Thursday, September 20, 2018
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Business Matters

Federalism’s unpleasant surprise

It has now been two years since the election of President Duterte. To date, he has maintained an approval rating of about 70 percent, which may be the highest sustained approval rating so far for a Philippine president for this length of time and well into his or her tenure.

It would be snooty and condescending to dismiss this popularity as merely arising from uneducated voters comprising the country’s masses. Perhaps our voters have actually longed for some time now for a strongman — an action-oriented, propoor president. They thought they had succeeded in electing one in Erap Estrada, and was thwarted in their second attempt in Fernando Poe Jr. Given the consistently high ratings of Mr. Duterte, it would appear the masses have finally found the man they were looking for.

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There is little doubt that the President has placed his unique stamp on the presidency with his unorthodox manners, clearly defined priorities (particularly a no-nonsense approach to criminality and corruption), and a staunch articulation and implementation of what he believes would serve the best interests of the Filipino people. Each of these has been viewed negatively by the President’s critics, but even members of the elite seem to admit that, while he may not still be on their guest lists, the President has redefined good governance to mean effective governance, with an emphasis on political will and implementation rather than impressive powerpoint presentations.

This perception is further bolstered by continuing successes in the economic front: the vigorous growth of the economy, the successful passage of the first part of the tax reform bill, the widening of our network of trade and investment partners beyond the United States and Japan, and a decided emphasis on building much-needed and much-delayed infrastructure.

This is not to say that things are anywhere close to perfect, but the general public mood remains optimistic. So, are we inexorably marching toward our dream of a prosperous economy?

Not quite. For there looms a potential nightmare scenario that causes many of us sleepless nights: federalism. It remains, thus far, an inadequately explained but apparently relentlessly pursued radical change in our system of government. A decided majority of Filipinos, including local government officials who will be among its main beneficiaries, still appear disinclined toward this proposed shift.

It is not just the fear of the unknown that accounts for this unfavorable disposition toward federalism. The analysis in many circles is that its risks far outweigh its benefits. Add to this the suspicion that it may provide a political Trojan Horse allowing politicians to extend their tenure.

It doesn’t help, either, to cite the US and Swiss federal systems as models of the supposed nirvana a federalist Philippines will realize. Both of these countries arrived at their federalist structures after a long evolutionary process, and not a quickly imposed one. In the case of the United States, each of its federal states is a far larger contiguous land mass than the Philippines and with a deeper resource base, thus supporting a basic principle of federalism that each federal state should be largely self-sufficient. However, that is a condition yet to be addressed in the proposed process of grouping existing provinces as federal states in a federalist Philippines.

Then there is the cost involved in the required additional number of public officials and their attendant perks (regional headquarters, offices, vehicles, security contingents, local pork barrel, etc.). Substantial gains from the TRAIN Law would need to be diverted from infrastructure to fund a federal system.

Finally, there is the high likelihood of serious economic slowdown and confusion, with investors likely taking a wait-and-see attitude as the country grapples with the new system.

Thus, we hope the President will approach federalism with the well considered gradualism it requires, lest he leave a legacy of an unpleasant surprise for his country and seriously stall the economic momentum his administration has generated.

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Roberto F. De Ocampo, OBE, is a former finance secretary and was Finance Minister of the Year in 1995, 1996 and 1997.

Business Matters is a Makati Business Club project to share the views of key leaders in the business community. The ideas do not necessarily reflect the organization’s views.

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TAGS: Business Matters, charter change, federalism, Roberto F. de Ocampo, Rodrigo Duterte
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