Directing the Abolition of the AFP-RSBS, Privatization of Its Subsidiaries, and for Other Purposes

April 8, 2016

MEMORANDUM ORDER NO. 90

DIRECTING THE ABOLITION OF THE ARMED FORCES OF THE PHILIPPINES-RETIREMENT AND SEPARATION BENEFITS SYSTEM (AFP-RSBS), PRIVATIZATION OF ITS SUBSIDIARIES, AND FOR OTHER PURPOSES

WHEREAS, Presidential Decree (PD) No. 361 (s. 1973) established the Armed Forces of the Philippines-Retirement and Separation Benefits System (AFP-RSBS) and gave it the mandate to provide a self-reliant funding scheme and continuous financial support to the AFP retirement system;

WHEREAS, in 2003, it was established by the Feliciano Commission Report that AFP-RSBS was "fundamentally flawed" and had not discharged its mandate;

WHEREAS, Executive Order (EO) No. 590 (s. 2006) and EO No. 590-A (s. 2007) were issued mandating the deactivation of AFP-RSBS, including its winding down and liquidation, but the same were not fully implemented;

WHEREAS, the interest liability of AFP-RSBS continues to grow and the GOCC now faces a depletion of its retained earnings by the end of November 2016;

WHEREAS, the pension and benefits of retired AFP personnel continue to be funded through the General Appropriations Act;

WHEREAS, Section 5 (a) of Republic Act (RA) No. 10149, otherwise known as the "GOCC Governance Act of 2011," empowers the GCG, in consultation with the department or agency to which a GOCC is attached, to determine whether a GOCC should be reorganized, merged, streamlined, abolished or privatized;

WHEREAS, the GCG finds the abolition of AFP-RSBS to be in the best interest of the State in order to improve national productivity and reduce ineffective and inefficient spending of public funds; and

WHEREAS, pursuant to Section 5 (a) (3) of RA No. 10149, the GCG recommended the abolition of AFP-RSBS, and upon approval of the President, GCG will implement such abolition unless another agency is otherwise designated.

NOW THEREFORE, the following are hereby ordered:

SECTION 1. Abolition of AFP-RSBS. — The AFP-RSBS is hereby abolished.

SECTION 2. Privatization of Subsidiaries. — Pursuant to the liquidation of AFP-RSBS's assets which includes its shares in its wholly-owned subsidiaries, namely, Monterossa Development Corp. (MDC) and Southern Utility Management and Services, Inc. (SUMSI), the privatization of said subsidiaries is hereby approved.

SECTION 3. Winding Down and Liquidation. — The AFP-RSBS Board shall act as a Board of Liquidators, subject to oversight by the Governance Commission, and is hereby directed to:

a. Cease collecting members' contributions and accrual of interest thereon upon the effectivity of this Order; AaCTcI

b. Maintain such number of personnel necessary to wind-down its corporate affairs and cease the hiring of new personnel unless first approved by the Governance Commission;

c. Collect all indebtedness due to the AFP-RSBS;

d. Continue a corporate operating budget for the purpose of the following:

1.) Continuation of leasing services, for the purpose of preservation of its assets;

2.) Collection of all indebtedness;

3.) Release of penalties to loans and inter-company receivables due to AFP-RSBS, provided it is not manifestly prejudicial to the government, and in compliance with existing auditing rules and regulations;

4.) Refund of AFP-RSBS members' contributions as they fall due; and

5.) Servicing of existing Membership Loan Programs;

e. For its Board of Trustees to act as Board of Liquidators, who shall recommend to the GCG dispositive actions for its subsidiaries and affiliates;

f. Enter contracts for the following purpose:

1. Sell all its real estate assets, such as, but not limited to, subdivision lots, house and lots, memorial lots, raw lands and all acquired assets in accordance with the existing internal policies of AFP-RSBS;

2. Sell its golf and country club shares, and all other personal properties;

3. Manage, preserve and maintain its buildings, facilities and equipment in line with the winding down activities;

4. Complete deliverables to subdivisions, and turn over completed subdivisions to LGUs and homeowners association; and

5. Maintenance and preservation of existing projects and properties, including security services, insurance, etc.

g. Pursue activities necessary to perfect the ownership of its real estate assets such as, but not limited to, Land Use Conversion, Comprehensive Agrarian Reform Program (CARP) Exemption, Reconveyance, Segregation, and Transfer of TCTs;

h. Continue, abrogate, and/or re-negotiate existing Joint Venture (JV) Agreements/Contracts, subject to the revised National Economic and Development Authority (NEDA) JV Guidelines; and

i. Maintain full power to sue and file complaints for the protection of the rights and interests of the corporation and engage the services of lawyers, accountants and other professionals, in accordance with existing laws, as may be necessary for the AFP-RSBS to protect its interest, wind-down its corporate affairs and carry out its mandate of preserving, managing and disposing its remaining assets.

 The foregoing are without prejudice to supplemental guidelines from the Governance Commission in implementing this Order.

SECTION 4. Separation Pay for Affected Personnel. — Affected officials and personnel of AFP-RSBS may avail the separation benefits below in addition to retirement or separation benefits allowed under existing laws:

 

Years in Service	Rates
First 20 years	1.00 x Basic Monthly Pay (BMP) x No. of years
20 years and 1 day to 30 years	1.25 x BMP x No. of years
30 years and 1 day and above	1.50 x BMP x No. of years

 

 

The payment of separation pay shall be sourced from its corporate funds.

SECTION 5. Creation of Technical Working Group. — To implement the provisions of this Order, the GCG shall be assisted by a Technical Working Group composed of representatives from the following departments, agencies, and GOCCs:

a. Department of National Defense (DND);

b. Department of Finance (DOF);

c. Department of Budget and Management (DBM);

d. Privatization Management Office (PMO);

e. AFP-Retirement and Separation Benefits System (AFP-RSBS); and

f. Armed Forces of the Philippines (AFP).

SECTION 6. Implementing Guidelines. — The Governance Commission shall issue such implementing rules and regulations as may be necessary to supplement this Order.

SECTION 7. Separability. — If any provision of this Order is declared invalid or unconstitutional, the other provisions not affected thereby shall remain valid and subsisting.

SECTION 8. Repeal. — All other orders, rules, regulations, and issuances or parts thereof which are inconsistent with this Order are hereby repealed or modified accordingly.

SECTION 9. Effectivity. — This Order shall take effect immediately.

DONE in the City of Manila, this 8th day of April, in the year of Our Lord, Two Thousand and Sixteen.