Federalism is not a solution

First of two parts

The concept of Federalism has recently been getting special attention in Philippine political circles. Judging by the constant talk about it, it appears our elected officials are determined to push efforts to adopt a form of Federalism through Constitutional amendment as the new basis of the political and economic union of the Filipino people.

As early as 2009, however, when I organized a national political party called Buklod, I have taken the view that Federalism is not a solution to the country’s economic and political problems. As I indicated in the “Objectives and Beliefs” of Buklod, Federalism is, in fact, a step backward.

I believe that this idea of Federalism gained traction as a consequence of feelings of frustration about the failure of past governments and elected leaders to lift the country to a high level of economic development that it deserves, and of desperation in the fruitless search for a solution that works. Federalism is now seen as the solution. But I am afraid it is not and I beg to disagree. I am convinced, in fact, that its adoption will only prolong the economic hardships of a large number of our people who find themselves stuck in poverty.

My position against Federalism as the solution is anchored on two broad factors which I will now discuss, setting aside less significant details for the time being. These two factors are, one, the incompatible condition of the present political and economic setting from where the proposed Federalism will rise and, two, the huge complexity of the resource allocation that its successful implementation will entail.

The advocates of Federalism must, of course, clearly define the form of Federalism that they wish to put in place. However, that is not important at the moment for purposes of this paper. Suffice it to say that in its economic form, the Federal subdivisions or states will have a greater authority in deriving their respective revenue than the present provinces have and each Federal subdivision has sole authority in deciding where to spend such revenue. There will therefore be a clear dividing line between the fiscal authority of the central government and the fiscal authority of the Federal subdivisions. In effect, through their powers of deriving and allocating revenue, in theory, the states will have a strong influence in shaping the respective economic development of the people within their geographical jurisdiction.

As to political form, there could be a few options. References could be made from the existing countries in the world that have a Federal form of political union. But the important consideration, I suppose, is choosing the political structure that can best deliver the desired economic prosperity while maintaining – even improving, hopefully – the freedom of the people in each state.

A motion in reverse direction
Regarding the first factor, I believe that the introduction of Federalism in the Philippines is a motion in reverse direction as compared to the forward motion pursued by the currently federated countries in the world today. These federated countries are composed of previously independent or autonomous/semi-autonomous entities that had existed for many years before they decided to form a political union to pursue a common cause. Good examples are the Federal Republic of Germany and the United States of America.

The states comprising the present Federal Republic of Germany used to be independent states which were component parts of a loose confederation, the Holy Roman Empire, until this was disbanded by Napoleon in early 19thcentury but was succeeded by another loose German Confederation after Napoleon’s fall. These independent states had existed for hundreds of years and had even fought each other under various alliances. The present Federal Republic has its origin from a unification drive taken under the leadership of Prussia, with Bismarck pushing it, after a successful war against Austria in 1866. In sum, a new German Federation (now excluding Austria), which subsequently became the German Empire in 1871, was formed through Prussian conquest of a few German states and peaceful accession to the Federation by the other German states.

The 13 colonies that first formed the United States of America were political units independent of each other and each one was governed under the British crown and government across the Atlantic. Many of them, if not all, existed for more than a hundred years before they found a common cause to form a then loose confederation to fight the British army for their independence. After the revolutionary war ended in 1788, these states came to realize that the loose confederation did not work well and adopted a constitution that became the basic political instrument of the United States. The birth pangs of this new Republic were not easy to deal with and there were continuous substantive issues between these states and the Central Government, as well as among the states themselves, which culminated in the horrible Civil War of 1861.

There is, of course, another example near our own doorstep, Malaysia. The present Peninsular Malaysia was already a Federation, consisting of nine sultanates and Penang and Malacca, when it was granted independence by Great Britain in 1957. Earlier, right after World War II, Great Britain established the Malayan Union putting together all these states to form a single colony and stripping the sultans of their sovereignty. This move was strongly resisted by the Malays and the British gave in by organizing the Federation of Malaya, with the role of the sultans restored in some form. This Federal form of government became a convenient structure when Malaysia was created in 1963 to include the separate British colonies of Singapore, Sabah and Sarawak. Singapore was pushed out two years later.

Why are these comments relevant in the forming of Philippine Federalism? There are several reasons. Firstly, unlike the component parts of the Federal countries I have described, the Philippines, I believe, is already one unified country. So why are we thinking of, in effect, subdividing it? We would, therefore, be pushing the country in a reverse motion. I cannot recall of any country in the world that had done such reversal. If this is true, then we are putting the Philippines on a path that has not been traveled before anywhere in the world and, as such, the journey will be full of unknown dangers and risks. On the other hand, if there is such a country or countries, then it will be prudent to study first their experiences before we embark on a trip of no return.

Secondly, each of the independent or autonomous/semi-autonomous states cited above that formed a federal union already had a separate government with its own institutions and bureaucracy that had been functioning and serving its own people, in most cases, for hundreds of years. Thirdly, these predecessor states, except perhaps the states comprising Malaysia, already had fiscal autonomy and had long experience in imposing taxation and allocating the tax revenue for various uses, including economic development purposes. Clearly, under these conditions, it will not be difficult for the federated union to function well immediately as the composing states, in most cases, were already functioning independently by themselves. In fact, the federating states were surrendering part of their previous independence by sharing power with the Central Government and foregoing some revenue to fund it. Fourthly, in spite of this ease of amalgamation, during at least the early period, the path towards meaningful and mutually beneficial confederation is difficult to travel, like in the case of the USA. And fifthly, it shall be noted that the motivation for the federation was not economic. In the case of Germany, it was a projection of German power in Europe. For the United States, it was the severing of political link with the mother country. In the case of Malaysia, the purpose was to consolidate the previously almost separate political entities under a central government.

The motivation for a Federal Philippines is nothing like those cited above. As I have stated earlier, the direction Federal Philippines plans to take is opposite to the direction taken by the countries mentioned above. The component parts of these Federal countries came together to achieve unification to gain greater strength as one nation. In the case of the Philippines, it could be described as splitting the country apart to some extent for the purpose of each subdivision to have a greater authority for its own internal purposes, which, I believe, are largely economic. The Philippine circumstances and its motivation for Federalism are therefore starkly different from those of the Federal countries I mentioned above.

The present government institutions and bureaucracy (referred to as institutions subsequently for brevity) of the Philippines as a unitary whole remain weak in spite of many decades of trying to improve them. Their ability to provide adequate and efficient services to the citizens is still very much wanting in many respects. More importantly, the Philippine citizenry views them as functioning with an all-pervading system of corruption.

The collection of national taxes still has to reach its optimal level in spite of greater efforts exercised in recent years. Recent Asian regional statistics show the Philippines at the bottom of the list in terms of tax revenue to GDP ratio. The allocation of tax revenue also lacks judiciousness, effectiveness, and efficiency as evidenced by constant outcries about pork barrel allotments to legislators, inadequate infrastructure spending, inadequate funding for poverty reduction, housing, education and the like. And of course, there are significant leakages in such allocations as a result of corruption. With these less than desirable performance at the national level, it is not difficult to see that if much of the functions and activities of these institutions are devolved to the Federal subdivisions, the performance of the equivalent institutions at the state level may worsen at least during the medium term.

Institutions at the state level still have to be organized
The institutions at the state level still have to be organized and developed, unlike in the Federal countries mentioned earlier, where the federating states already had existing and functioning state government at the time of federation. The initial resources for the state institutions of Federal Philippines will necessarily be drawn mainly from the existing national institutions and partly from the existing provincial bureaucracy which, I believe, is much weaker than the national institutions. But the resources coming from these sources will not be enough as the Federation necessarily results in creating an additional level of government and therefore will need more personnel and other resources that need to be procured from the outside. Each state will need to develop its own expertise in formulating policies and programs relating to economic development, taxes, infrastructure and similar areas. It needs to develop the capability for budgeting, collecting taxes, contracting for construction and other services and many other areas of government activity. All these put together need organization and development of resource capability and capacity. These organizational and developmental activities require time to put the state institutions at a reasonably functioning level. When that level is reached, I do not think these will function any better than the performance of the present national institutions. As such, the increased economic performance that is being sought will be set back for some time before it can move forward. On this consideration, the present unitary form of government, given the chance, may in fact do better than if it were to be subdivided into states. Federalism will create disruption in the present order of things and require reorganization and redevelopment on the subdivided parts.

The second factor – the allocation of financial resources among the Central Government and the various states — is a much more daunting challenge. The difficulties will not only occur at the beginning of Federalism but also for many years to come. As shown in the statistics developed by the Philippine Statistics Authority, the regional distribution of GDP in 2014 is hugely disproportional. NCR alone earned 36.3% of the total 2014 GDP. Together with Region III (Aurora, Bataan, Bulacan, Nueva Ecija, Pampanga, Tarlac and Zambales) and Region IV-A (Southern Tagalog), these three regions have 62.8% of total Philippine 2014 GDP.

Mr. Punongbayan is an accountant and has been such for almost all his working life.

As published in The Manila Times dated 2 August 2016

(Read the second and concluding part of Mr. Punongbayan’s article here)