[OPINION] Federalism in motion: a runaway train?

Joel Rocamora

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[OPINION] Federalism in motion: a runaway train?
The logic of the PDP proposal seems to suggest an 'intended consequence' – a political system which will be easier for the Duterte regime to control

The federalism train has left the station. The Partido Demokratiko Pilipino-Laban (PDP)  has submitted a draft Constitution to the House of Representatives; hearings on proposed changes are ongoing. But the PDP draft is loaded with so many compromises in an obvious  bid to secure quick approval that it is not clear what its destination is.

Many key elements, the number and powers of federal states, fiscal relations between local and central government – the core of federalism – apparently are still to be worked out.

The PDP draft does not propose the number of federal states. Art X, Section 6. says (1) “There shall be created regions of the federal republic each consisting of provinces, cities, municipalities, and barangays and geographical areas with sufficient territories, inhabitants, and resources necessary to sustain and promote a stable and efficient regional government, sharing common and distinctive historical and cultural heritage, economic and social structures…” The federal states and their boundaries will be set in an ordinance which will be an integral part of the Constitution. In interviews, leaders of the PDP Laban Federalism Institute say that they support the 11 federal states plus Metro Manila of Nene Pimentel.

The proposed formation process is long and involved. 

(a) There shall be a plebiscite for the approval of regional units and territories simultaneous with the plebiscite ratifying the proposed amendments to the Constitution.

In case the voters of a proposed region did not vote favorably on the creation of a region, upon the petition of 5% of the registered voters in a region, another plebiscite shall be called and conducted for the purpose of this section.

The federal government shall continue to exercise its powers and functions over regions that did not vote favorably in such plebiscite.

(b) Within a period of 18 months from the ratification of the Constitution, Parliament shall enact a regional and local government code applicable symmetrically to all regions except for autonomous regions established under the 1987 constitution.

The regional local government code shall establish a regional commission which shall act as the interim regional government. Members will include incumbent governors of provinces and mayors of highly urbanized cities and independent component cities within the region. Until the enactment of an organic act for each region, the regional commission shall be the interim regional government, acting as a collegial body, with executive and legislative powers.

Chairmanship of the commission shall be by rotation among its members where each member of the commission from each province, highly urbanized city, and independent component cities shall be given a term of one year to serve as chairperson. The commission shall exercise the executive powers of the region as a collegial body. The commission shall elect a regional chief administrator who shall be a professional manager to exercise the executive functions of the commission. The commission shall create and organize the government offices and bureaucracy necessary for the effective and efficient functioning of the regional government.

The commission shall exercise the legislative powers granted by the Constitution to regional governments. The commission shall be assisted by a regional consultative assembly composed of 3 representatives from each of the legislative assemblies of each province, highly urbanized city and independent component cities.

The commission shall provide for regional councils composed of representatives of regional departments of the federal government and other government offices, and representatives from different sectors and non-governmental organizations for the purpose of advising the commission and regional consultative assembly.

The terms of office of elective regional and local officials, except barangay officials, which shall be provided by law, shall be 5 years and no such official shall serve for more than 2 consecutive terms.

(c) The federal government shall gradually devolve and decentralize funding, functions, and responsibilities in accordance with the financial and organizational capacity of the regions.

(d) Five years after the creation of the region, each region may opt for an organic act to be enacted by parliament in order to form the regional government with elective legislative and executive departments.

The PDP proposal leaves room for negotiating the fiscal shares of local and central government, limiting itself only to setting the frame for fiscal federalism. Thus, while national/federal taxes will be shared, “specific national taxes collected within the territorial jurisdiction of each region shall be retained by and shall accrue exclusively to the regional government.” Regional governments shall be entitled to at least 50% share in the proceeds of the utilization and development of the national wealth such as mining, hydro and geothermal, forestry, fisheries, pasture leases within their respective areas.

An “Equalization Fund” is proposed to give unconditional, general purpose block grants as well as conditional and matching grants. The fund is to be administered by a “National Finance Commission” appointed by the president. The commission shall, after consultation with the regions, submit a report and recommendation to parliament on how the equalization fund shall be allocated. The allocation of these revenues among different constituent units of the regional government shall be determined under the regional and local government code.

The long transition period proposed by the PDP makes sense, given the complexity of the changes. It also gives scope to local initiative, making it a more democratic process than if it were imposed top- down. Another advantage is that it would minimize the resource requirements, less people and less additional money. Not incidentally, it would allow incumbents to remain in place with considerably more resources, minimizing opposition. Its main disadvantage, given the long and elaborate process, is that there’s also a lot of scope for things to go wrong.

I have a problem mainly with the criteria for determining the number of federal states. The PDP formula has no connection with the main weakness of the current set-up, the dependence of local government on central government transfers. There is more than enough fiscal space to support a shift to a federal system and its attendant redistribution of resources.

The problem is that given sharp inequality of regional economic activity, even if you give federal states new taxing powers, only 3 regions are financially viable. Only these 3 regions can generate enough revenue to support their expanded share of services. You will recreate the current system where the central government subsidizes most of the regions.

Miral is clear on the results of the current arrangement on corruption and service delivery. This arrangement “…weakens local governments’ incentive to exert effort in the provision of market-enhancing public goods. Local governments that exercise good governance are not able to fully internalize the revenue benefits of their good policies since increased tax collections that go with their economic growth-enhancing policies accrue to the central government that, in turn, distributes it to all local governments regardless of their performance… Financing of local government services by central government transfers weakens the link between the benefits and costs of public spending. Transfers relieve local governments from raising their own revenues that would require them to explain, justify, convince and demonstrate to their taxpayers that taxes are necessary and the funds raised will be spent responsibly…clientelism is facilitated and sustained by centralized taxation and central government transfers to sub-national governments…This is because they only consider the benefits of these projects without seriously examining their costs.”[1]

The design for a new federal system should address the way the current fiscal arrangement generates local governments which have little incentive to collect taxes, provide services, and are not accountable to their constituents. The new design should generate a new dynamic in local politics where political competition is focused on providing social and economic services for generating growth, where, as a result, local governments become more accountable to their constituents. In the end, a shift to a federal system with its attendant risks, is justifiable only if it advances local democracy.

In an earlier presentation PDP called for a “grand bargain” – a package of reforms to make federalism succeed. This is concretized in the proposed amendments. There is a long section (Art IX Section 11-13) regulating party-switching, dynasties and providing financial support for political parties. The allocation of 40% of seats in the federal assembly to a system of proportional representation could have done more to strengthen political parties. But this was compromised by putting the system in a regional straight jacket. Proportionality is to be determined by region instead of nationally.

In the end, the reform impulses of the PDP proposal are compromised by a design which is apparently geared towards securing support in the House of Representatives. Single member districts and their incumbents will be retained. The majority of party-list groups which are creations of local political clans are assured seats through a bastardized region-based proportional representation system. With federal regions still dependent on the central government, congressmen will also retain their “fetching” roles.

Students of charter change warn of “unintended consequences”. The logic of the PDP proposal seems to suggest an “intended consequence” – a political system which will be easier for the Duterte regime to control. Local governments which will remain dependent on central government largesse and a basically unchanged House of Representatives will mean no significant change from the current situation. The malleable “super majority” in the House will not have to contend with the Senate which will have less powers in the PDP proposal. 

Can the Duterte regime pull this off? They first have to contend with the Senate where the required three-fourths vote means the 5 opposition senators only have to secure two more votes to block a House proposal. PDP people say there’s a “gentleman’s agreement” between Senate President Pimentel and House Speaker Alvarez for separate voting. One should also not underestimate the incompetence of this regime.

To assure regime continuity, the 2019 election should already be in the new system. This means they should go through the House and Senate deliberations and hold a plebiscite to approve a new Constitution within one year. If the Senate opposition secures the no votes, the Duterte people will have to go to the Supreme Court. All these will take time. By early 2019, they will have difficulty controlling politicians who will be busy preparing for the May 2019 elections.

Is there still room for significant reform through charter change? The PDP proposal does not provide too much hope. – Rappler.com

Joel Rocamora is a political analyst and a seasoned civil society leader. An activist-scholar, he finished his PhD in Politics, Asian Studies, and International Relations in Cornell University, and had been the head of the Institute for Popular Democracy, the Transnational Institute, the Akbayan Citizens’ Action Party, and member to a number of non-governmental organizations. From the parliament of the streets, he crossed over to the government and joined Aquino’s Cabinet as the Lead Convenor of the National Anti-Poverty Commission.

[1] Romulo E.M. Miral, Jr., “Taxation in a Federation”, in Brillantes, Ilago, et.al, p.62-64



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