Federalism unlikely under Duterte

Ben D. Kritz

Ben D. Kritz

ONE unexpected conclusion from the current impasse between the Duterte administration and Congress over the P2,000 per month increase in SSS pensions is that changing the Philippines’ system of governance from its present unitary form to a federal system almost certainly will not happen under the current government, despite its being a significant part of Duterte’s campaign platform.

The SSS pension issue does not have any direct bearing on the federalism issue, but instead is indicative of an incompatible mindset, which is also revealed in the provisions of the administration’s tax reform package that effectively raises the VAT, and provides for large increases in fuel and vehicle excise taxes.

For all the posturing that the Duterte regime represents “change,” from an economic standpoint its policy is a continuation of the same conventional neoliberalism practiced during the Arroyo era and pursued in a more inept and not completely sincere way during the term of BS Aquino 3rd. The basic priority is to maximize government revenue while minimizing government outlays, with a strong bias toward the most secure revenue options. Hence, the administration’s position that the SSS pension hike cannot be carried out without a corresponding increase in premiums (as opposed to expanding the fund’s investments).

That kind of orientation is completely at odds with the idea of creating a federal system, because federalizing the Philippines will not be possible without the central government surrendering a massive part of its revenue stream.

Unlike the unitary system, in which the country is divided up into progressively smaller government units in a top-down fashion, a federal system forms the unified country by agglomeration of smaller units.

In the Philippines’ unitary system, the smaller government units—provinces, cities, municipalities, barangays—are supported by the central government. In a federal system, the central government is created and supported by the states—the states decide what powers will be reserved to the central government, and each state contributes financial resources to support it.

It has never happened before that a country has devolved a unitary system into a federal one; every federal system in existence (for example, in countries like the US, Canada, Germany and Switzerland) was formed by the agreement of several states. The one common feature of all those states is that they were self-sustaining, economically and politically, and continued to be so after joining to form a unified country. The original 13 states of the US began as individual British colonies, each with its own charter from the Crown. The states in Germany were originally independent kingdoms and principalities.

Likewise, the only way federalism can work for the Philippines—if the intent is a real federal system, and not just a bastardized unitary-federal hybrid where political primacy still rests with the central government—is if the states or provinces that will be created are self-sufficient.

The central government, through several administrations, has demonstrated that it loathes the idea of giving up any revenue whatsoever, and in creating a federal system would have to surrender a lot of revenue. If the Philippines followed the US model—and it would almost certainly have to—then a likely source of income that would be transferred from the central government to the provinces would be the VAT.

Even if the devolution of administrative responsibilities reduced the central government’s expenses by a like amount, the prevailing mindset would still see it as a loss, and would react in one of two ways—either blocking the federalism initiative entirely, or watering it down so severely that the result is only a modified unitary system.

Given the geographically fractured nature of the country and significant regional cultural differences, as well as the chronic economic imbalance favoring the Metro Manila area, federalism is not a bad idea. But it is not one that fits at all with the left-leaning, socialized big-government mindset of the current president and most of his Cabinet, which makes one wonder if Duterte either did not understand the concept of federalism when he made it a part of his campaign repertoire, or was insincere about it.

Either way, any hope that federalism is a serious initiative under Duterte is seriously misplaced, and efforts to advance that particular cause would be better spent elsewhere.



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