The National Economic Development Authority (NEDA) has issued Guidelines and Procedures for Entering Into Joint Venture (JV) Agreements between Government and Private Entities. The Guidelines, which will take effect on May 2, 2008, were promulgated pursuant to the mandate given to NEDA under Section 8 of Executive Order No. 423, dated April 30, 2005.
The Guidelines apply to all government-owned and/or controlled corporations (GOCCs), government corporate entities (GCEs), government instrumentalities with corporate powers (GICPs), government financial institutions (GFIs) and state universities and colleges (SUCs) which are expressly authorized by law or their respective charters to enter into joint venture agreements. However, Local Government Units (LGUs) are not covered by the Guidelines, as well as transactions of government financial institutions (GFIs) in the ordinary course of business as part of their normal and ordinary banking, financial or portfolio management operations. Activities covered under the joint venture agreements must be directly related to the primary corporate purpose, mandate or charter of the government entity. More importantly, the joint venture should not crowd out private sector initiative in the particular industry.
Full freedom is accorded the government entity with respect to the extent and duration of its participation in the joint venture. The Guidelines expressly provide that there are to be no barriers for the government’s withdrawal of its contribution to the joint venture. In this regard, the mobility of government entities is enhanced and protected with respect to their participation in joint venture agreements entered into with the private sector. As such, the private sector is then allowed to completely take over the project once the government entity divests itself of its investment in the joint venture, setting it apart from the other modes of procurement, where control and ownership ultimately belongs to the government.
A win-win situation for all parties is envisioned under the Guidelines. On the one hand, the government entity enjoys the freedom to enter into such agreements to accomplish national development goals and objectives, at the same time enjoying returns on its investment, without being compelled to remain in such an arrangement (having full discretion when and if to divest itself of its participation in the same). On the part of the private entity, not only can it maximize its profits, it is also free to control the direction of the project upon the government entity’s withdrawal from the venture.
In formulating the Guidelines, the NEDA has taken into account the objectives of the administration to promote transparency in such transactions as well as to encourage the pooling of resources and expertise between the public and private sector. The passage and adoption of the Guidelines by the NEDA is expected to further a fruitful and viable collaboration between government and the private sector in the attainment of national development objectives.
Liza Michelle E. Ramos
SYCIP SALAZAR HERNANDEZ AND GATMAITAN
SSHG Law Centre, 105 Paseo de Roxas
Makati City, Manila, Philippines