For The Bohol Tribune
In This Our Journey
NESTOR MANIEBO PESTELOS
Last
Thursday night, I arrived home in time to watch former Senator Aquilino
Pimental, Jr., being interviewed on TV 5
about the talk of the hour, the adoption of the Federal form of government by
the incoming Duterte administration.
Being a
long-time advocate of federalism, along with former UP President Jose Abueva,
the Senator looked and sounded like an elderly statesman, as in the old days.
This time, on this TV show, he seemed to have a perpetual grin on his face. He brought
his decades-long advocacy to this level in which he predicted that in two years’
time, legislation would put in place the Federal Republic of the Philippines.
That law
actually was a breakthrough in the advocacy to give local governance and, by
extension, their local communities, greater say in the management of their
affairs.
Prior to
that law, there were victories achieved in the creation of development councils
at regional, provincial, municipal/city and barangay levels which oddly enough,
under martial law, have provided mechanisms
for greater participation of sub-national levels of governance in the planning
and implementation of projects.
Several
decades later, under the decentralization law authored by Sen. Pimentel,
responsibilities for key programs in agriculture, health, tourism, and other
sectors were devolved to the local level. He himself acknowledged that not enough
financial resources have been given to local governments to be able to
implement these programs.
He said that
under that law, local governments are getting only 20% of revenues collected.
In contrast, under a federal set-up, local governments would get 80% of total
revenues and other income generated from other sources.
With this
larger share of income, local governments will take care of building their
schools, hospitals, and other infrastructures, and run their services. At the
national level, the Government will take care of security, diplomacy, and
overseeing the maintenance of standards for health, education, social welfare
and other services. Provinces will be grouped into Federal States with Metro
Manila as the seat of the Federal Government.
Greater
administrative and financial authority will be devolved to sub-national levels
or States and a capital designated for each cluster of member provinces. Sen.
Pimentel sees no problem in creating this institutional framework. Asked on who
would take care of States which are relatively more disadvantaged resource-wise
than others, he said a Bank would be created where these States could secure
loans.
Politically,
he sees federalism as solving Muslim Mindanao’s propensity to secede. Under Federalism,
it will be granted its own State to run and manage without dismembering the
Republic. Federalism is the long sought-after solution to the Mindanao conflict
which has cost so many lives over the years of struggle and conflict among
Filipinos.
This line of
thinking by Sen. Pimentel and others in his group, which now has expanded to
include other political parties, validates the significance of federalism at
this stage of our national life. We must be aware, however, that federalism has
two faces. After listening to Sen. Pimentel, I refer back to the digital notes
I made some time back when decentralization was first talked about among
colleagues involved in participatory development.
I will pick
some relevant notes for this column –
I find as
quite relevant what Donna Barry of Penn State University has said on the
subject of federalism in relation to democracy and markets in her paper, “Two
Faces of Federalism”:
“In the past 15 years, research on newly democratic countries has come
to reflect two increasingly divergent views of federalism. For one school, the
division of powers among two or more levels of government provides a critical
anchor for developing democracy and markets. For the other school, federalism
creates yet another set of problems that new democracies must somehow overcome.”
On the threshold
of new changes in our form of government, it is best to reflect on both the
benefits and perceived disincentives in adopting federalism. First, on the
benefits:
“For its proponents, federalism provides a number of political
advantages that help to strengthen democratic governance. One is
responsiveness. Where regional governments possess substantial authority, they
can react more quickly and effectively than central governments to satisfy the
preferences of the local citizenry. Central governments, in this view, are
simply too large and too slow to identify and respond to all of the diverse
demands of citizens in different regions.
“A second advantage is that federations provide
more opportunities for meaningful citizen participation in public
decision-making below the central level Public participation, in turn, should
increase the accountability of regional and local officials. Citizens have more
opportunities and more incentive to choose their representatives and to monitor
their work.
“With expanded participation comes a third
advantage – increased political competition. Regional- or state-level elections
multiply the potential “entry points” for new candidates and parties, and thus
provide additional opportunities for representation of diverse groups and
interests. In newly democratizing countries, the opportunities are especially
important for opposition groups. As a result, increased participation and
competition make it less likely that new democracies will revert to old
authoritarian modes of rule.
“Advocates of federalism also see important
economic advantages as well. One advantage is that regional/state governments
compete among themselves to attract business, investment and skilled labor.
Such competition typically makes it costly for any government – central or
regional – to impose excessive regulations or taxes. And the less the
government regulation, the more effectively the economy can develop.
“In other words, economic competition across regions helps to limit the
role of government in the economy. If one regional government imposes higher
taxes or excessive regulations, businesses and investors will seek another
region with less burdensome restrictions. And if a regional government is
ineffective in providing public services – such as education or public safety –
then residents with the most valuable skills will move to regions that perform
more effectively. In this sense, citizens, businesses and investors all ‘vote
with their feet,’ i.e., they move to regions with more effective public
services and less burdensome government involvement in business.”
In this era
of globalization, there is a push towards decentralization: “Increasingly open
trade and investment flows demanded smaller and more flexible organizations
that could adapt readily to changing market conditions – in government as well
as in business. For regional governments, dependence on the center thus became
a serious economic disadvantage.”
On the other
hand, here are some observations and insights from “real world” federalism and
decentralization as cited in the paper:
-Any region
that pursues economic reform by itself is unlikely to solve economic problems
that are essentially national in scope. And many regions face concentrated
costs – for example, the closing of a major factory has far more impact at the
regional than at the national level. As a result, many regional governments
have appeared unwilling to support needed but painful economic reforms.
-In some
cases, regional governments have pursued policies directly at odds with the center’s.
Thus federal governments seeking to limit government spending and maintain
monetary discipline have faced regions with expanding government payrolls and
rising budget deficits. The problems have been even greater where subnational
governments have had the power to borrow money to finance government spending.
They could spend with impunity, while leaving the federal government to rescue
them from default.
-Regions may pursue policies that are popular locally – such as
providing government jobs, overspending and the like – but at the expense of
effective management of the economy as a whole.
-Since
regions typically have few tax sources of their own, they may end up relying on
a “quasi-fiscal” strategy to raise revenues… Such regions impose a variety of
regulations, licensing requirements and other devices as a way of raising
revenue indirectly. But the various fees raise the fiscal burden on businesses
and citizens, and make government finances less transparent. The end result is
to undermine economic development.
-Regions that require residency permits, for example, or impose other
similar rules, limit mobility of labor. Regions that require government
purchasing to be limited only to internal suppliers may end up spending far
more, or compromising on quality or fit. Regions may also adopt protectionist
strategies that shield local enterprises from central taxes and regulations…
Thus regions may compete with each other, but in ways that undermine rather
than enhance the country’s overall economic performance.
- Another
view suggests that federalism simply multiplies the number of governments – and
number of government officials – with the power to demand bribes, kickbacks, or
other forms of payment.
-A third
view suggests that regional governments face more problems in promoting
transparency of governmental activity. Given their limited resources, regional
governments often find it difficult to publish full and timely information
about their activities on a regular basis. It is typically far easier to find
information on government policies and performance for countries as a whole
than for individual regions. And if information is lacking about state/regional
government activity, then there are fewer opportunities for citizens to hold
their government accountable.
- State
governments added more employees to their payrolls, ran substantial budget
deficits, and borrowed with impunity – leaving the federal government to bail
them out. Central government efforts to control inflation and promote sound
fiscal policies were thus impaired by the inability to constrain regional
governments.
According to
one assessment, devolution [in one country] had created “predatory federalism”
that undermined federal government’s economic policies.
On account
of these negative experiences, the paper notes:
“… now the prescription for reform emphasized a combination of more
centralized government and privatization of public services. Newly democratic
federations have attempted to follow suit, by imposing more fiscal discipline.”
These
observations have been derived from the experiences of what have been termed as
Third Wave countries or new democracies, but they may be relevant as we embark
on a yet unchartered course towards Federalism in our country.
Indeed let
us have Federalism without tears by anticipating constraints and lining up
options to address them more systematically which will serve as better than resorting
to sloganeering and reciting “hugot” lines. ###
NMP/27 May 2016/5.38 p.m.