Federalism in the Philippines: A Way Forward

For the past decades, extreme poverty, political instability, corruption,

and a weak economy has plagued the Philippines. These concerns among
others have posed developmental challenges to the highly centralized
unitary form of our government. As a response to this dilemma, past
administrations have attempted to institutionalize variants of
decentralization as a reform to improve public sector governance by
bringing the government closer to the people and dispersing economic
development to the regions and to the countryside. As a result, various
reforms and strategies such as the Decentralization Act of 1967 (R.A. 5185),
establishment of Autonomous Region in Muslim Mindanao in 1989, and
Local Government Code of 1991 have been implemented in an effort to
solve the problem. However, such legislations only proved to be a temporary
solution as the problems not only continue to persist but has even worsened
in other aspects. Obviously, despite the sincere efforts to decentralize, the
governing style that the Philippines still continue to enforce had failed to
uplift the nation as a whole. The most recent approach being considered to
solve these pressing problems is the revision of the 1987 Constitution and
the adoption of a federal form of government.

Federalism is not a new topic in the Philippines. In fact, as early as the

framing of the Malolos Constitution of the first Philippine Republic in 1899,
the Filipino revolutionary leaders Emilio Aguinaldo and Apolinario Mabini
have already proposed a federal government for the Philippines dividing the
islands into three federal states representing the country’s three island
groups – Luzon, Visayas and Mindanao. However, the proposal was
dismissed to give way for the more critical issue of unifying the diverse nation
at that time. Fast forward a century later, several attempts have been made
by political parties, scholars, and former president Gloria Macapagal Arroyo
in proposing a shift to a parliamentary and federal form of government. In
the present administration of President Rodrigo Duterte, there is another
attempt to move away from the unitary presidential government as he
believes this form of government will finally bring peace to the conflict-
stricken Mindanao according to an article by CNN Philippines. The question
then arises: what is really in the concept of Federalism that offers a better
response to the development and decentralization challenges that the
Philippines faces?

The word federalism is derived from the Latin word foedus meaning
“covenant”, which signifies a partnership or marriage in which individuals or
groups consent to unite for common purposes without giving up their
fundamental rights or identities (Kincaid 2005). Many decentralized or
decentralizing countries are exploring federalism as a means for greater
decentralization. Federalism’s considerable appeal can be attributed to two
pressures: the need for larger political units that would foster economic
development and ensure security, and the demand for smaller political units
that are more sensitive to their electorates and capable of expressing local
distinctiveness (Watts 2002).

The federal structure should the Philippines shift to federalism is still

to be decided and up for debate but there are three fundamental features
that are indispensable: 1.) a streamlined allocation of responsibilities
between the central and state governments 2.) a state government
structure that reflects a collective approach to governance; and 3.)
mechanisms that foster cooperation and collaboration among the state
governments in addressing national concerns. The following persistent
development challenges make up the socioeconomic backdrop against which
reforms at decentralization were designed and initiatives at federalism are
being forwarded:

1. Poverty
A major contributing factor to the slow poverty reduction in the
Philippines is the unequal distribution of benefits from economic growth.
Economic growth and poverty in the Philippines have notable spatial and
geographic dimensions. Balisacan, Hill and Piza (2006) have made the
following observations:

 Working with scarce infrastructure funds, the Philippine

government chose to invest more on ports and harbors, or
“internationally oriented” infrastructure, neglecting the
development of domestic land and water transport systems. This
expenditure pattern merely reinforced the economic advantage of
the NCR, NCR’s neighboring regions and the province of Cebu.
 For the last three decades, Philippine economic geography has
been unchanged. Notably, western Mindanao has remained poor,
with weak local governance and issues of conflict aggravating its
position. Studies show that differences in income and poverty
across localities can be explained by geographic factors, access to
key public services such as infrastructure, education and health
services, government policies especially on agrarian reform and
trade, peace and order, and quality of governance.
2. Political Instability

Periods of political instability were mainly brought about by attempts

to shift political regimes, declaration of martial law, military uprisings,
 impeachment, cabinet crises, and Muslim secessionist movements among
others. By disturbing systems of distribution and property rights, political
instability have dampened investor performance. De Dios (2008) pointed out
that political instability do not only negatively affect the country’s economic
growth performance, they are also closely connected to the following
interrelated factors: alienation of the majority of the people to the formal
political institutions, centralization of power in the executive branch, and the
intense political rivalry among factions of the elite.

3. Common Resource Pool Problem

A common resource pool is a resource that is available for the joint

use of numerous individuals but where the consumption of the resource by
an individual or group reduces the amount available to others (Grossman,
2010). The national government budget has the attributes of a common
resource pool and the power to control this resource is at the hands of a
highly centralized government. Taxes collected from all taxpayers
nationwide are pooled to finance the provision of government services
which mostly have localized benefits. Since the local residents only partially
pay for their costs as the projects are funded from taxes collected
nationwide, it is to their interest to get as many local projects from the
national budget as possible while minimizing their tax burden. To do this,
local government units and officials would have to establish and maintain
favorable relationships with the powerful central government. However,
the national budget is also finite, and channeling parts of it to particular
localities lessens what is available to the rest of the country.

4. Fiscal Illusion

Taxpayers usually wrongly equate the cost of public services that they
enjoy to the revenues of their local government or to their share of financing
public services which is referred to as “fiscal illusion”. This weakens the link
between the benefits and costs of public spending which explains why
nationally funded local goods and services and national transfers to local
governments tend to be high relative to revenues collected by the
government. Disproportionately huge expenditures results in the enactment
of bloated budgets and subsequently, to impounding funds to manage
budget deficits. From the years 1960-2016, the Philippines’ annual national
government budgets were in deficit except for 8 years. This dragged down
the country’s national savings and investment rates and increased public
sector borrowing. Sicat (2007) pointed out that public sector borrowing
reduces the amount of loanable funds that can be used by the private sector
for its own investment and operation. Consequently, the private sector’s
capacity to generate higher income can be stunted, which in turn, negatively
effects economic growth. Thus, instead of increasing national government
transfers and expenditures on local services to address the imbalance in
expenditure need and revenue capacity of local governments, it is more
appropriate to reform the assignment of taxing powers towards broadening
and increasing the taxing powers of local governments.

All the development challenges cited above share a common feature:

a highly centralized government to manage and solve it. I concede that the
decentralization efforts of the past governments are not for nothing. Some
degree of administrative and political authority have indeed moved from the
center to the regions, and some local governments under the Local
Autonomy Act have had remarkable accomplishments. However, the desired
overall and significant transfer of power and resources from the national to
the subnational levels has not been attained. Many might argue that such
developmental challenges can be addressed by amending the Local
Government Code and effectively implementing it. However, there are
certain structural and institutional challenges that constrain mere
amendments to the Code, but which a shift to a federal from of government
could possibly address. Unlike in decentralization, wherein the central
government determines the functions and powers to be devolved to local
governments and can withdraw them back, in federalism, the functions and
powers are constitutionally assigned to the different government levels and
cannot be unilaterally changed without the process of constitutional
amendment participated in by all government levels.

On the one hand, many critics fear that Federalism will only enhance
the ethnic cleavages, regionalism, and secessionist sentiments characterizing
Philippine society today. They equate federalism to the break up of the
Philippines into smaller self-centered republics with a weak national
government powerless to intervene. However, history points out that
secession and disintegration are events that more often than not happen in
unitary and centralized countries and rarely under federations. Moreover, it
is the insistence on symmetry and integration of different cultures that
promote secessionism.

Indeed, Federalism is not a cure-all to the Philippines’ problems nor is

it a perfect system; but, it may be an answer to the country’s lingering
troubles rooted in Philippine society’s multi-cultural nature and
developmental challenges.
REFERENCES
De Dios, E. S. (2008). Institutional Constraints to Philippine Growth.
University of the Philippines School of Economics. Retrieved from
www.econ.upd.edu.ph/dp/index.php/dp/article/download/93/85 on
August 19, 2018.

Kincaid, John (1999). Federalism and Economic Policy-Making: Advantages

and Disadvantages of the Federal Model. Background Paper: International
Conference on Federalism, Mont-Tremblant. Retrieved from
http://www.federalism2005.org/home/attachment/i/631 on August 19,
2018.

McGarry, John (2005). Asymmetrical Federalism and the Plurinational State.

A position paper for the 3rd International Conference on Federalism,
Brussels. Retrieved from
http://www.federalism2005.be/home/attachment/i/580 on August 20,
2018.

Montes R. (May 2016). Federalism and Multiculturalism. Retrieved from

http://localgov.up.edu.ph/federalism-and-multiculturalism-montes-
understanding-federalism.html on August 19, 2018.

Santos E. (January 2018). Proposed Charter for Federal PH Weakens Senate,

Eyes Prime Minister. CNN Philippines News. Retrieved from
http://cnnphilippines.com/news/2018/01/09/draft-proposal-federalism-
PDP-Laban-senate-prime-minister.html on August 18, 2018.

Watts, Ronald L. (2002). The Relevance Today of the Federal Idea.

International Conference on Federalism 2002, Saint Gallen. Retrieved from
http://www.forumfed.org/federalism/Watts.asp?lang=en on August 18,
2018.

Yusingco M. (June 2017). 3 fundamental features of a federal framework.

Inquirer.Net. Retrieved from http://opinion.inquirer.net/104538/3-
fundamental-features-federal-framework on August 19, 2018.