating the complexities of public administration and governance in the Philippines.