Federalism is not for the Philippines

Posted on October 24, 2016

THE IDEA of changing the union of the Filipino people into a federal form from its
present unitary form was brought about by a sentiment prevailing in a few regions of
the Philippines that the government is still too centralized. To dramatize this point, the
central government has been described in these sectors as Imperial Manila.
This condition of strong centralization was thought to have led to neglect of these regions by the central
government which, in turn, caused the slow economic growth and proliferation of poverty in their
geographical areas.

It is believed that this perceived unequal treatment may be solved by changing the country’s entire
political structure by transforming the existing provinces into bigger states through federalism. The key
element of this concept is to provide the designated states a high degree of autonomy.

Under usual arrangements under federalism, the state is responsible for its own infrastructure
development, industrial and agricultural development, school system, health services, police functions,
and many other government functions, including having a greater responsibility on economic
development. For its part, the central government will be responsible for national defense and security,
foreign affairs, and top level responsibility for economic development, including central banking. Through
the federal government institutions, the central government will provide the general direction to where the
country is going and establish uniform laws for the states to follow when these are needed.

To enable each state to perform its designated functions, an important principle in federalism is to give
the state its own fiscal authority where the state will impose and collect its own taxes, including those
coming from the use of natural resources situated in the state, and decide by itself how to allocate the
funds. Of course, the central government will need to have its own share of the taxes and therefore there
would be a sharing plan between the central government and the states. Under this arrangement, I think
it will be inevitable for the share of the central government to include a portion that it can distribute as
subsidies to some states as the existing economic development among the expected designated states
varies to a large extent. In other words, there will necessarily be rich states and poor states because the
geographical composition of each state has to be contiguous.

A SQUARE PEG IN A ROUND HOLE

Previously, I argued that federalism is not the solution to this problem of unequal economic development
owing to two important considerations.

The first one is that the federated countries in the world today are composed of previously independent or
autonomous states that agreed to form a federal union for a common cause, which was not economic, but
for either of forging collective defense against external threats or projection of power to external forces.
These federating states had been governing their respective states by themselves for generally hundreds
of years before they combined into a federation.

The Philippine case is starkly different -- the Philippines is already a unified country which is now being
proposed to be splintered into federal units, which still have to be organized and developed, for economic
reasons. This clearly opposite direction of movement alone -- forward for the currently existing federal
countries and reverse in the case of the Philippines will already give the readers ideas why federalism for
the Philippines cannot be a solution. I believe federalism for the Philippines is a step backward and will
just set all of us back for many years instead of moving the country forward. The issue is not about the
advantages of a federal form of government, as derived in theory or as actually experienced by federal
countries in the world today, the advantages of which I recognize. The issue to my mind is that federalism
and the Philippines do not fit together. It is that simple.

Within the presently existing federal countries, the autonomy enjoyed today by their constituent
federating states is a valuable right that they already possessed and practiced for a long time before
federation. In the case of the Philippines, such state autonomy will still have to be introduced, structured
and developed. These are two sharply contrasting cases.

To be more specific, I do not think that in the Philippine case, the newly introduced autonomous political
institutions in each designated Philippine state can develop more rapidly under a federal structure,
especially when the federal structure itself will be organized and developed from its predecessor unitary
government whose own state of political development is also weak and not competent and wanting in
many respects.

If the proponents of federalism expect that a newly designated Philippine state can function ably and
successfully and thereby achieve higher economic development within a reasonable time than it would
otherwise achieve under a unitary government, they need to sharpen their analysis a lot more before they
plunge the entire country into the unknown. Under existing Philippine political condition, installing
federalism is clearly putting a square peg in a round hole.

FEDERALISM: AN OVERKILL?
The second important consideration is that the present regional distribution of Philippine GDP is hugely
disproportional.

In 2014, the National Capital Region alone earned 36.3% of the total gross domestic product (GDP).

Together with Regions 3 and 4A, these three regions (let’s call them states) generated 62.8% of Philippine
economic output in 2014. In contrast, the population of these Philippine states constitute only 38.5% of
the Philippine total. Clearly, for the other designated Philippine states to be able to keep in step with the
three rich Philippine states, these other (poor) states will need a substantial amount of subsidies from the
rich states, coursed through the central government, for a long time or even permanently.

This inevitable situation by itself makes a lie of the expectation of the proponents of federalism that each
Philippine state can reasonably fend for itself.

Think about it. How can a poor state constituted in northeast Mindanao, which does not have much
sources of income, no matter how corporate income tax is allocated, can develop itself without substantial
subsidies? Impossible. One can try pairing poor states with non-contiguous rich states, but that does not
make sense. Besides, there are only a very few rich states to pair with. But more than these, who will
make the decision in doing the pairing? There will be other unfavorable major unknown consequences --
population shifts; conflicts between rich states and poor states; conflicts between the states and the
central government; and very likely many more, including possible secession by some states.

I want to draw attention to the fact that the problem of an Imperial Manila is not shared by most of the
regions in this country. These majority regions do not see a unitary government as the problem in
hindering economic development for the entire Philippines. And this is the picture I wish we Filipinos
should focus on.

By adopting federalism for the entire country, we are drawing the entire country into a solution to a
problem which is not felt by the whole country. On this basis, the solution being offered is an overkill. We
may be unwittingly taking the whole country to an untried path where there would be unknown dangers
and risks. Why don’t we just focus on finding an effective solution specific to where the problem is felt?
Or, provide much more decentralization to all provinces under a unitary government. We may be able to
find some solutions that will be much less disruptive and avoid forcing everyone to travel to the unknown.
I hope our public policy makers will ponder on these options.

Benjamin R. Punongbayan (ben.buklod@yahoo.com) is the founder of Punongbayan and Araullo, one of

the Philippines’ leading auditing firms. He is also chairman of Buklod, a national political party.